In or Out? ‘Brexit’ and Intellectual Property

It’s now less than a month before the British public vote in a referendum to decide whether or not to stay in the European Union (“EU”).  Intellectual Property Law is significantly affected by EU membership, and so the result of a victory for the “Leave” camp has the potential to be disruptive to the protection of your IP assets.

With that in mind, we have produced a brief update on what a “Brexit” could mean for your IP.

No doubt you will see commentary from law firms about the impact of a possible “Brexit”.  However, rather than just tell you what may/may not happen, we give some suggestions below on steps you can take now to protect your business’s intellectual property, regardless of the outcome.

You will appreciate that the outcome and its impact are speculative, and ours is no more than an educated guess.  However, if you have any queries or need advice, please do not hesitate to get in touch.

What happens if the UK stays in?

Many European Union treaties have the stated aim of an “ever closer union” – ever stronger political, social and economic ties between Member States. Although it appears that Britain’s Prime Minister has secured some kind of opt-out for the UK (here), we expect that Intellectual Property Law across the EU is likely to converge. In particular, in relation to patents and copyright law:

The Unitary Patent and Unified Patent Court (“UPC”)

This is the most certain IP development over the next few years. The UK Government is proceeding with ratification of the UPC Agreement on the assumption that it will remain in the EU. The UPC Agreement is expected to come into effect towards the end of 2017.

If patents are relevant to your business, then it is worth thinking about how your patent filing and/or enforcement strategy should change with the introduction of an EU-wide patent. For example, you should consider whether you will save money filing a Unitary Patent compared to national patents, and be aware that there will be additional German and French-style enforcement remedies available for Unitary Patents that are not available for UK patents.

With that in mind, if the UK votes to stay in the EU, then we will send out a further update on what preparations you can make for the UPC.

Further harmonisation of copyright law

Copyright law is partly harmonised across the EU through measures such as the Information Society (“InfoSoc”) Directive. Amongst other things, there are exceptions to copyright, such as parody and quotation, and the same length of copyright term applies across all Member States. However, the implementation of the InfoSoc Directive has been inconsistent (or completely absent) across Member States.

As a result, there are plans to introduce further copyright harmonisation. These measures are focussed on adapting copyright law to the digital world, including the proposal to eliminate “geo-blocking”, i.e. restricting access to copyrighted material based on the location of the user. There is even talk of a possible single EU copyright title, which would replace national laws of the 28 separate states. This could affect your ability to licence copyrighted materials but also make it easier to enforce your rights on a pan-European scale, as with EUTMs and RCDs.

Given the competing interests, these measures will take some time to materialise. We will keep you updated when proposals become more concrete.

What will happen if the UK leaves the EU?

The extent of the impact of a Brexit would depend on the trading relationship between the UK and the EU post-separation. For example, the UK may chose the ‘Turkish’ route (a customs union but little power to shape policy) or the ‘Norwegian’ option (membership of the European Economic Area Agreement (“EEA”), which includes provisions related free movement of goods, services, capital and persons) and some intellectual property law harmonisation.

However, withdrawal would not be immediate because the post-exit trading terms would be negotiated. In relation to intellectual property, we outline some of the possible outcomes below.

UK registered rights (UK patents, trade marks and designs)

As protection and enforcement of these rights is only in the UK, they will not be affected by leaving the EU.

European Patents (i.e. those granted by the European Patent Office (“EPO”))

The EPO is not an EU institution and so patents granted by the EPO are not affected by EU membership.

Unitary Patent and Unified Patent Court (“UPC”)

Presently, the UPC Agreement only covers EU countries. The Agreement has not yet come into force, so it is possible that its introduction could be postponed, whilst the UK negotiates to be included, or the rest of the EU could proceed without the UK.

If a Unitary Patent no longer cover a major economy like Britain, obtaining a Unitary Patent would be less valuable. Fees for Unitary Patents may be reduced (or not) and location of the London division of the UPC would probably be moved to another Member State.

British companies/inventors could still apply for a Unitary Patent – you don’t have to be a company/inventor based in a Member State to be able to apply.

European Union Trade Marks (“EUTMs”) and Registered Community Designs (“RCDs”)

It is likely that the UK Government would introduce provisions to convert or extend a EUTM/RCD to cover the UK because EUTMs/RCDs would in all likelihood cease to have effect in the UK once the Brexit was complete. This is likely to increase the workload of the UK Intellectual Property Office and could lengthen the time it takes to register UK trade marks and designs. The need to own separate marks for the EU and the UK would also increase your protection costs.

Similarly, for pending applications, it is possible that applicants would be given the choice to continue with the application in the EU only, and/or UK, after paying an additional fee.

If Britain leaves the EU, the UK courts will be the final interpreter of the legislation (whether or not derived from previous EU law), and quicker decisions could be made. In addition, outside of the EU, the UK could have greater freedom to introduce its own exceptions and/or expansion of copyright law.

Some of your registrations could be at risk, and it could be more difficult to block others from registering the same/similar marks. For example:

* You may no longer be able to rely on a UK trade mark or UK-based reputation (where reputation in the rest of the EU is minimal at best) to prevent registration of a EUTM by another party.

* If a EUTM was converted into a UK trade mark, it may be open to revocation for non-use if the mark has not been used in the UK, and similarly a EUTM where use was predominantly UK-based may also be open to revocation.

Copyright

Copyright is an unregistered right, with mutual recognition across most of the world, so its existence would not be affected by an exit.

The InfoSoc Directive outlines options for Member States to incorporate into national copyright law and the UK has already implemented much of it. When there is an issue with interpreting law derived from a Directive, guidance from the European courts is needed. They can take several years to deal with the query. Copyright law has been particularly busy in this regard, and each interpretation by the European courts arguably can open up further issues, rather than resolving them.

As with trade marks and designs, the UK courts will be the final interpreter of the legislation and quicker decisions could be made. In addition, outside of the EU, the UK could have greater freedom to introduce its own exceptions and/or expansion of copyright law.

Enforcement of Intellectual Property

Issues post-exit would include:

* IP Enforcement Directive – the UK courts have been reluctant to award damages for “moral prejudice” in IP infringement cases, and it is possible that laws that have a “European” feel to them such as this may be repealed.

* Injunctions – if a EUTM/RCD no longer covers the UK, you would probably be unable to get a pan-European injunction via the UK courts; you would have to go elsewhere to get an injunction for the EU.

* Possible new borders – this will depend on the structure of the relationship post-Brexit. For example, if UK becomes be a member of the EEA, then if goods have legally entered EEA, a trade mark owner cannot prohibit further distribution into the UK or another EEA state (i.e. the rights are exhausted). If the UK adopts another route, then it is possible that a trade mark owner may be able to stop goods coming from the EU into the UK and vice versa.

* Interpretation of law – UK courts would no longer be obliged to interpret UK IP law in light of EU legislation, and interpretation of IP law is likely to diverge over time.

Miscellaneous IP rights (e.g. Supplementary Protection Certificates, Geographical Indicators, Plant Variety Rights)

There are several other IP or IP-associated rights such as Supplementary Protection Certificates, Geographical Indicators, and database rights which may also be affected by the outcome, but sake of brevity, this note doesn’t address these issues. If you have any specific queries, please do not hesitate to contact us.

When would it happen?

An official notification to withdraw will automatically result in the UK ceasing to be a Member State of the EU, two years from the date of notification, unless either:

* the UK and EU have put a withdrawal agreement in place which sets a different date; or

* the UK and the remaining Member States (voting unanimously) agree to extend that time limit.

What should I do now? (regardless of whether or not we leave the EU)

The Referendum is a good reminder to give some thought to your existing IP protection across the EU. For example:

Consider reviewing your registered IP portfolio

We can assist you with a gap analysis to identify if you have sufficient coverage in your principal place(s) of business. If you get your portfolio in order now, you will be ready to take steps immediately once the outcome of the Referendum is known.

If you are thinking of acquiring IP assets, would they sufficiently protect you post-Brexit, or are there gaps that need filling?

If you have UK trade mark and EUTMs covering the same goods and/or services, keep the UK trade mark(s) registered, to avoid the need and cost to convert or reapply for a UK trade mark, if a Brexit occurs.

If your principal place of business is the UK, consider filing UK trade mark(s) and/or UK designs in order to protect your business assets. There are two good reasons for this:

* It is unclear what will happen to EUTMs and RCDs if the UK leaves the EU. If you have a UK trade mark or UK registered design in place, it would be unaffected by an exit.

* Whether or not the UK stays in the EU, the UK courts have held that where a EUTM is only used in the UK, then it may be at risk of being revoked for non-use (Sofaworks v Sofa Workshop – see our summary here).

Review existing commercial relationships that may be affected by the UK leaving the EU, and seek to insert contractual provisions e.g. a “force majeure” clause or termination rights. This is one way to avoid an uncertain outcome. This includes settlement agreements where a party has undertaken not to apply for a registered IP right in the EU.

However, if you don’t have time now to consider all the above issues, then don’t worry. If the British public vote to leave the EU, then there will be sufficient time (probably two years) to prepare your business and its intellectual property for a post-Brexit world.

If there is an exit, we have a tried and trusted network of IP lawyers across the EU, with whom we can work to fill in any gaps in your IP protection.