Brexit: English Intellectual Property law implications

20 September 2017

Sally Shorthose

On 29 March 2017, the UK Government served formal notice under Article 50 of The Treaty on European Union to terminate the UK's membership of the EU (following the June 2016 UK referendum on EU membership). Based on Article 50, the EU Treaties shall cease to apply to the UK and the UK exit will take effect in March 2019 (subject to the increasingly unlikely possibility of the withdrawal agreement being concluded sooner and unless all Member States agree to extend the period).

Negotiations between the UK and the EU relating to the withdrawal of the UK from the UK and forming a  new trade agreement with the EU commenced in June and three rounds have been completed, with the third due to commence on 25 September 2017. A more detailed analysis of these negotiations is found elsewhere on this topics page and can be accessed here. At the current rate of progress, it could take several years beyond 2019 to agree a the terms of a free trade agreement even if the initial so called Withdrawal Agreement is agreed, although the Prime Minister has declared the objective of achieving such an agreement within the two-year period.

This briefing note advises readers on the immediate considerations and anticipates how Brexit will impact on the IP/IT market which has been governed by so many EU Regulations and Directives in the past (albeit not exclusively) that intricately bound the UK to the EU. As the UK and EU set out their respective stalls in a number of position papers on a variety of matters (including, for example, IP, life sciences, rights of EU citizens, public procurement and the supremacy), we analyse how these papers may be interpreted to predict the likeliest outcome.

Relationship with EU law

IP laws are harmonised to a large extent across Europe, and much of the UK legislative framework in this field is currently composed of directly effective EU Regulations and transposed EU Directives. Unless those EU Regulations relevant to IP and life sciences (especially pharmaceuticals) are transposed into English or Scottish law, a regulatory vacuum may be created.  

In October 2016, the Prime Minister proposed a "Great Repeal Bill" – the 'European Union (Withdrawal) Bill 2017-19'. Following the UK's departure from the EU, this Bill (which passed its second Reading in the House of Commons in September 2017) would end the 1972 European Communities Act (ECA), which gives EU law primacy over UK law. All enactments previously in force in the UK under EU law would subsequently be reinstated. MPs would then go through each law on a piecemeal basis and amend or repeal them as necessary based upon national interests. This would facilitate a smooth transition with all EU laws, including the relevant IP Regulations and Directives remaining in force. However, the UK would no longer be a member of the EU, which would affect the unitary character afforded to IP rights. The UK will have to negotiate an agreement with the EU to address this, but for now, until the UK actually leaves the EU, UK rights holders can continue to enforce their IP in the EU.  The EU has made certain proposals which are set out below in the section on the EU position paper on IP.

In a speech on the Brexit process in January 2017, Prime Minister Theresa May indicated that:

  • The UK will not remain a member of the EU single market or Customs Union but would instead seek to negotiate separate trade and customs agreements with the EU, including the greatest possible access to the single market on a reciprocal basis.
  • The UK would look to negotiate new trade deals with other international countries that are not EU member states.
  • Guaranteeing the rights of EU nationals living in the UK is a priority, but that not every other EU member state favours such an agreement.
  • Controls will be introduced on immigration from the EU (removing the existing freedom of movement for EU nationals).  

However, in light of the above, the implications of Brexit are still very uncertain and will, to a large extent, be determined by the terms of any international agreements negotiated and by the amendments and repeals of EU laws following the "Great Repeal Bill".

Implications of the Brexit

Some implications of  Brexit will apply to organisations in the same way whether they are based in the UK, in the EU or elsewhere in the world.  For example, the changes to unitary patents are pertinent to any company seeking pan-European patent coverage, whereas the now likely exclusion of the UK from the European Digital Single Market, will be more acutely felt in the UK. Below is a summary of some of the main implications. 

The EU Position Paper on IP

The EU has published a set of principles relating to IP and Brexit.  It should provide some clarity and comfort to IP holders and applicants in that it seems we are not approaching an IP cliff edge, but the lack of reference to the UPC (see below) is notable.  The UK government response will be interesting as the EU position is that EU IP rights must be upheld post-Brexit with no further action or cost from the IP holder – how will UKIPO deal with this potential avalanche of new registrations and responsibilities if they are not able to charge for the additional burden?

The principles can be summarised thus:

  • Unitary granted rights and applications therefore existing on the date of Brexit should be recognised as a right in the UK comparable to the right provided by Union law in the remaining 27 Member States;
  • The recognition in the UK of such rights should be automatic and with no financial cost to the IPR holders;
  • In relation to EUTMs this means that the UK must continue to apply the rules on e.g. genuine use existing before Brexit – so that a right would therefore continue to exist in the UK even if genuine use could not be proven in the UK provided it could be proved in one of the remaining 27 Member States – there is no opportunity for a double dip;
  • Since there is currently no domestic legislation in the UK relating to protection of designations of origin or geographical indications, by implication, the UK will be required to implement such legislation locally to continue protection;
  • On exhaustion, any IPRs exhausted in the EU before Brexit should remain exhausted thereafter in the UK and the remaining 27 Member States – again, no double dip at asserting rights
  • SPCs and database rights should continue to be recognised for the remainder of their duration.
UPC

The Brexit vote delayed the implementation of the Unified Patent (UP) and the Unified Patent Court (UPC), which were expected to start at the beginning of 2017. However, on 28 November 2016, the UK announced that it would ratify the UPC Agreement, which means that the UPC system will go ahead. The Preparatory Committee announced that a further delay was been caused by uncertainty regarding the protocols and the UK election. There have since been delays by a challenge in the German courts. The proposed revised start date of early 2018 is not now going to be possible, in the absence of the UK and German ratification.

As mentioned above, the EU position paper on IP does not mention the UPC – the IP community is split between those that believe the UPC will not go ahead, those that think it will do, but without the UK and a third group who believe that pragmatism will win the day and a way of accommodating the UK even though it outside the EU, will be found Notwithstanding this optimism, Mrs. May's pronouncements regarding the future refusal of the UK to accept the supremacy of the ECJ, make it a challenging prospect. Further analysis on this is found here.

Community rights

Without an agreement to the contrary,  community rights, such as registered and unregistered community designs and EU trade marks (previously community trade marks), will no longer have effect in the UK. Ultimately the scope of any rights applied for will not include the UK, and there remain questions about what will happen to the "UK portion" of such rights obtained before Brexit. If the right in question is automatically reduced in geographical scope, its value will diminish, especially given the economic significance of the UK, which could result in the right-holder losing out commercially. Any organisations which rely on community rights will now need swiftly to respond to changes in this area; notwithstanding the EU paper which was designed to give a degree of certainty to IP holders by saying unitary rights SHOULD continue to be recognised in the UK in a seamless manner. This will have to be agreed by the UK as part of any withdrawal agreement.  More details on the future of trade marks may be found here

Life Science regulation

The UK’s various Life Sciences regulatory regimes are currently intimately connected with the EU; the European Medicines Agency is based in London and a sophisticated and comprehensive pharmacovigilance system has been established around this regime. Whilst change will, no doubt, be managed to enable a smooth transition, organisations working in this sector will need to be ready to adapt now that the regulatory framework is likely to be reshaped; a “soft Brexit” involving continued affiliation with the current system was rejected by the government so this area is particularly uncertain. Currently, 19 cities are offering to host the EMA post-Brexit, with Barcelona being the front runner. There will be significant implications for UK based pharma companies if the UK cannot agree a way of remaining within the EU life sciences regulatory environment. These are discussed here.

European Digital Single Market

There is a real risk that the UK will be shut off from operating in the European Digital Single Market. The drive behind the single digital market was to promote common data protection laws, provide better access to products and services at reduced costs, and generally increase adoption and acceptance of digital services. There are significant differences in the attitudes of different European countries towards the use of social and digital media marketing and, in the absence of the UK within the EU, these differences are now likely to widen and the influence of the UK will be minimal.

Conclusion

As we have already seen, Brexit is not going to be a simple divorce. Now any UK legislation, which has hitherto been dependent on EU legislation, will have to be unpicked (see above for reference to “The Great Repeal Bill”). Beyond this, the key development in the IP field is the likely exclusion of the UK from pan-European rights systems (notwithstanding the government statement that the UK will ratify the UPC). Separation presents the opportunity for the UK's laws to diverge from those of Europe, and such separation may be embraced in some areas. However, in IP, this is unlikely to happen to any significant extent given the interconnection of trade and the universal recognition that harmonisation is beneficial. Going forward, the UK is no longer going to be able to assert the same influence on EU policy, which may undermine the position of UK-based IP and IT companies both within Europe and on the world stage (especially vis-à-vis the USA as the UK may be seen as second class without a voice in Europe) and make it a little more difficult to compete. 

Given the two year period (minimum) before which Brexit will be implemented, and given the uncertainty about what the exact Brexit environment will comprise, the long term future is still unclear. Thereafter, IP owners should identify which of their rights are now likely to be affected and may need further application/registration in order to achieve maximum protection over that right.

For any queries about any matters raised in this note, or other questions about how Brexit may affect your business, please contact Sally Shorthose.

This article is part of our Brexit series