Brexit: English Intellectual Property law implications

By Sally Shorthose

10-2018

The UK Government served formal notice under Article 50 of The Treaty on European Union to terminate the UK's membership of the EU on 29 March 2017 (following the June 2016 UK referendum on EU membership). The EU Treaties will accordingly cease to apply to the UK and the UK exit will take effect on 29th March 2019. If a Withdrawal Agreement is agreed by the UK and EU and is approved by the UK Parliament, this will include provisions for a transitional or "implementation" period to the end of 2020, during which EU law will continue to apply in the UK. Any Withdrawal Agreement is expected to include an outline of a future UK/EU relationship agreement, in the form of a political declaration, to be negotiated during the transitional period. If no Withdrawal Agreement is concluded, i.e. in a "no deal" or "hard Brexit" scenario, EU law will cease to apply in and to the UK on 29 March 2019.

This briefing note advises readers on the immediate considerations and anticipates how a 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. For the purposes of this note, we are assuming that following Brexit the "Norway model" (i.e. EEA membership) will not be applied to the UK and that the UK will be outside the single market.

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.

The European Union Withdrawal Act 2018 ("the EU Withdrawal Act") will repeal the European Communities Act 1972 ("ECA 1972") as from Brexit (or from the end of the transitional agreement if a Withdrawal Agreement is concluded) and will also include provisions to convert the existing body of currently directly applicable EU law into domestic UK law, by means of statutory instruments. This will mainly apply to EU Regulations which would otherwise cease to apply on Brexit, and also to statutory instruments implementing EU Directives, where the statutory instruments were adopted pursuant to the ECA 1972 and would otherwise fall away on repeal of that Act.

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.

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 EU Withdrawal Act.

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.

UPC

The new EU patent regime is intended to provide patentees with the option to apply for a single pan-EU Unitary Patent (UP) covering most of the EU. It would also create the Unified Patent Court (UPC) to hear and determine patent disputes on an EU-wide basis.

The introduction of the new regime, whose future was already uncertain after the Brexit vote in June 2016, is now further delayed and complicated by the challenges to the regime going through the German courts. The announcement by the UK on 28 November 2016 that it will proceed to the ratification of the UPC Agreement is of questionable relevance given the effluxion of time. Further analysis on this is found
here.

Community rights

There is a potential that 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. In order to address this, the current draft of the withdrawal agreement currently being negotiated between the UK and the EU aims to ensure community rights will automatically convert into analogous UK rights upon Brexit. In addition, regardless of whether a final agreement is reached, the UK Government has confirmed that its aim is to "ensure the continuity of protection" and to "avoid the loss" of existing rights.

Concurrently, it has also been confirmed that the UK intends to create and grant 1.7 million automatic and free-of-charge intellectual property rights (including trade marks) corresponding to existing EU-wide rights. Note however that this is subject to the agreement of the Withdrawal Agreement, and as such the government has stopped short of providing a guarantee of free-of-charge IP rights without an agreement with the EU.

Ultimately the scope of any community rights applied for post Brexit will not include the UK, and it remains to be seen precisely what will happen to the "UK portion" of such rights if they were obtained before Brexit. If agreement is not reached, or if the UK Government does not follow through on its promise to ensure continuity of protection, the rights in question will be automatically reduced in geographical scope and their 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.

Life Science regulation

The UK’s various Life Sciences regulatory regimes are currently intimately connected with the EU; the European Medicines Agency was 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. The Netherlands won the competition to host the EMA post-Brexit. In October MHRA published its proposals for a life sciences regulatory framework after Brexit. The proposals can be found at https://consultations.dh.gov.uk/mhra/mhra-no-deal-contingency-legislation-for-the-regul/

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

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 Withdrawal Bil) . 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 forwards, 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 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

 
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