This bulletin discusses the implications of Brexit on licensing EU Trade Marks (EUTMs). The bulletin very briefly considers what will happen to EUTMs in the UK after Brexit, before turning to implications for EUTM licences.
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.
Once Brexit takes effect, how will unitary EU-wide registered IP rights, such as EUTMs, be addressed with regard to the UK, and what implications are there for EUTM licences? 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.
Will my EUTM still cover the UK?
The answer is no. However, a new UK trade mark will be created out of the existing EUTM, to cover the UK territory. This appears to be going to happen whether or not a Brexit deal is done, The UK Government recently set out its position regarding a "no deal" Brexit, stating that its aim is to ensure continuity of protection for EUTM owners and to avoid the loss of currently held rights. Accordingly all existing EUTM holders will be granted an equivalent trade mark registered in the UK. In respect of pending EUTM applications, applicants will have a grace period of 9 months to apply in the UK for the same mark to retain the priority date of the original EUTM application.
What about EUTM licences?
Of equal concern to licensors and licensees is what will happen to existing EUTM licences after Brexit, where the licensed territory includes the UK. Will the UK continue to be covered by the licence?
The question will be easy enough to answer where wording is used such as "the EU as constituted from time to time" (on the one hand), or "as constituted at the date of this Agreement" (on the other). Where no such wording is used, the answer is likely to depend on the factual background to the licence (assuming it is governed by English law), meaning it requires case by case analysis. Was the "EU" simply being used as convenient shorthand for a list of countries, so the UK would continue to be in scope? Or was the terminology used because it had certain factual or legislative implications on the subject matter of the contract?
Relevant factors might include whether, for example:
- any national rights (registered or unregistered) are included in the licence alongside the EUTMs;
- the EU territory was chosen because it is a single market, with ability to protect against unauthorised imports from outside but not to prevent parallel trade of authorised goods within;
- there are legal or regulatory reasons why the licensee needs to be located in an EU Member State.
Assuming parties are in agreement, they would be advised to amend existing licences to ensure it is clear whether the UK will remain part of the licensed territory after Brexit, and at the same time to clarify the position with regard to future EU joiners/leavers. The same is true for licences currently under (re-)negotiation.
If the correct interpretation is that the UK remains part of the licensed territory, there is a second question about whether the new UKTM right deriving from the EUTM is automatically included in the existing licence without the need to amend the licence. This is a matter which might be provided for in any transitional legislation which sets out how the Brexit "gap filling" UKTMs are created in the first place. Failing that, the answer is again likely to depend on the factual background to the licence (assuming it is governed by English law), meaning it again requires case by case analysis.
Assume that the UK 'portion' of an EUTM will be converted into a UKTM registration (e.g. with the same filing, publication and registration dates as the EUTM). The right being licensed in the scenario contemplated above is likely then to either: (1) change altogether from an EUTM to a UKTM (where the territory is the UK only), or (2) be expanded to include a UKTM (for the UK part of the licensed territory), alongside the existing EUTM (for the EU part of the licensed territory).
This means that the legal rules governing the UK portion of the licence will change. This is because the licensing of UKTMs is governed by sections 28 to 31 of the Trade Marks Act 1994, whereas the licensing of EUTMs is governed by Articles 22 and 23 of the EUTM Regulation. Until recently, this risked creating material divergences between a licensee's rights under the EUTM and under the UKTM portions of the licence (described fully in an earlier version of this bulletin). However, the recently enacted UK legislation implementing the new Trade Mark Directive (Directive 2015/2436) will now align the regimes, so that is no longer relevant.
However, licensees in particular should note that a licence of a UKTM is only effective against a third party acquiring a conflicting interest (such as a party buying the UKTM, or a subsequent licensee whose rights conflict) if it has been registered at the UK IPO. The rights of an exclusive licensee to enforce the UKTM in its own name are also contingent on the licence having first been registered at the UK IPO.
As a result, absent specific transitional provisions directed at this, a licensee of an EUTM licence whose territory includes the UK should seek to register the licence at the UK IPO as soon as the new UKTM deriving from the EUTM comes into existence. This will be the case even if the EUTM licence has previously been registered at the EU IPO. It costs £50 to register the licence against the relevant UKTM with the UK IPO, and this can be done without the licensor's involvement if the licensee supplies a copy of the licence. Of course, there remains a question over how the UK IPO will respond after Brexit to requests to register what is on the face of it an EUTM licence against a UKTM which is not expressly listed as one of the licensed marks, something on which the "no deal" technical notice concerning trade mark registrations is silent.
This article is part of our Brexit series