The legal consequences of Brexit and their impact on UK businesses

Many of the UK’s intellectual property (IP) laws are derived from EU law. And, most businesses will deal with IP on an international basis. As well as EU wide Design Rights, Trade Marks and Plant Variety Rights, we have a Supplementary Protection Certificate Regulation and Directives harmonising national laws in areas such as:

• trade marks;
• designs;
• databases;
• copyright;
• software;
• trade secrets; and
• biotechnology inventions.

Some Directives have been implemented by statute, others by secondary legislation under the European Communities Act 1972 (ECA). Transactions dealing with intellectual property are also often affected by EU law, particularly competition law and the Technology Transfer Block Exemption.

Following Brexit

Following Brexit, existing EU wide rights were replaced by new UK national rights which were effectively clones of their EU parents administered by the UK Intellectual Property Office or Plant Varieties Office.

Going forward, IP right holders and users of the IP system will need to deal with a major market where IP rights are free standing and where the local law is likely to diverge over time from the law in the EU, as judgments from the EU courts will no longer bind the UK courts.

However, the UK has always been a well respected jurisdiction for resolving IP disputes and UK law a flexible and predictable choice for international contracts and we expect this to continue in a post Brexit world.

Trade marks, designs, plant varieties, etc.

Now that the UK has left the European Union, EU Trade Marks, Registered and Unregistered Community Designs and Community Plant Variety Rights cease to have effect in the UK, and the Regulations under which they were granted and enforceable no longer have effect in the UK.

The UK Government is legislating for equivalent rights so that there should be no (or minimal) loss of rights for right holders.

So far, the UK Government has laid before Parliament two draft Statutory Instruments dealing with such new rights, the Trade Marks (Amendment etc.) (EU Exit) Regulations 2018 (The Trade Mark Exit Regs) and the Designs and International Trade Marks (Amendment etc.) (EU Exit) Regulations (The Design and IR Exit Regs).

We are expecting similar draft regulations for plant variety rights and geographical indications.

The Government has confirmed that right holders with existing EU Trade Marks and registered Community Design rights will be protected on exit through the creation of new, equivalent UK rights granted at no cost and with minimal administrative burden (with an opt out available for those who do not want to receive a new right of this kind).

Use in the EU prior to Brexit will support the validity of these new rights.

Individuals or corporations with pending EU Trade Mark and registered Community Design applications when the UK exited the EU, have 9 months to apply in the UK for equivalent UK protections. They are also able to retain the initial EU application date as the priority date and any rights to seniority.

These new UK trade mark and registered design rights:

• are renewable in the UK (separately from the EU rights from which they are derived;
• can form the basis for proceedings before the UK Courts and the UK Intellectual Property Office (UKIPO); and
• can be assigned and licensed independently from the corresponding EU right.

The UKIPO has taken over the administration of the registrations which substitute in the UK for the former EU wide rights.

Existing Unregistered Community Design Rights (UCDRs) will continue to be enforceable in the UK for the remaining period of their protection under the Design and IR Exit Regs. These designs will be known as 'continuing unregistered Community Designs'.

In addition, the Government has confirmed that it will create a new ‘supplementary unregistered design right’ in the UK, which will mirror the scope of the UCDR and arise automatically. This will mean that designs disclosed to the public after Brexit will be protected in the UK as supplementary unregistered design rights.

Existing EUTMs, Community Plant Variety Rights, registered Community Designs and UCDRs arising from disclosure in the UK prior to Brexit, will remain valid in the remaining EU27 member states.

UK registrants of .eu domain names will no longer be able to own such rights post Brexit. They either need to transfer their rights to an EU27 based registrant or buy an alternative top level domain.

The UK Government has stated that ‘provision will be made’ regarding litigation pending before the UK courts where the claim is based on an EUTM or Community design. We expect this will be the subject of future guidance from the Government once the future relationship becomes clearer.

UK lawyers, and patent and trade mark attorneys, have lost their rights of audience before EU courts and bodies including the Court of Justice of the European Union (CJEU), the EU Intellectual Property Office (EUIPO formerly OHIM) and Community Plant Varieties Office unless they hold an alternative EU/EEA qualification.

The previous requirement that professional representatives are EEA nationals and have a place of business in the EEA (or are lawyers with a right to practise in the EEA in the case of the CJEU) means that the IP departments of UK companies, which have hitherto dealt directly with EU institutions, may need to restructure how they operate.

They may need to relocate, replace staff or instruct external agents, in order to be represented before these bodies.

Patents and Supplementary Protection Certificates

Since the European Patent Convention is not an EU instrument, it will not be affected by Brexit and European Patents (with a UK designation) will continue to be granted by the European Patent Office and to take effect in the UK. Amendments to the UK Patents Act 1977 introduced by secondary legislation under the ECA to implement EU Directives (notably the Biotech Directive) will also be preserved when the ECA is repealed.

Existing UK Supplementary Protection Certificates (SPCs) will continue as SPCs are granted and administered on a national basis. The Government has confirmed that it intends to maintain the current SPC legal framework as the UK leaves the EU.

For more information see Patents and SPCs after Brexit: a quick look.

Customs detection, parallel imports and exhaustion

Customs detention of (allegedly) infringing goods at the point of importation is an important weapon in the hands of rights holders, not only against counterfeiters, but also in standards based industries such as electronics and telecoms. Following the UK’s departure from the EU, there will be a border between the UK and the EU where detention of goods can take place.

Whether or not a right holder can object to importation of goods depends on the principle of exhaustion of intellectual property rights. At the moment, once a product is put on the market anywhere in the EEA with the right holder’s consent, the IP rights protecting that product are said to be exhausted and the right holder cannot rely on its intellectual property rights to prevent importation of the product.

Since 1 January 2021, (through the Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations SI 2019/265) the UK has recognised the EEA regional exhaustion regime post Brexit IP rights in relation to goods (lawfully) sold in the EEA have been considered exhausted in the UK and practically, parallel imports have continued from the EEA.

However, IP rights in goods (lawfully) sold in the UK may not be considered exhausted in the EEA. As such, exports of goods first placed on the market in the UK to the EEA may need the permission of right holders from 1 January 2021.

The UK recently launched a detailed consultation to consider what IP exhaustion regime it will apply in the longer term. The UK Government is broadly considering 4 options: (i) maintaining the current, UK+ regime, (ii) moving to a national exhaustion regime, (iii) moving to an international exhaustion regime or (iv) creating a mixed regime where specific goods, sectors or IP rights are subject to different regimes.

For more information see Exhaustion of IP rights and parallel trade.

IP licensing

The impact of a Brexit on IP licensing, particularly by major businesses, will be comparatively small. This is because licences usually cover the whole or substantial parts of Europe and need to comply with EU law (particularly competition law and the Rome choice of law rules) even if they are governed by the law of a non EU Member State.

This will only change if, in the longer term, the UK is treated by licensing businesses as an entity separate from the EU into which IP rights are licensed separately.

It would be prudent in licensing agreements to provide for the eventuality that licensed rights such as European Union Trade Marks or Registered or Unregistered Community Designs might be converted in part into national rights to which the licence will continue to apply.

IP enforcement

The means and remedies provided for enforcing IP rights have been harmonized under the Enforcement Directive. Many of the remedies required by the Enforcement Directive were already available in UK law, and so we expect to see little change at least initially in the procedures and processes governing enforcement of IP rights post Brexit. Over time, there may be a divergence as UK law and practice develops separately from the EU27.

Long term effects

In the longer term, IP right holders will need to deal with a major market where IP rights are free standing and where the local law is likely to diverge over time from the law in the EU, as judgments from the EU courts will no longer bind the UK courts.

This will reverse the movement to harmonise IP law in Europe. Once the negotiations over the future relationship have been completed, even if the UK remains part of a single market in the European Economic Area (EEA), manufacturers will have to accommodate a significant market where courts can decide that what can be sold is not the same as elsewhere in Europe.

Of course, this is a problem that has existed in the recent past and will affect only a small number of companies, but it does (re)introduce a complication which manufacturers will need to consider if their businesses involve selling the same products throughout Europe.

Rights of audience in the EUIPO and the CJEU

Post Brexit, as things stand, UK lawyers and patent and trade mark attorneys who do not have an additional qualification elsewhere in the EU will no longer have rights of audience in the EU Intellectual Property Office or the CJEU as these rights depend on being a national of, and having a place of business in, an EEA state (or, in the case of the CJEU, in being qualified to practise in the EEA).

The UK Government is looking to extend rights of audience to UK professionals as part of its negotiations with the EU on the future relationship. The European Patent Office will be unaffected, as it is not an EU institution.