Brexit: Potential Impact on Intellectual Property & Technology
This note identifies those European and international legal frameworks concerning intellectual property rights that are unaffected by Brexit and those that may cease to apply in the UK when it withdraws from the European Union unless specific arrangements are put in place. It is one of a series of GTM Alerts designed to assist businesses in identifying the legal issues to consider and address in response to the UK's referendum vote of 23 June 2016 to leave the EU.
The sections below address the potential impact of Brexit on: (1) trade marks and designs, (2) patents; (3) copyright; (4) enforcement and licensing of IP rights; (5) exhaustion of IP rights; (6) UK's membership of WIPO; and (7) the impact of Brexit on the application of EU law in the UK.
EU Trade Marks and Community Registered Designs Affected
Brexit will not affect UK national trade mark or design registrations. The UK Intellectual Property Office (UKIPO) will continue to grant UK national trade mark and design registrations as before. UK trade mark and design law is unlikely to change significantly in the short term, but may diverge from EU law over a longer period of time. It is likely, however, that there will be an impact on the UK’s membership of the EU Trade Mark (EUTM) and Community Registered Design (CRD) systems. It is currently possible to obtain EUTMs and CRDs that cover the UK as well as the other 27 EU Member States. For rights that were obtained pre-Brexit, it remains to be seen what effect any negotiated transitional arrangements will have on the UK portions of such EU-wide rights, however they could be automatically converted into rights that cover both the UK and the remainder of the EU, saving rights owners time and cost. For applicants wanting to obtain trade mark or registered design protection for the 27 remaining EU Member States and the UK after Brexit has become effective, it seems likely that they will have to apply for an EUTM/CRD and file separately in the UK as well.
Patents Largely Unaffected
UK patent law is based on national legislation in the guise of the Patent Act 1977, so the key legislation will not change due to Brexit.
The UK will remain part of the European Patent Convention system, as it is not a part of the EU’s apparatus. This means that it will still be possible for applicants to apply for European Patents which designate the UK centrally via the European Patent Office. Any European Patents which applicants have obtained pre-Brexit and which cover the UK will also be unaffected.
European Commission proposals for a European unitary patent, providing patent protection across most of the EU, and a new Unified Patent Court with a central division in Paris and sections in Munich and London, were targeted to take effect in 2017 after ratification by the EU Member States involved. The UK has not yet ratified the Unified Patent Court Agreement and is under pressure to do so in order for the proposal to proceed. However, unless a mechanism can be found to preserve the UK's continued participation post-Brexit, this would be short-lived, and the London section of the court is likely to be moved elsewhere.
Copyright Largely Unaffected
For businesses whose key assets are copyright works, Brexit is unlikely to affect UK copyright law in the short term.
UK copyright law is partly based on international conventions, which will likely remain unaffected by Brexit. It is unlikely that the UK will repeal its main copyright legislation (the Copyright Designs and Patents Act 1988), and so it will retain EU law influences derived from, inter alia, the EU Copyright Directive and decisions of the Court of Justice of the European union (CJEU).
In the longer term, UK copyright law might begin to diverge from EU law. This is because post-Brexit CJEU decisions will not bind the English courts and the UK will not have to implement future EU copyright legislation. However, such divergence may depend on the extent to which the UK courts choose to be mindful of CJEU decisions and other sources of EU law in developing and implementing UK copyright law.
Enforcement and Licensing of IP Rights
It is likely that pan-European remedies (such as injunctions) will no longer be available in the UK post-Brexit. This will necessitate separate applications to the English courts to obtain remedies that will cover the UK.
In terms of licensing of IP rights, businesses should review the provisions of their intellectual property licenses for the implications of Brexit. Terms that are likely to be affected include choice of law (although the UK's rules are similar to the EU rules and respect any agreement as to applicable law), the territory of the license granted, and the licensed rights themselves. The impact of Brexit may necessitate license terms to be amended or negotiated.
Digital Single Market (DSM)
The EU Commission has initiated a DSM strategy that is designed to bring the EU's single market into the digital age. This strategy is to be implemented by the introduction of future legislation, such as the draft Geo-Blocking Regulation and draft Portability Regulation. The draft Geo-Blocking Regulation prevents online traders from refusing to sell goods or services (excluding audio-visual and copyright protected content) to customers on the grounds of their geographical place of residence, nationality, or place of establishment. The draft Portability Regulation provides that EU consumers can access online content from their mobile devices when away from their Member State of residence for the purpose of leisure, travel, business, or study.
If the UK were to adopt the "Norway model" and remain part of the EEA post-Brexit, these draft Regulations would apply to the UK once they enter force. If the UK adopts the "WTO model", then the draft Regulations would not apply to the UK.
Exhaustion of IP Rights
Where goods have been placed on the market in the European Economic Area (EEA) by the owner of a trade mark, distribution rights under copyright or a registered design, or with their consent, the owner is barred by the principle of exhaustion from preventing further dealings in those goods (unless there are legitimate reasons for doing so).
The principle of exhaustion of IP rights is designed to encourage free trade in the EEA. How far these principles will apply post-Brexit depends on the model chosen for the future relationship between the UK and EU. If the UK were to adopt the "Norway model" and remain part of the EEA post-Brexit, there will be no impact on the principle of exhaustion. However, if the UK adopts the "WTO model", the principle of exhaustion would cease to affect the UK. This would mean that UK trade mark, copyright distribution or design rights could be used to prevent goods first sold in the EU from being sold in the UK, and vice versa. This could lead to a reduction in parallel trade between the two markets, as well as price differentials for the same goods between the two.
WIPO Membership Unaffected
Brexit will not affect the UK's status as a member of the Geneva-headquartered World Intellectual Property Organisation (WIPO), set up under the WIPO convention of 1967 as a self-funding agency of the United Nations. It provides a global forum for intellectual property (IP) services, policy, information, and co-operation among the 188 UN Member States.
EU Law Continues to Apply in the UK until Brexit
The UK has not yet left the EU. It will remain a member of the EU, and EU law will continue to apply in the territory of the UK until Brexit, for some time, for the following reasons.
Before exiting, the UK needs to go through the exit procedure set out in Article 50 of the Treaty on European Union, starting with notification to the European Council of its decision to leave the EU. The new UK Prime Minister, Theresa May, appointed on 13 July 2016, has clearly stated that, while “Brexit means Brexit,” there should be no rush to serve the Article 50 notification. She and David Davis, the Secretary of State for the new government department in charge of managing Brexit, have supported the view that notification should not take place before the end of the year. Following their recent discussions with Mrs May, German Chancellor Angela Merkel and French president François Hollande have both accepted that the UK needs time to prepare for exit negotiations, although they have also stressed that the UK's Article 50 notification should not be unduly delayed as this would not be in the interests of the EU or UK economies.
While the situation remains fluid, it is expected that the next few months will see the UK establishing its preferred negotiating position on the terms of its exit from the EU and its preferred model for its future relationship with the EU, before notification in early 2017. This timetable should also allow sufficient scope to resolve a number of actions in the English High Court, aimed at ensuring that the government does not serve the Article 50 notification without first giving Parliament the opportunity to vote on it.
When the notification is made, it will trigger a two-year, extendible period of negotiation with the EU on the UK’s terms of exit only. At this time, it is not clear if negotiation of new arrangements with the EU will be conducted in parallel, or at a later stage. It is clear, however, that the UK intends to start negotiating trade terms with non-EU countries as soon as possible.