What does Brexit really mean for IP?

There has been a lot of panic about the impact of Brexit. For the few of you who aren’t familiar with the concept of Brexit, it was one of the many unexpected political events of 2016.

In short, the UK held a non-binding referendum regarding whether the UK should remain a member of the EU. A slight (52%) majority of the people who voted in that referendum (around 70% of eligible voters) voted to leave. As a result, the UK is heading toward complete constitutional upheaval with no real understanding of what the alternative to EU membership might be.

Intellectual property was one of the areas of law which had been made most consistent across the EU in the last 40 or so years. Consequently, it is particularly likely to change significantly after Brexit – although quite how is as much a mystery at the moment as the true meaning of Brexit. Whilst the politicians try to figure that out, there are some things which we can be reasonably certain will change:

1. The European Union trade mark

Most obviously, the EU trade mark is unlikely to cover the UK after Brexit. Note that I say “unlikely” – even this is not a definite as one of the many potential solutions is that the EU trade mark is treated as covering the UK even after the UK leaves the EU.

A favoured option is that there is an automatic opt in to registration of EU trade marks as UK trademarks (and vice versa). Provided the process is straightforward (and bug free) this should be relatively straightforward. However, if examination of the marks is required or use becomes an issue this may be very cumbersome and time consuming. This may be a particular issue when converting the UK part of an EU mark into a UK mark. This is because, like in the US (but unlike the EU), on filing a UK mark, applicants are required to provide a statement of use. If the EU mark is more than five years old and has never been used in the UK, it may not be possible for trade mark holders to make this statement.

2. Exhaustion of rights (AKA first sale doctrine)

Before the UK joined the EU, it allowed worldwide exhaustion of goods. In other words, once a branded product was put on sale anywhere in the world, a trade mark owner could not prevent its resale in another territory. In the USA, this is known as the first sale doctrine. Following EU membership, the UK limited exhaustion to goods from the European Economic Area (essentially the EU plus a few others like Norway and Iceland).

After Brexit, the UK may return to international exhaustion or could agree to a much more limited exhaustion based on trade deals.

3. EU designs

The UK, particularly the fashion industry, has benefitted from EU unregistered design right. This protects the shape or appearance of the whole or part of a product for three years from the date the design is first made available to the public. The removal of EU unregistered design right may lead to increased copying in the UK.

In addition, the UK will lose the protection of EU registered designs. It is anticipated that it will be possible to divide EU registered designs into UK and EU designs but this may be slightly more complicated than trade marks because:

(i) unlike a trade mark, if you lose design protection you cannot refile with a later priority date
– once a design is made public for more than a year is no longer new and therefore it
cannot be registered at all;

(ii) the EU design system does not examine designs for earlier conflicting rights prior to grant
– this means that there are a lot of EU registered designs which are invalid.

The second point is a particular issue from a political perspective. The UK registered design system requires the examination of earlier rights in order to register a UK design. As there are far fewer EU registered designs than trade marks and the lack of examination is a major problem with EU registered designs, it may be that a different approach is taken to trade marks and EU designs have to undergo an examination process (potentially prior to litigation or renewal – which under the EU and UK systems happens every five years up to a maximum of 25 years).

4. Contractual terms

We are still seeing contracts which define the territory as the “European Union”, are intended to cover the UK and apply after 2019 (when the two year period for the UK negotiating the terms of its departure from the EU ends and the UK can no longer be a member of the EU). There are many more contracts out there which include these sorts of clauses and may be continually renewed based on a course of dealing or last for a long term. This could pose a big problem in the future. If in doubt, check all contracts and include Brexit proof wording, e.g. “all countries which are members of the European Union on the date of this agreement”.

5. Other issues

This is just the tip of the ice berg as far as IP is concerned. Other issues include the status of pan-EU injunctions, settlement agreements and co-existence agreements which are based on EU rights may no longer cover the UK etc. Similarly, .eu domains are only available for EU citizens or businesses.

There are many other lesser known pan-EU rights such as Protected Designations of Origin and their close cousins, Protected Geographical Indications. These mean that you don’t see English Champagne or Dutch stilton on the shelves. This could all change in the English supermarkets of the future. In many instances there are parallel trade mark rights e.g. Scotch whisky but this can pose problems when the trade mark owner has not got the right sort of licence scheme in place.

WHAT CAN YOU DO?

Although the outcome of Brexit is still somewhat up in the air, there are some simple steps that can be taken now to make sure that you are dealing with known unknowns (and not unknown unknowns).

First, review your portfolio now and identify any potential issues such as marks which are registered in the EU but are either (i) only used in the UK or (ii) not used in the UK.

Secondly, remove the risk by filing for UK marks now for key existing brands as well as for all newbrands (in tandem with EU marks).

Thirdly, review your contracts including distribution agreements, settlement agreements, co-existence agreements and anything similar. Is there a clause which covers the EU but is intended to cover the UK or which deals with EU rights only? When does the agreement expire? How business critical is this contract? Bear in mind that renegotiation may come at a price, so prioritise.

Finally, if this really matters to your business, consider joining one of the many groups lobbying the UK and EU so your concerns and potential solutions are taken into account.

Alt Legal Blog

What does Brexit really mean for IP?