Practical preparations for Brexit: a global perspective
Avoiding the double-filing of trademarks and designs and transferring .EU domain registrations are just two recommendations for IP owners in light of Brexit, as Beverley Potts, David Stone, Joachim Feldges, Keren Livneh and David Shen of Allen & Overy explain
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Only the very brave are predicting with certainty the outcome of attempts by the UK to leave the EU. There is still no clarity on whether: (i) the UK Parliament will approve the withdrawal agreement negotiated between the EU and the UK government; (ii) the UK will leave the EU without any deal (‘hard Brexit’); or (iii) the UK will hold a second referendum or even revoke Article 50 so that the UK remains in the EU. The agreed extension to the proposed exit date has currently removed any ‘cliff-edge’ urgency, but this has only increased the uncertainty surrounding if and when the UK will leave the EU. From an IP perspective, there remains no need to panic. The UK government has made it clear that its priority is to ensure that it is business as usual and that no IP rights will be lost in the UK, regardless of whether the UK leaves the EU with or without a deal. Nevertheless there are a number of practical issues which IP owners are considering to ensure continuity, regardless of the outcome of Brexit.
Whether there is a Brexit deal or not, IP owners should be considering at least the following developments to ensure continuity.
Trademarks and registered designs
With regard to trademarks and registered design rights, things will likely remain unchanged on Brexit day, apart from the envisaged conversion of registered EU trademarks (EUTMs) and registered Community designs (RCDs) into a single EU right in 27 member states (EU27) plus a UK national right (a 'UK child right'). So, effectively, IP owners will retain the same protection across the same territories but this will be achieved via two separate rights instead of the current one. Practically, this means, for example, that two separate marks will need to be assigned or licensed (and the transactions recorded on two registers) and two separate rights renewed – although, helpfully, the renewal and priority dates will be the same for the EU mark/design and UK child right.
We are not recommending double-filing at this stage (i.e. there is no need to register a UK mark or design in addition to an existing EUTM or RCD). It can't hurt, of course, but it does have a cost – and for larger portfolios, that cost is substantial. The UK government has committed to creating the equivalent UK child rights with minimal administrative burden regardless of whether there is a deal with the EU or not. Accordingly, at this stage, filing for additional UK marks or designs when there is existing EUTM/RCD protection appears to be an unnecessary duplication and expense. On either a deal scenario or a crash-out scenario, the pan-EU rights will be cloned, automatically and for free. If there is no Brexit, then the additional filings will have been wasted.
Trademark and design law
Over time, diverging interpretation and application of trademark and design law in the EU27 and the UK could have an impact on branding and marketing strategies, for example, with regard to the use and protection of so-called non-traditional marks (e.g. slogans, and 3D, colour and sound marks), the relevance of the different functions of a trademark or whether functional elements of a product design are protectable. However, we emphasise that this divergence won't happen immediately. The current version of the withdrawal agreement has a two-year transition period during which EU law will remain in force in the UK. Even in the event of a hard Brexit, previous case law from the Court of Justice of the European Union (CJEU) will have the status of rulings from the UK Supreme Court. This means that trademark or design disputes will need to be taken to the Supreme Court in order to overturn CJEU decisions, and currently only a few IP cases are heard there each year. The UK courts can also have regard to post-Brexit CJEU rulings if they are relevant to the dispute being decided (like they do currently with, for example, US or Australian cases) but we will have to wait to see whether they follow suit or take UK law in a different direction.
Finally, the UK has already implemented the recent EUTM reforms but will be free to decide whether it wishes to align itself with further EU developments such as any changes to design law stemming from the current evaluation of EU legislation on design protection.
Pending EUTM and RCD applications and oppositions
In a no-deal or a deal scenario, owners of pending applications for EUTMs and RCDs will be given a nine-month period to file a new UK application with the same filing/priority date as the EUTM/RCD application. The recent extensions to the Article 50 period mean that more marks and designs should be successfully registered before the new planned date for the UK to leave the EU. Again we are not recommending double-filing at this stage but saving costs by waiting to see what happens and, if necessary, re-filing in the UK within the nine-month window in order to keep the earlier filing date.
The EUIPO has indicated that, in the event of a hard Brexit, pending opposition or invalidity proceedings based solely on UK rights will be dismissed. There has been some criticism of this approach, and a court challenge is possible. The good news for now is that the EUIPO has lifted its previous suspension of these proceedings in light of the Article 50 extension, giving parties the chance to proceed with their cases as planned. However, there is a risk that the EUIPO will reinstate the suspension if there is a lack of progress with the Brexit negotiations and/or ultimately dismiss such cases if there is a no-deal exit. While there is some doubt about the legality of the EUIPO's position, it is worth checking current EUIPO proceedings to ensure none relies only on UK rights – and progress quickly with UK rights proceedings. Any newly filed actions should be based on rights in at least one EU27 country.
The UK government has made it clear that it does not want designers to lose unregistered Community design protection in the UK post-Brexit because this three-year unregistered right is vital for protecting high fashion items such as clothing and footwear. Accordingly, under both the withdrawal agreement and a no-deal scenario, any existing unregistered Community designs will be given equivalent protection in the UK for their remaining duration. There will also be a new UK right for new designs, called the "supplementary unregistered design right". This means that fashion businesses will need to take into account two separate rights – the Community unregistered design for designs first disclosed in the EU and the new UK supplementary unregistered design right for designs first disclosed in the UK. One issue we would bring to the attention of international designers is how they might achieve protection in both the EU27 and the UK. This will require simultaneously first disclosing the design in both the UK and the EU27, which is practically very difficult but may be possible using, for example, the internet.
.EU domain names
UK businesses and individuals will no longer be able to own .eu domain names after Brexit day. The registry for .eu domain names, EURID, will be able to revoke the ownership of .eu domain names if they are owned by organisations that do not have a registered office or principal place of business in the EU or by individuals who are not resident in the EU. UK businesses should therefore be considering transferring registrations now to an EU-domiciled entity or to other top-level domains (such as .com, .co.uk, .net or .org) in order to avoid the loss of any domain names and/or the interruption to internet traffic.
Businesses that invest heavily in data and databases may also want to be considering the effect of Brexit on sui generis database rights. Under the withdrawal agreement, rights that subsist at the end of the transition period will remain in force in the EU and the UK for the remainder of their duration. However, in a no-deal situation, there will be no obligation for EU member states to provide this protection to UK nationals, residents and businesses, and UK legislation will be amended so that only UK citizens, residents and businesses are eligible for new database rights after exit. Accordingly, international businesses that wish to retain rights in both the EU27 and the UK may want to consider whether they might be able to claim alternative protection, such as copyright, which protects creative originality in the data or the arrangement of the database as opposed to investment in obtaining, verifying or presenting the data. Additionally, they should be considering whether their contractual arrangements (e.g. restrictive licensing) are as tight as possible.
Patents and SPCs
With regard to patents, the UK leaving the EU will not affect the UK's membership of the European Patent Organisation (which is not an EU organisation). This means there will be no change on Brexit to either the UK patent system or the system of patents administered through the European Patent Office. Accordingly, as long as the unitary patent does not come into force, there will be no change with regard to European patents designating the UK as the European Patent Convention will continue to apply to the UK.
There is continuing uncertainty about when and if the Unified Patent Court (UPC) will come into effect. Some of that uncertainty stems from Brexit but there is also a pending challenge to the legality of the system in Germany. If and when the unitary patent and the UPC come into force, there is debate about whether the UK may still qualify as a member state under the Agreement on a Unified Court. For the time being, patent owners are waiting for the further development of the UPC and, in particular, for the decision on the German constitutional complaint (judgment still pending).
With regard to supplementary protection certificates (SPCs), which are granted for each country separately, the SPC Regulations remain in force and apply in all the EU27. The regime governing SPCs in the UK largely depends on the terms of Brexit and the provisions the UK may put into force. The UK intends to mirror the provisions of the SPC Regulation in domestic UK law post-Brexit, but whether it will mirror exactly decisions of the CJEU relating to the interpretation of the SPC Regulation is not certain.
One thing clients are looking at now in anticipation of Brexit is the impact on their existing or planned IP licence agreements. Definitions of territory should be reviewed and amended if necessary to make sure that the territory of the UK remains included in the agreements after Brexit (if that's the parties' intention). The same applies to the list of licensed rights where EU IP rights such as EUTMs or Community design rights may be converted into UK child rights. Any references to an existing EUTM in any document such as an IP licence shall be read as including references to the comparable UK child mark unless there is evidence that the document was not intended to have effect in the UK. Clarity on this within the agreement could still avoid a lot of uncertainty in the future. In addition, clients are looking at the impact of their local law – for example, according to German Civil law, the parties may be obliged to amend any relevant contract in view of developments that were unexpected when they entered into the contract, such as Brexit.
Governing law and choice of jurisdiction
Some IP owners are revisiting the choice of governing law and choice of jurisdiction for their IP licence agreements. For licence agreements that include IP governed by EU law, the choice of English law did and does not raise any specific concern as long as the UK was and continues to be a member state of the EU. After Brexit, however, English law will no longer be subject to the development of IP law in the EU and the courts of the UK will no longer be authorised to submit questions for preliminary decisions to the CJEU. It is also important to note that, after Brexit, the UK courts will be unable to grant pan-EU injunctions in relation to EUTMs and Community designs, and the Brussels Regulation on jurisdiction and the recognition and enforcement of judgments will no longer be applicable to the UK courts. This may combine to raise potential issues for EU IP licences if, for example, the law governing the contractual side of the licence is different to the law governing the validity, infringement or enforcement of some of the IP rights involved. The parties will need to evaluate carefully to what extent these points may be relevant to them.
Prior to any switch of governing law clause, parties should carry out a careful analysis of both the advantages and disadvantages of changing the approach and will need to conduct a comparative law exercise, including identifying any implied rights or restrictions under such other governing law. In practice, parties would need to work out whether the meaning or effect of the contract will change if the governing law is altered and whether any amendments might be needed to ensure the agreement operates as originally intended.
The Trade Secrets Directive had to be implemented by the EU member states by June 9 2018. The UK duly passed implementing legislation the day before the deadline so that the directive is now part of the existing body of UK law. This means that the legal position on trade secrets (or at least the minimum level of trade secrets protection) is currently harmonised across the EU (Germany is about to transpose the directive this year) but, in future, the law may develop differently in the EU and in the UK.
(L-R) Beverley Potts; David Stone; Joachim Feldges; Keren Livneh; David Shen
Beverley Potts is a senior professional support lawyer and David Stone is a partner in the London office of Allen & Overy; Joachim Feldges is a partner in the Munich office; Keren Livneh is a senior associate in the New York office; and David Shen is a partner in the Shanghai office.