A guide to European IP post-Brexit

On June 23 2016, a referendum was held in the UK allowing the citizens to express their preference for either remaining in the EU or leaving the EU. The outcome was a narrow victory for the leave campaigners.

The referendum result does not mean that the UK will leave the EU immediately. Instead, the outcome is merely advisory for the government.

To leave the EU, the UK government will have to invoke Article 50 of the Lisbon Treaty. Although the official view at the time was that this would happen shortly after the referendum in the event of a Brexit vote, Article 50 has not yet been triggered.

If and when Article 50 is invoked by the UK, this will initiate a two-year period for the UK and the EU to negotiate the terms of the UK's departure. This two-year period can be extended if both the UK and the European Council unanimously agree to extend it. Therefore, the actual leaving date is likely to be at least two years away.

A major unknown is what the relationship between the EU and the UK will be post-Brexit.

One option is that the UK could remain a member of the European Economic Area (EEA). The status of the UK would then be comparable to that of Norway. However, some of the key obligations associated with EU membership which resulted in many voters wanting to leave the EU apply equally to EEA membership. In particular, to retain EEA membership, the UK will realistically have to accept the free movement of workers across the EEA area and agree to pay significant monetary contributions to other EEA countries.

Therefore, it could well be that the relationship between the UK and the EU relationship in the future will be based on an individually negotiated bilateral integration treaty between the UK and the EU, which could put the UK into a similar situation to Switzerland. This would leave flexibility for more creative solutions as compared to EEA membership. It is also possible that no new general trade agreement will be established between the UK and the EU at all, so that the relationship would be principally governed by the WTO terms, subject to individual agreements for specific areas.

Of course, once the UK leaves the EU, so-called primary EU law (in particular the Treaty on the EU and the Treaty on the Functioning of the EU) will no longer apply to the UK. Additionally, after many years as an EU member state, EU legislation has had a major influence on the law applicable in the UK. In particular, there are numerous EU regulations and directives. Several of these are also relevant for IP rights in general:

• Brussels I Regulation dealing, among others, with international jurisdiction;

• Rome II Regulation on the law applicable to non-contractual obligations;

• Regulation on Customs Enforcement of IP Rights;

• Intellectual Property Rights Enforcement Directive.

Others deal with specific IP rights, such as the EU Trade Mark Regulation, the Community Design Regulation and the Regulations on Supplementary Protection Certificates.

"After many years as an EU member state, EU legislation has had a major influence on the law applicable in the UK"

EU regulations are powerful pieces of EU legislation, which have direct effect in all EU countries. Most of them are extended to the EEA. If the UK leaves the EU (and, as the case may be, the EEA), these will cease to be effective in the UK. If the UK wishes to keep corresponding laws in force, national UK legislation must be implemented to fill this legislative gap.

In contrast, EU directives have no direct effect, but must be implemented by each EU member state. To date, a large number of EU directives have been implemented into UK law. As the laws implementing EU directives are part of national law, these will remain in force when the UK leaves the EU, although the UK can at that point repeal these laws or amend them.

The impending Brexit will affect IP matters in Europe. The extent of this is of course dependent on the terms and conditions under which the UK leaves, and in particular on whether the UK will remain in the EEA, enter into a Swiss-like integration agreement with the EU or neither.

For example, depending on whether or not the UK will remain in the EEA, there will be an effect on the territorial scope of the exhaustion of IP rights. Based on case law of the Court of Justice of the European Union (CJEU), IP rights cannot be invoked in an EU/EEA member state with respect to a product that has been put on the market by the right holder or with the right holder's consent (for example, by a licensee or distributor) in another EU/EEA member state. If the UK ceases to belong to the EEA, putting a product on the market in the UK will not trigger EU/EEA-wide exhaustion of IP rights and vice versa.

Unless specifically stated otherwise, the following comments assume that the EU law relevant for IP rights will cease to have effect in the UK upon Brexit.

EU regulations define the existence of unitary IP rights for the EU in the areas of trade marks and registered designs. Based on these regulations, EU Trade Marks (EUTMs) and Registered Community Designs (RCDs) can be applied for at the European Union Intellectual Property Office (EUIPO), and when granted they are effective in the entire EU territory.

In parallel, national legislation exists in the UK (as in other EU member states), providing for national trade marks and registered designs.

Post-Brexit, any EUTMs or RCDs applied for will not result in any rights in the UK. It is reasonable to assume that a separate national trade mark or design application will have to be filed with the UK Intellectual Property Office (UKIPO) if protection is desired for the UK.

Likewise, any EUTMs and RCDs in force at the time of the Brexit must be expected to stop being effective in the UK at that point. While this could theoretically lead to a loss of rights, it is widely believed that there will be transitional provisions in place which will allow current EU right holders to obtain a corresponding UK right. Details of how this will work are at present unknown.

Practice tip Applicants may want to consider whether to start filing both UK and EU applications for their trade marks and designs now, especially in cases where it is important to secure protection in the UK. This way, it will not be necessary to rely on the expected transitional provisions.

Apart from national UK applications, post-Brexit it will still be possible to designate the UK when filing an international trade mark application with WIPO. This option is not available for international design applications as the UK is not a member of the Hague Agreement. After Brexit, it will therefore no longer be possible to obtain protection in the UK via an international design application.

The EU Trade Mark Regulation (EUTMR) includes a use requirement, whose operation will very likely also be affected by a Brexit.

Pursuant to Article 15 EUTMR, owners of registered EUTMs are required to use their marks in a substantial part of the EU within five years of registration; if this is not done, the consequence can be cancellation of the trade mark. Use in only a single member state generally is sufficient to uphold protection for the rest of the EU.

Assuming that there will be an option to detach the UK part from an EUTM to form a national mark (with the priority of the EUTM) and that the EU component of the mark simply will continue to exist as such, the question arises how the use requirements for the two new parts of an existing EUTM will be assessed.

Especially in cases where the EUTM has been used either (i) exclusively in the UK or (ii) exclusively in the rest of the EU, there would on the face of it be a failure to comply with the use requirements for at least one part of the existing EUTM.

Practice tip It would seem prudent for holders of EUTMs to use them both in the UK and in the non-UK part of the EU to improve chances of complying with post-Brexit use requirements.

Brexit can also be expected to have significant influence on the litigation of trade marks and registered designs.

Firstly, the UK courts will lose jurisdiction over EUTMs and RCDs.

Secondly, the UK courts are currently required to follow decisions of the CJEU. However, post-Brexit this will no longer be the case; for UK national rights, UK courts will be able to deviate from CJEU decisions. Therefore, a divergence between the way validity and infringement of parallel EU and national UK trade marks and registered designs is assessed may develop.

Brexit will also have an impact on representation in proceedings before the EUIPO and CJEU unless the UK remains part of the EEA.

Firstly, UK companies will lose the option to carry out their trade mark and design prosecution in-house. Non-EEA companies are required to be represented by a professional representative.

Secondly, the European Union Intellectual Property Office (EUIPO) will only enter a person on its list of registered representatives if that person is (i) a national of an EEA member state; (ii) has a place of business or employment in the EEA; and (iii) is entitled to provide representation in trade mark/design matters before the central industrial property office of an EEA member state. Post-Brexit, this may be a problem for professionals with UK nationality, UK-based employment or UK professional qualifications.

In addition, representation at the CJEU will be an issue. Only lawyers authorised to practice before a court of an EEA member state may represent or assist a party before the CJEU.

While there are several instruments of EU legislation with relevance for patent law, the effect of a Brexit on the present system of patent prosecution and enforcement will not be as severe as in the area of trade marks and designs.

Patent prosecution in Europe is governed by the European Patent Convention (EPC) and by national laws. The EPC is not related to the EU, and a Brexit will not change the UK's status as an EPC contracting state. Patent protection in the UK will continue to be obtainable by national UK applications or by an application for a European patent at the EPO. European patents validated in the UK will continue to have effect in the UK.

In the area of patent litigation, the status quo will also be largely maintained, although there the lack of applicability of the EU Regulations having an impact on IP law in general (see above) will have an impact on multi-jurisdictional case scenarios.

Until the announcement of the surprising outcome of the UK referendum, it was expected that the European patent package establishing the European Patent with Unitary Effect (UP) and the Unified Patent Court (UPC) would come into force in spring or summer 2017.

The Brexit vote has, however, changed that. It is now uncertain if, when and with what modifications we will see the UPC and the UP coming into existence.

As long as the UK remains in the EU, the system requires the ratification of the UK to be able to start. According to Article 89 UPC Agreement (UPCA), it will come into force only upon ratification by 13 contracting states including the three EU member states in which the highest number of European patents had effect in 2012. This includes the UK in addition to France (which has already ratified) and Germany. Only if and when the UK leaves the EU would it be replaced by Italy, the number four in terms of effective patents in 2012.

As long as the UK is an EU member state it could ratify the UPCA irrespective of the result of the referendum and pave the way towards the expected start of the new system in 2017. However, it is doubtful that the UK will follow that path, considering that this will result in a new system being set up in the knowledge that modifications will in all likelihood have to be made as soon as the UK leaves the EU. Furthermore, even if the UK should ratify the UPCA, it would still be necessary for Germany to ratify as well before the new system can become operational; however, there appear to be good reasons for Germany to withhold its ratification to avoid a situation of uncertainty at the outset of the UPC system.

It rather seems that as long as the UK is an EU member state, i.e. for at least two years, there is a deadlock situation in which the necessary ratification by the UK and Germany will not happen.

A possible way out of such deadlock could be an amendment of the UPCA. This would require significant effort by all involved parties, in a period where the UK as well as the EU and its member states may have other priorities.

If the discussions regarding the UPCA are reopened, it can be foreseen that there will be demands for further changes. It is expected that the London seat of the Central Division of the UPC will be re-assigned, for example to Milan. This may trigger discussions regarding a re-assignment of responsibilities among the seats of the Central Division. It also seems that the presently proposed system of renewal fees for the UP based on the renewal fees of four countries including the UK may require reconsideration. After all, patentees desiring protection in the UK would need to validate and pay for their European patent separately in the UK.

There are also voices suggesting that even after the UK leaves the EU it would be possible for it to be part of the UPC and UP system. However, it seems difficult to reconcile the necessary subjection of the UK courts to the jurisdiction of the CJEU with the Brexit objectives, not to speak of the legal uncertainties that would follow from any such solution.

The most likely Brexit scenario will thus entail amendments of the UPCA and re-consideration of several issues which were already agreed upon, and a significant delay of the launch of the new system.

One obvious Brexit implication in the area of IP agreements is with regard to contracts that stipulate the EU as the territorial scope of the agreement. Once the UK leaves the EU, this will create uncertainty as to whether the UK is still covered.

Practice tip When drafting or reviewing IP agreements using the term “EU”, be specific as to what this term should mean, or avoid the term entirely.

Depending on the applicable law and contract language, a Brexit may be ground for termination under material adverse change or force majeure provisions.

Practice tip Review existing agreements to establish what consequences, if any, the UK leaving the EU will have. If necessary, seek clarification with your contract partner.

Morten Garberg
		Morten Garberg graduated from Oxford University with a Master’s degree in chemistry in 2002. After qualifying as a UK and European patent attorney while working in Hoffmann Eitle’s London office, he transferred to the Munich office in 2006, where he is now a partner. Morten advises clients on patent prosecution and litigation, and has particular expertise with EPO opposition practice, frequently presenting cases at oral proceedings. Technically versatile, he has experience not only in the field of pharmaceuticals, but also food science, materials science and polymers. He frequently presents on topics related to European patent law at international conferences, especially in the US and in his native Scandinavia.

Dirk Schüssler-Langeheine
		Dirk Schüssler-Langeheine graduated from Bonn University and has been a German Rechtsanwalt (attorney-at-law) since 2000. He now co-heads the patent litigation and licensing department of Hoffmann Eitle. Dirk advises clients in all technical areas on patent litigation before the German courts and has special expertise in organising and coordinating multi-jurisdictional patent disputes. He has particular experience in enforcing pharma patents throughout Europe. Other fields of expertise are licensing law and the IP-related aspects of competition law. Having lived in Japan for several years and being fluent in Japanese, he has a focus on providing strategic advice for Japanese clients and conducting negotiations between Japanese and European or US companies. He is a frequent speaker and the author of numerous publications on European and Japanese patent law.