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Brexit implications and developments

Now that Article 50 has been triggered, we know the UK will be leaving the EU by spring 2019. Martyn Fish of HGF asks what this means for various IP rights

With the triggering of Article 50 on March 29 2017 the UK will leave the EU in spring 2019. In the nine months since the UK referendum much has been written about the impact of leaving the EU on IP rights. While we have clarity on a number of issues, there are still many details that have yet to be worked through. What is the likely impact of Brexit on IP rights in Europe? We take a look at what Brexit could mean for patents, trade marks, designs and related agreements.

Brexit and patents

Will Brexit affect the filing of patents through the EPO?

Patent filing and prosecution at the EPO will be unaffected by the UK leaving the EU. The EPO is not an EU institution and UK patents will still be available through the EPO. UK-based attorneys will also continue to represent clients before the EPO both during prosecution and oppositions. Brexit will of course also have no impact on patents prosecuted through the UK IPO. There is no reason in light of Brexit for patentees to change their filing strategies.

Will the Unitary Patent and UPC still happen?

One potential casualty of the vote to leave the EU could have been the Unitary Patent and Unified Patent Court (UPC). At present only member states of the EU can participate in the Unitary Patent and UPC. This created a potential issue following the Brexit vote as it is expressly written in the UPC Agreement that the UK ratification of the agreement is essential for the system to come into force. Furthermore, what is expected to be the busiest seat of the UPC central division is set to be located in London. The concern following the vote to leave the EU was that without the UK, there would have to be a renegotiation of the agreement between the participating member states which could mean that the introduction of the system would stall or be scrapped. However in a surprise announcement in November the UK government confirmed that the UK was pressing ahead with ratification which paves the way for the new patent and court coming into effect in December 2017.

What does the introduction of the UPC mean for patent owners?

Firstly, during 2017 all European patent owners will need to decide whether to opt their existing European patents out of the jurisdiction of the UPC. From the court opening date, all existing and future patents that have been prosecuted through the EPO can be litigated in the new court unless an opt out has been filed. If an opt out is filed, any litigation will take place before the national courts. There are potential issues with exercising the opt out and so patent owners should start work now in reviewing their portfolios and taking the decision as to whether they wish to opt their patents out of the jurisdiction of the new court. Patentees concerned about central revocation of their patents or the untried and untested nature of the court may wish to exercise the opt out. The opt out can be withdrawn in future if the patentee wants to use the new court; however, this withdrawal can be prevented if national litigation has already been commenced. The Rules of Procedure allow for a sunrise period of a few months before the UPC system goes live, in order for patentees to opt-out their existing EPs from the UPC's jurisdiction before the court opens its doors. We expect that the opt out sunrise period will commence in September 2017.

What about European patents that are granted after the UP system takes effect?

Once the new system is operational, patentees will be able to validate their European patents as a Unitary Patent. This means that they will have one patent which covers all of the participating member states which have ratified the agreement. We expect that this will be substantially over 14 countries by the time the system becomes operational. In deciding whether to validate as a Unitary Patent, patentees will have to decide whether the overall cost versus the territorial coverage of the Unitary Patent will make sense for them. Bear in mind that patentees who want to validate broadly at the EPO will also need to validate in the EPC countries which are not covered by the Unitary Patent. They also need to be comfortable with the fact that a Unitary Patent will be litigated before the new court, with no potential opt out, giving jurisdiction to the national courts.

What will happen to the UPC and UP once the UK leaves the EU?

There are number of possibilities. The UK could negotiate to remain within the system and to keep a seat of the central division in London. One would hope that this is the intention of the UK government in pressing ahead with ratification before the UK leaves the EU. Continued participation would however require the CJEU having authority over some aspects of patent litigation which may cause political issues. An alternative would be to leave the system on Brexit – this would not be very attractive and would leave the whole UPC project in a much weaker position. It would also open up a renegotiation of the UPC Agreement as the location of one of the seats of the central division in London would need to be moved. It may well be difficult for the remaining participating countries to agree on where the court should be located. Similarly, we anticipate there would be no loss of rights for Unitary Patents covering the UK. We would expect processes would be put in place to continue the effect of Unitary Patents in the UK without any loss should the UK have to leave the system, perhaps by way of a conversion to a national right.

What is the impact on licence agreements of the UPC?

All licensees of European patents will be affected by the introduction of the UPC. If no action is taken, all existing European patents will be subject to the jurisdiction of the UPC so decisions need to be made as to whether it is appropriate to opt-out existing European patents from the jurisdiction of the new court. Unfortunately, licensees (even those who operate under an exclusive licence) will have no automatic right to be involved in the decision of whether a European patent they have licensed should be opted out. Absent any agreement to the contrary, the patent owner could therefore make its own decision on exercising the opt-out without reference to its licensee(s).

What can licensees do to protect their position in respect of the UPC?

Early dialogue with the patent owner is key. The licensee should decide upon its preferred opt-out strategy and communicate this to the patent owner. If European patents are not opted out during the sunrise period, a third party could initiate a central revocation action as soon as the UPC comes into existence, effectively trapping the patent in the UPC system. In many cases the interests of the licensee and patent owner will be aligned. However there may be disagreement; perhaps a genuine difference of opinion or even an opportunistic attempt by the patent owner to renegotiate the terms of the licence. The patent owner may also find itself in a difficult position if it has multiple licensees who have different views as to whether the licensed patents should be opted out. In the event of disagreement it is unlikely that existing licence agreements will help to resolve the issue, although a detailed review of licence terms would still be worthwhile.

Brexit and trade marks

UK national trade mark rights will be unaffected by UK exit from the EU. EU registered trade marks, which at present cover the UK, will remain in place and enforceable in the UK until new provisions are put in place to give them continuing, or corresponding, effect in the UK.

Does action need to be taken in relation to EUTMs now?

You don't need to take any immediate action regarding EUTMs. In the coming months and years there will be changes to address the UK's departure from the EU; new processes will be put in place to continue your trade mark rights without any loss.

When will Brexit directly impact trade mark portfolios?

There is unlikely to be any impact before the UK leaves the EU in two years' time. National UK trade mark rights will not be affected at all by Brexit. So above there is plenty of time to reflect and make decisions that are best for trade mark portfolios. It will be business as usual for some time. At present there is no clarity on when any changes might happen and what those may be, so until we have any clarity on those changes, the UK remains a member of the EU with no change to any EU trade marks.

Should we change trade mark filing strategies now?

In the main there is no real need to change trade mark filing strategies at present. We have seen recommendations to file both UK and EUTM applications for the same mark as a matter of course; but there would seem to be little merit in filing unnecessary applications. Separate applications should only be filed if there is a good reason for doing so. Transitional provisions will almost certainly be put in place to enable the cost-effective conversion of existing EUTM registrations and pending EUTM applications, with no loss of priority, filing or seniority claim dates, into UK national applications in the longer term, resulting in no loss of rights.

What about renewals and seniority claims relating to UK and EUTMs?

Although making seniority claims from UK trade mark registrations in relation to EUTM registrations resulted in considerable renewal cost savings it may well make sense not to go down that route at this point. If separate UK and EUTMs exist for the same mark, it may be advisable to renew and maintain them separately from now on. As noted above, there will undoubtedly be transitional provisions in place to convert existing EUTM registrations into UK trade marks.

What about trade mark assignments, licences and agreements covering the EU?

Any new agreements containing clauses which regulate the ownership and use of trade marks in the EU should consider the territorial scope of the agreement, in particular how the EU is defined at the date of the agreement. Parties to existing agreements may want to review terms once the situation regarding EUTM conversion has been established.

Brexit and designs

Design protection in the UK comes in two forms: EU-wide rights and national UK rights. UK national rights will be unaffected by Brexit. EU design rights, which at present cover the UK, will remain in place and enforceable in the UK until new provisions are put in place to give them continuing, or corresponding, effect in the UK.

Does action need to be taken in relation to RCD now?

There is no need to take any action regarding registered Community design (RCD) portfolios now. In the coming months and years there will be changes to address the UK's departure from the EU; we expect new processes and legislation will be put in place to continue registered design rights without any loss.

What will happen to RCDs after Brexit?

Once the UK actually leaves the EU, RCDs will most likely not cover the UK. It seems very unlikely, given the unitary nature of RCDs, that their territorial scope would extend beyond the EU member states.

We envisage the creation of a transitional period, allowing for RCD registrations to be split into and back dated as UK design registration with no loss of rights, resulting in both a UK design right and a RCD (not covering the UK). Once the UK is outside the EU, new RCDs will not cover the UK and therefore it would be necessary to obtain a national UK design registration alongside a RCD.

Should design protection strategy be changed in light of Brexit?

If your particular product is UK centred, and has a very limited interest in the EU beyond the UK in the longer term, then a UK design application may be your best course of action. However, if you have business interests in both the UK and a number of EU member states and your present strategy is to only file RCD applications, that strategy could be maintained in the short term.

What is the impact on agreements that cover RCDs?

Any agreements containing clauses which regulate the ownership and use of designs in the EU should consider the territorial scope of the agreement, in particular how the EU is defined at the date of the agreement. Parties to existing agreements may want to review terms once the situation regarding RCDs has been established.

What about unregistered design rights?

There are now two parallel systems in the UK for protecting unregistered designs: UK unregistered design right and EU unregistered design right. The scope and term of protection offered by these two distinct rights are different in a number of important elements. For instance, surface decoration is not protected by UK unregistered design right but is protected by the EU right.

Even though it only has a term of three years (as opposed to up to 15 years for UK unregistered design right) the EU unregistered design right has been a popular addition to the armoury of those seeking to protect rights in a number of different sectors. The fashion industry in particular has found the right a very useful tool.

When the UK exits the EU, EU unregistered design right will no longer be available to prevent infringing acts in the UK. However UK-based parties should still be able to rely on the right to bring legal actions in the remaining EU countries. It may well be that the UK enacts an unregistered design right equivalent to the EU unregistered design right to ensure that there is no gap in protection for the UK design industry. It would be a loss to the protection of designs in the UK if no right equivalent to the EU unregistered design right remained available in the UK after Brexit. However nothing has changed at present and there is no need to take any action in relation to unregistered design rights.

Martyn Fish
Martyn Fish advises clients on all aspects of contentious and non-contentious IP law with a focus on IP litigation. He regularly acts for clients at all stages of litigation from pre-action issues right through to trial and appeal. Martyn’s work often has an international aspect and he has considerable experience of coordinating legal teams in various jurisdictions.

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