Intellectual Property and Brexit. What next?
26 October 2016
With Brexit on the horizon, what are implications for those who hold Intellectual Property rights? With much speculation on the future of IP laws we spoke to Andrew Bowler, partner with London law firm Bristows, about the impact of leaving the EU and what right holders should do now
Brexit means Brexit,” said our new Prime Minister Theresa May following the momentous referendum result in June 2016 in which 52% of voters opted for the UK to leave the European Union (EU).
Those shocked by the outcome wondered whether the government would actually go through with it but May emphatically stated that “…there will be no attempts to rejoin the EU by the back door.”
At this early stage there is much speculation as to how we will go about unpicking ourselves from the EU and the political and economic changes it will bring. One area of particular relevance to DEVELOP3D readers is intellectual property (IP) and the effect Brexit will have on EU IP rights.
First don’t panic!
Nothing is going to change overnight. The Treaty of Lisbon, which came into force in 2009, introduced for the first time a procedure for a member state to withdraw voluntarily from the EU.
This is specified in Article 50 of the Treaty on European Union, which the leaving country has to trigger before it enters a two year negotiation period ahead of an official exit date.
There has been much made of Article 50 being triggered and whether May would indeed do it but at the beginning of October she announced that Article 50 will be triggered before the end of March 2017. This means that an exit date will be early 2019.
The UK Intellectual Property Office (IPO) handles UK trademarks, UK registered designs and UK (national) patents, which are unaffected by Brexit. UK patents granted through applications made to the European Patent Office (EPO) in Munich will also be unaffected. EU trademarks and Registered Community Designs are administered by the European Union Intellectual Property Office (EUIPO) in Alicante, Spain.
They have effect throughout all 28 member states of the EU and will continue to apply in the UK until the official exit date. However, it will be a bit of a waiting game to see what deal the government can achieve during the negotiation period and how any deal will impact on these “European” rights as far as the UK is concerned after Brexit.
“It would be unacceptable to business if there was a gap in our laws and IP rights when the UK leaves the EU, and because there are so many EU laws to consider across the board, I think it is likely that the UK government will decide to take a pragmatic approach such that, upon Brexit, all the EU IP rights already registered will continue in some way or other to provide protection in the UK as a matter of UK law; for future IP rights it may be possible to obtain the same rights in the UK, with a level of protection at least equivalent to the EU, although for types of EU IP rights which currently have no UK equivalent, such as database rights, we need to wait to see what will happen,” says Andrew Bowler, partner with London law firm Bristows.
Pan-European patents are granted through the EPO and then essentially converted into national patents effective in up to 38 countries that are members of the European Patent Convention (EPC), including the UK.
These patents are unaffected by the UK leaving the EU as the EPO is not a body of the EU. However, significant changes to the European patent system have been negotiated over recent years with the proposed establishment in 2017 of a Unitary Patent system and a Unified Patent Court (UPC) by various EU member states, including the UK.
The aim of the UPC was to make EU patent law more streamlined and harmonised for participating EU member states with a single court ruling being applicable throughout those territories.
“Following the referendum result, it is now not at all clear what will happen with the new Unitary Patent and Unified Patent Court. There are various different schools of thought: it might be that a version of the system goes ahead without the UK, or there might be a way in which a version of the system can go ahead with the UK, or the new Court might not happen at all, but whatever happens there will probably now be a hiatus,” comments Bowler.
“If the new system doesn’t go ahead at all, then very little will change for patent protection in the UK. It will mean that users will still have to decide whether to obtain patents in all countries across Europe, or only in certain jurisdictions key to their business.
The pharmaceutical industry tends to seek the widest geographical patent protection, whereas other industries are generally more selective.
“For companies who only ever validated patents in one or two countries e.g. UK and Germany, then the current system is actually cheaper than seeking a Unitary Patent. For companies who typically validate patents in large numbers of countries, then the Unitary Patent would have been cheaper.
If the UK is not covered by the Unitary Patent, the Unitary Patent fees may be reduced, but companies wanting protection in the UK and across the Unitary Patent countries would need to pay additional UK patent fees.”
Trademarks and registered designs
European trademarks and registered community designs are granted by the European Union Intellectual Property Office (EUIPO) and these will remain in force after the UK leaves the EU but probably only covering the remaining EU member states.
The question mark is over how to ensure that protection is provided in the UK after Brexit so that firms currently relying on existing EU rights for protection in the UK are not prejudiced.
Where trademarks are concerned, the UK is a member of the Madrid System, an international trademark system administered by the World Intellectual Property Organization (WIPO) that allows users to file one application, in one language, with one fee (variable depending on the scope of coverage) to protect their trademarks in up to 113 territories including the EU. Post-Brexit it will still be possible to apply for UK trade marks using the Madrid System, but, depending on the Brexit deal, a future EU trade mark applied for through this system would likely not cover the UK.
With regards to design protection, firms who want to commercialise and distribute their products in the EU market can either obtain a registered community design (RCD) before they commercialise it or, alternatively, commercialise it directly without registration by relying on what is known as unregistered community design right (UCD). RCD can be applied for via the EUIPO website and is renewable for up to 25 years.
Currently, it’s all speculation as to exactly what will happen to these rights upon Brexit.
In all likelihood they will no longer apply to the UK in which case the UK government will need to ensure that there is adequate protection in the UK for rights holders.
According to Bowler, the most likely outcomes are either that the UK will allow existing EU registered rights to be reregistered at the UKIPO with the same protection as if they had been filed at the date of the original EU right, or that rights holders will be able to apply to convert their existing EU rights into a UK national right and a post-Brexit EU right.
“It is possible that there will be a transitional period, to allow companies to decide what to do and take the necessary administrative steps, although this may not start until after Brexit happens,” he says.
Saying that, he advises that, for really key brands and designs, it may be wise to start taking steps now to ensure that there will be UK national trade mark/design protection in place whatever the government decides to do (without forgetting about EU protection as well for products where the rest of the EU remains important).
Since the June referendum the government has made a step in the right direction by making clear its intention to ratify the Hague System for the International Registration of Industrial Designs in a national capacity within the next year (this is the equivalent to the Madrid System for trademarks).
Currently the UK has access to it through its EU membership but not in its own right.
Administered by WIPO, the Hague System provides a practical business solution for registering up to 100 designs in over 65 territories through filing one single international application.
As stated above, unregistered community design right (UCD) arises automatically and unless the UK passes new legislation creating an equivalent right, then automatic protection for certain designs might be lost post-Brexit.
According to Bowler, relying on current UK unregistered design right, which also arises automatically, might not be a suitable substitute as there are significant differences in protection between UCD rights and its UK equivalent.
For example, some elements of spare parts would be protectable under UCD right, but not UK unregistered design right, and similarly surface decoration (e.g. covering designs for textiles and clothing) is only protectable under the former but not the latter.
“For products currently in development, rather than continuing to rely on unregistered design rights (of either type), it might be advisable for companies to consider obtaining UK Registered Designs which have a broader scope of protection, and Registered Community Designs for protection in the rest of the EU, although whether this is worthwhile will also depend on the expected lifecycle of the product in question.
“For non UK and/or non-EU companies wishing to continue to rely on unregistered rights, it would also be wise to seek advice about the country in which first to market the design as this can have a major impact on whether or not protection is available,” advises Bowler.
Currently, copyright law is not harmonised across the EU and in the short term little change is likely to happen.
“However, it is recognised at the EU and UK level that developments are needed to bring copyright law into the digital era (for example the European Commission, as part of its Digital Single Market initiative, has recently published its plans for an EU wide copyright), so it will remain to be seen whether this happens without the UK” says Bowler.
For existing EU trademarks and RCD, Bowler offers a scenario in which rights holders are given the option to split their rights into (i) UK marks/designs and (ii) post-Brexit EU marks/designs.
If this is the case, it is quite possible that it will not happen automatically, in which case there would certainly be an internal resource cost for companies in deciding what to do with each mark/design and ensuring the administrative steps are correctly followed.
There may also be an admin fee payable to the EU IPO and/or the UK IPO (as there is currently if rights holders want to convert an EU trade mark into national rights), though the required payment of such a fee might be seen as unpalatable in these circumstances.
In a post-Brexit UK, firms will need to apply for new trademarks and registered designs separately from the UK IPO, for protection in the UK, and the EU IPO, for protection in the EU, and pay a fee for each.
“In the longer term, depending on the deal reached between the UK and EU, companies wanting protection in the UK and post-Brexit EU will presumably need to apply for separate rights. Currently, the fees for applying for a UK trade mark are a minimum of £170 and for applying for an EU trade mark area minimum of €850, though the fee for the latter could perhaps be reduced as post-Brexit it would cover a smaller market and be less valuable. Renewal fees to keep both types of right on the registers will also likely be higher in total,” says Bowler.
Brexit will affect companies all over the world who currently have EU wide registrations for trade marks or designs. They will all have to decide whether to continue to seek protection for the UK and/or the post-Brexit EU.
“For trade marks, ‘genuine use’ requirements mean that it may not be possible over a period of several years to maintain both UK and EU trade marks without businesses changing their demographics.
The genuine use requirements are essentially that EU trade mark holders need to show genuine use in the EU (which will post-Brexit exclude the UK). There are equivalent requirements for UK trade marks.
“For design rights, in particular unregistered design rights, companies should check whether post-Brexit they will still be eligible for protection. Designs created by employees of companies which only have a place of business with substantial business activity in, for example, the USA or China, do not currently qualify for UK unregistered designs, whereas for community design rights all companies can qualify.
This means that unless changes are made to the UK legislation, companies which currently only qualify for community unregistered design protection will post-Brexit no longer be protected in the UK,” says Bowler.
It’s not all bad
You could argue that Brexit offers the UK an opportunity to innovate within the IP sector (see Maxine Horn’s box piece above).
Once the dust has settled, the UK government could re-write some of the EU laws to provide UK designers with stronger and better design protection and to make the UK a really IP friendly market to encourage investment (or they could go the other way in an attempt to keep prices lower for consumers).
However, nothing will happen immediately and even after Article 50 is triggered there will be a more-or-less two year negotiation period and we’ll have to wait and see exactly what deal the government will achieve.
Although EU intellectual property rights remain effective in the UK for now, the long-term future is unclear so it’s best to start looking at how your business is affected by EU law and monitor any progress of the negotiations because as our illustrious leader has made clear “Brexit means Brexit”.
There are a range of resources and guidance available to readers. Bristows has published ‘Brexit and IP’ - the UK Intellectual Property Office has published ‘IP and Brexit: The Facts’ – and the trade organisation ACID has some relevant information for UK designers on its website.
With the UK leaving the EU, Andrew Bowler offers three tips to DEVELOP3D’s UK readers on what they should now
Readers who are entering into new contracts should “future-proof” these agreements.
This includes considering how “Europe” is defined. For example, thinking about what the impact would be if the UK no longer falls within the definition of “Europe”.
In addition, for collaboration agreements, it should be made clear who will be the owner of any IP resulting from that collaboration, and what obligations they have. This point is of general relevance but also in relation to Unitary Patents and the Unitary Patent Court (UPC), if that does indeed move forward with or without the UK.
For example, if there are any resulting patents from the collaboration, will new unitary patents be applied for, or will “classical” European patents (i.e. the bundle of national designations that are currently granted by the European Patent Office) be preferred, and will these “classical” patents be opted out of the UPC (which is an option for patent proprietors) or be left to be litigated in the UPC?
The opt out point is also of relevance to agreements under which “classical” European patents are licensed.
Further, distribution agreements should be considered to assess whether, for example, once products covered by a EU trademark have legitimately been sold in the Post-Brexit EU, it is permissible for them to be imported into the UK (as would be the case pre-Brexit), or whether any additional licences are required.
An audit should also be done of current contracts and a decision made as to whether any amendments can/should be made.
Readers should seek advice on how best to protect their key brands.
For example, moving forward, readers could consider applying for national UK trade marks as well as EU trade marks.
This is because although there should be some sort of protection for existing EU trade mark owners as far as the UK is concerned, it is not clear how any transitional provisions will apply.
Readers should also consider whether they currently rely on unregistered community design right (an EU right which arises automatically for example in relation to textile or clothing designs) which is likely not to apply in the UK upon Brexit, and whether any gap in protection could/should be filled by applying for UK registered designs.
Lastly, get involved! If readers have particular concerns surrounding Brexit, issues which they would like to be addressed in future legislation, or ideas for reform, then the government is much more likely to listen to industry than lawyers like me.
Get involved with industry groups such as the IP Federation in order to lobby the government.
The UK IPO is the main conduit for providing feedback to the government on all IP matters and it is very receptive to ideas at this time. If readers do not provide their views, then others may lobby in a direction they do not like!
Brexit provides an opportunity to innovate within the IP sector, says CEO of Creative Barcode, Maxine Horn
IP law has become far too complex over the centuries yet the purpose of copyright remains just as simple now as it was when the Statute of Anne came into effect in 1710 — and essentially that is to enable creators the right to earn a living from their artistic works and be accurately credited as the creator and/or owner.
That same purpose was extended to brands (trademarks), 3D designs and inventions (patents).
In the digital age any person with a creative talent can produce works others would like to use.
However, what hasn’t been developed is a cost effective and simple means for others to transact directly with creators on a mass scale.
In terms of industrial design and to lesser extent professional 2D design, licensing deals tend to be negotiated on a one to one basis generally involving two sets of lawyers.
Without a formal licensing infrastructure in place that is accessible, simple and low cost for designers, their ability to generate revenue from non-exclusive licenses is at best, curtailed.
However, three technologies can or will drive change for designers and manufacturers.
These include 3D printing, blockchain and transaction systems to support automated licensing.
Blockchain is the technology behind digital currencies such as bitcoin.
Experts say it represents the second generation of the internet, and has the potential to not only transform the financial services industry but anything of monetary value such as IP, creative digital assets, designs, inventions, music, art and so forth.
The internet was created for storing, moving, searching and displaying information. Blockchain is built for authenticating asset ownership and its value and transparently recording transactions in an irrefutable manner, in perpetuity.
However, whilst blockchain would play a critical role in a new licensing infrastructure, it is a new business model that is required to achieve disruption and open up a new market place for the trading of IP.
Creative Barcode has studied blockchain development and its ability to transform the IP sector. A full feasibility exercise has been undertaken culminating in the design of a 360-degree business model.
The IP blockchain model seeks to do for design what Netflix did for film and iTunes and Spotify did for music.
If achieved, post a £7.5 million fund raise, licensing a design for 3D print will become as easy as purchasing and streaming a film or music track. And in the future both 2D and 3D designers will be able to develop their own consumer base of customers simply by licensing files purchased through an automated system. Or by teaming up with 3D printing hubs to provide a design-to-printto-order business.
Creative Barcode / IP Blockchain has established an advisory board to include representatives of the IPO, British Library, Renfrew Group, Ernst Young, IBM, the Chartered Society of Designers, the Society of British and International Design, 100% Design and Creative Pool.
However, without substantial investment and a leap of faith, implementation of the business model remains on the runway.
Post Brexit, both private and public sector investment remains stagnant but when things are more settled and confidence is restored opportunity will emerge.
It’s interesting to note that the former Prime Minister, David Cameron, launched the original Hargreaves IP Review with one question — could the UK have established a Google? Google launched with $25 million investment and since has become omnipotent.
The UK has a new opportunity to lead the second generation internet with investment into blockchain new business models and could therefore play an important part in innovation in the IP sector.
If the government wishes the result of Brexit to be a new beginning for the UK and the empowerment of every creative citizen to generate their own job and income, then investment in the infrastructure needed to facilitate that must be forthcoming.
If it is, a myriad of new businesses can be formed and the strength of the UK as a transaction-led, creative design, digital and manufacturing base will be transformed.