Viviana Mucharraz, Commercial and Intellectual Property Partner at Carbon, discusses the potential impact of Brexit on IP rights in the United Kingdom.
Brexit… where have I heard that before? A word used in the discussions of many yet with uncertainty of what it really means (or will it mean) when applied to ‘real life’ scenarios.
One thing is certain, the withdrawal of the United Kingdom (UK) from the European Union (EU) implies that all primary and secondary EU law will cease to apply to the UK thus becoming a 'third country’. This is not a matter of ‘if’ but rather of ‘when’ and ‘how’; the ongoing debate is to determine whether it will happen after a transition period or from 30 March 2019, and the conditions on which it will happen.
The implications of Brexit are many, from citizens’ rights and labour forces to custom borders, tariffs and trade, and all these implications will have a direct impact on private businesses, no matter how big or small they are. Hence the second certainty is that, with or without a withdrawal agreement, the UK's withdrawal will undoubtedly cause disruption to business operations and supply chain’s both in the UK and the EU.
Intellectual Property (IP) rights are no exemption. The impact of Brexit will affect the territorial scope of these rights putting at risk their protection and ability to enforce them if caught out of guard. Full understanding of the likely outcomes of current negotiations are vital to be prepared and take necessary steps to ensure the protection of your IP assets and rights whether a deal is reached between the UK and the EU or not.
DEAL OR NO DEAL?
From past negotiations it seemed like the only thing that both parties could agree on was to disagree. But finally, last week a final text for the withdrawal agreement was provisionally agreed, and the UK presented it to its Cabinet for approval.
Amid much speculation, the Cabinet agreed to back the terms of the withdrawal agreement, so the next step is a special Brexit summit on 25 November where, if all goes to plan, the UK and the EU will officially sign the deal.
If the deal is signed, it will then be put before Parliament for ratification – i.e. the Parliament will have to vote to approve or disapprove the agreement. This is considered the moment of truth for Brexit and the biggest obstacle in the UK to any hopes of getting a deal through.
If the withdrawal agreement is ratified in the UK, then it will also be put before the European Parliament for ratification.
There’s obviously still many ‘ifs’ at play; therefore, stakeholders and businesses need to prepare for two possible main scenarios:
Withdrawal Agreement fully ratified before 30 March 2019 = transition period of 21 months – EU law will cease to apply to and in the UK on 1 January 2021.
Withdrawal Agreement not fully ratified before 30 March 2019 = no transition period – EU law will cease to apply to and in the UK as of 30 March 2019. This is referred to as the "no deal" or "hardBrexit" scenario.
IMPLICATIONS FOR EU TRADEMARKS AND COMMUNITY DESIGN RIGHTS IN A DEAL-SCENARIO
The holder of an EU trade mark or a Community design which have been registered before the end of the transition period “shall, without any re-examination, become the holder of a comparable registered and enforceable intellectual property right in the United Kingdom, as provided for by the law of the United Kingdom”. This means that, after the transition period, they will be holders of two identical trademarks or registered designs: one registered in the UK and another one registered in the EU (and therefore still enforceable in the rest of the EU member countries). The renewal date of the ‘newly-converted’ UK IP rights shall be the same as the one for the original EU IP rights, but the renewal procedure shall be done according applicable UK laws rather than EU ones.
The holders of an EU trademark or Community design shall not be required to introduce an application or to undertake any administrative procedure to convert their corresponding EU IP rights to UK IP rights, until the time of first renewal in the UK.
However, if a EU trade mark or a Community design is declared invalid or revoked in the EU as the result of an administrative or judicial procedure which was ongoing at least on the last day of the transition period, the corresponding right in the UK will also be declared invalid or revoked unless the grounds for invalidity or revocation do not apply in the UK.
In a deal scenario, a UK-converted trademark will not be liable to revocation on the ground that the corresponding EU trade mark had not been put into genuine use in the territory of the UK before the end of the transition period.
The holder of a right related to an unregistered Community design, which arose before the end of the transition period, shall “ipso iure” become the holder of an enforceable IP right in the UK, according to the rules provided for by the applicable UK law. The level of protection afforded to the converted unregistered design right in the UK and the term of protection of that right shall be at least equal to the one conferred by the applicable EU Regulation.
For trademarks, however, it doesn’t work the same. The EU trademark system is register-based. This means that an EU trademark comes into existence solely through registration with the European Intellectual Property Office (EUIPO) or an international registration with the World Intellectual Property Organization with designation of the EU. There are, therefore, no unregistered EU trademarks – not even if the mark is well-known in the EU. However, unregistered trademarks do exist in the EU where the national laws of the Member States so provide, which is the case of the UK. While there are no unregistered EU trademarks, unregistered rights recognized in the Member States can certainly have an impact on them. These rights can be held against the registration or validity of an EU trademark, just like a prior registered mark, if the unregistered trademark in question proves to be reputable or well-known.
The draft withdrawal agreement makes no provision regarding unregistered trademarks, so one can only infer that any goodwill or reputation generated from an unregistered trademark used in the UK could be used to oppose a EU trademark registration application presented before the end of the transition period. After that, the goodwill generated will limit only to the UK territory.
Exhaustion of rights
Under EU law, the enforcement of IP rights is limited by the doctrine of exhaustion of rights which allows distributors to freely import goods which have been put in the EU’s internal market by or with the consent of the proprietor of IP rights, from one EU Member State to another. Once goods enter the internal market lawfully those rights are exhausted, and the proprietor cannot prevent parallel imports.
In this case, IP rights that were exhausted both in the EU and the UK before the end of the transition period shall remain exhausted in both jurisdictions thereafter and therefore parallel imports could not be prevented after the end of the transition period.
Implications for EU trademarks and Community design holders in a no deal-scenario
EU trade marks and Community designs are protected only in the EU and not in third countries. In a no deal scenario, as from the withdrawal date, EU trade marks and Community designs registered prior to that date would cease to be protected in the UK.
Likewise, EU trade marks and Community designs registered as of the withdrawal date would not be protected in the UK, irrespective of whether they were filed before or after that date. Unregistered Community designs made available to the public (according EU law) before the withdrawal date, will continue to be valid in the all the remaining EU Member States but will have no longer effect in the UK as from the withdrawal date.
UK courts would not any longer be competent for taking measures with effect in the EU, therefore disputes on the infringement and the validity of EU trade marks would have to be settled by EU trade mark courts.
Preparedness is next to success
In view of the considerable uncertainties – in particular concerning a timely ratification of the withdrawal agreement, it is advisable for IP right holders, or any businesses who rely on IP assets to generate them value, to review their current IP strategies, align them to their wider commercial strategies and make all necessary decisions (completing in its case all required administrative actions) before 30 March 2019 in order to avoid disruptions to their businesses and the protection and enforcement of their IP rights (which, as analysed above, will be even more significant in the event of a no deal scenario).
Even if the withdrawal agreement is ratified and a future relationship agreement is successfully concluded during the transition period, this relationship would not be that of a Member State of the EU. Therefore, preparing for the UK becoming a third country is very important, even in the least disruptive scenario. Preparedness cannot prevent the occurrence of these disruptions but aims at mitigating their impact.
If your business operations are equally based both in the UK and the EU, or you are planning on expanding into either of these jurisdictions from the other one, it is advisable to seek EU-wide protection as soon as possible. If there is a chance that a pending EU trademark or Community design application might not proceed to registration before the withdrawal date, applicants should consider filing both an EU and UK application or designate both territories in an International application.
The European Commission’s website has over 60 preparedness notices on a wide range of economic sectors. You can search for those which are more relevant to your business and seek advice if you are unsure on how this can apply to your business or consider necessary to implement any preparatory measures to ensure protection your IP rights. At Carbon we are always here to help.
 According to the draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, as agreed at negotiators' level on 14 November 2018 (https://ec.europa.eu/commission/sites/beta-political/files/draft_withdrawal_agreement_0.pdf) and assuming the relevant text is signed and ratified with no significant amendments.
 Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs.
 Under the common law of ‘passing off’.
Viviana will be back with a further update following the Brexit summit. Watch out for her follow up article in Carbon Thinking, first week of December.