IP Rights

Intellectual property rights after Brexit

Last autumn, the Government published a number of “technical notices” explaining what would happen to the protection of IP rights in the UK following Brexit.    The European Union (Withdrawal) Act 2018 (“the EU Withdrawal Act”) already provides that all existing EU laws will be transposed into English law as of the date of the UK’s exit.  The technical notices expand on some of the uncertainties which still arise depending upon which scenario applies to the UK’s departure (i.e. “deal” or “no deal”).

If Brexit occurs based on something similar to the current draft withdrawal agreement, then it can be expected that nothing materially will change during whatever “transition period” may follow.  The current text of the draft Withdrawal Agreement envisages that during that period, the UK will in effect be subject to a continuation of all current EU laws – so nothing will really change.  But if there is an exit with no deal, then the UK really will be out of the EU as of 29 March 2019.  It is in that scenario, that businesses must look carefully at what is stated in the technical notices.

Trade marks

The UK’s trade mark laws are fully harmonised with the EU’s.  After Brexit, the same law will continue to apply because of the EU Withdrawal Act although the degree to which UK law may in time start to diverge from EU law will depend on the role (if any) to be played by the Court of Justice of the European Union and the degree to which the UK courts take (or are obliged to take) its decisions into account. 

What is clear is that owners of EU trade marks (EUTMs) which cover all the Member States of the EU will have their rights protected in the UK after Brexit (deal or no deal) by being granted a new UK mark in lieu of their EU trade mark rights.  So, after Brexit,  the holder of an EUTM will still have EUTM protection in the remaining 27 member states of the EU, but will, in addition, have a UK trade mark providing identical protection in the territory of the UK.

Designs

There are a number of different protections available for designs in the UK.  The existing design protections available under domestic UK law will continue unchanged after Brexit.  As regards those design laws which are currently harmonised with the EU, the situation is the same as with trade mark law.  Holders of Community registered designs (CRDs) will have their rights protected in the UK after Brexit by the creation of a new UK registration based on their CRD.  The EU Withdrawal Act means that the same EU derived law will apply to designs as it does now.    The extent to which that law may diverge with the EU’s design laws over time will depend upon the nature of the future arrangements between the UK and EU.

Copyright

There is no system of registration in the UK for copyright law.  But although copyright law was, for a long time, the exclusive preserve of UK domestic law, there has been increasing encroachment of EU law over the past two decades.  The EU Withdrawal Act will apply all of that law to the UK-post Brexit.  But again, the degree to which in the future UK copyright law may diverge from the EU’s will depend upon the nature of the UK’s exit and future relationship. 

Patents

Patent law in the UK is largely governed by English domestic law and is not derived from EU law.  Perhaps the most significant aspect where this is not the case concerns so-called “supplementary protection certificates” which apply to certain patented agrichemicals, pharmaceuticals and biotechnology products.  The same laws will still apply to the supplementary protection regime (deal or no deal) but will be governed by domestic law and so will exist separately from the current EU regime.  

Exhaustion of intellectual property rights 

This is a potentially very important issue which straddles both IP law and international trade. 

Under the current “EEA exhaustion” which applies in the UK, once goods bearing trade marks , designs or incorporating copyright works have been placed on the market in the European Economic Area by or with consent of the relevant IP rights owner, the IP rights in those goods are “exhausted”.  This means that they can be freely traded within the EU and the IP rights owner cannot generally impose restrictions upon their further resale.  (There are some limited exceptions to this such as where goods are repackaged or changed after they have first been placed on the market). 

Once the UK leaves the EU, the question arises as to whether the UK will revert back to “international exhaustion” (i.e. IP rights are exhausted once goods are put on the market anywhere in the world) or whether it will retain the current “EEA exhaustion” regime. 

In its technical notices, the Government has confirmed that in the event of a “no deal” Brexit, the current EEA exhaustion rules will continue to apply for the foreseeable future.  So there will be no sudden change to the current regime.  But depending upon the future trading relationship between the UK and EU (and between the UK and non-EU countries) it remains a possibility that the exhaustion rules might change at some point in the future.  An international exhaustion regime would have significant implications for businesses who sell goods since it would open up the possibility of buying cheaper goods from non-EU markets and importing them into the UK.  For IP rights owners who have enjoyed the protections of “fortress Europe”, this would be a potential headache. 

Enforcement

One of the features of the current EU trade mark and design regimes is that it is possible for rights holders to obtain pan-European injunctions based upon their EUTMs or CRDs.  If the UK leaves the EU without a deal then it is likely that facility will no longer apply in respect of judgments obtained in the UK courts.  The degree to which judgments in IP cases generally will be readily enforceable in other EU Member States will depend on the path taken by negotiations over any future relationship.

Commercial Issues

Supplier concerns

• Pricing clauses – if you are exporting goods or services and if, following Brexit, additional tariffs were to apply to that export, is it clear who will be responsible for those additional costs? Does your supply contract include references to Incoterms and have you considered the consequences of Brexit for those terms? If you are contracting on the basis of an Incoterm under which you are liable for export and/or import duties (eg DDP (delivered duty paid)) are you happy to accept the potential additional costs that might arise? If you need to import raw materials, components or finished products in order to fulfil your supply obligations to your customers, will the terms on which you obtain those goods mean that you are likely to incur additional costs? If you have contracted to purchase all your requirements for a particular raw material in the next 5 years from an overseas supplier on, say, an ex-works basis or any other term which will result in the potential increase in import/export duties being borne by you, are you happy to bear that additional cost? Do you need to include price variation clauses in future contracts to enable you to pass on any cost increases to your customers?
• Currency fluctuations – do you need to consider including a currency fluctuation clause so that prices can be either automatically varied or renegotiated if currency fluctuations exceed a certain threshold?
• Customs clearance – who has responsibility for dealing with customs clearance of any goods supplied under the contract? If this is your responsibility are you able to pass on any increased costs if, following Brexit, additional procedures have to be followed?
• Time of the essence/Just-in-time supply chains – are your delivery obligations such that missing delivery dates will incur potential damages claims and/or termination of the contract? If so, could delays caused by Brexit, such as customs clearance formalities or long queues on roads leading to ports, trigger adverse consequences under the contract? Is it clear that any force majeure clause that might be included in the contract will cover this eventuality?
• Data protection – [■deal with both adequacy and data controller/data processor obligations?]
• Force majeure clauses – do you wish to clarify in your contracts going forward that any potential adverse consequences of Brexit will amount to a force majeure event so that it is clear that you will not be liable for delay or failure to perform if such events have an adverse effect on performance?
• Disputes – enforcement of the judgments of the English courts in an EU member state following Brexit may not be as simple as is currently the case. You may wish to consider whether it would be better to provide for arbitration in a particular situation.
• Additional supplier costs and expenses – if you may incur additional costs and expenses due to Brexit (eg visa costs for employees who may need to travel to the EU to perform services for your customers ) consider whether you will be able to recover those costs from your customers.
• Commercial Agents Regulations – are you a commercial agent? If you operate outside the UK under an agreement which is currently governed by English law, have you considered whether the UK Regulations (and, for example, a choice to receive an indemnity payment on termination) will continue to apply post Brexit, or will the law of the EU Member State in which you are operating apply? If so this may provide scope for claiming increased compensation on termination of your appointment. Similarly, if you are an agent performing your services in the UK under an agreement which is governed by the law of some other Member State, will your agreement become subject to the UK Regulations on Brexit?]
• Termination rights – are you about to enter into new long term contracts? If you have any concerns that following Brexit the commercial landscape may be such that you might not wish to remain bound by that contract have you considered including appropriate termination rights whether break clauses, early termination clauses or other more focussed rights of termination?
• Hardship and Material Adverse Change clauses – do your contracts include hardship or material adverse change clauses which you might be able to invoke? If you are about to enter into long term contracts which will continue beyond Brexit, have you considered including clauses along these lines?
• Applicable laws – is any obligation on your part to comply with all applicable laws likely to be affected by Brexit? Who will bear the costs of any additional compliance burdens? For example, if you will incur additional costs in employing a workforce with the right to work in the UK, can those costs be passed onto your customer under the contract?

Customer concerns

• Pricing clauses – if goods or services are being imported and additional tariffs apply to that import following Brexit, is it clear who will be responsible for those additional costs? Does your supply contract include references to Incoterms and have you considered the consequences of Brexit for those terms? If you are contracting on the basis of DDP (delivered duty paid) you may not have any concerns. But if you have contracted to purchase all your requirements for, say, Brussel sprouts in the next 5 years from a supplier on an ex-works basis or any other term which will result in the potential increase in import/export duties being borne by you (eg FOB), are you happy to bear that additional cost?
• Currency fluctuations – have you considered how potential currency fluctuations following Brexit might impact your obligations? Do you need to include a right to renegotiate or to terminate if currency fluctuations exceed a certain threshold?
• Customs clearance – who has responsibility for dealing with customs clearance of any goods supplied under the contract? Can your supplier pass on to you any additional costs incurred in dealing with any additional burdens which may be imposed following Brexit?
• Data protection – [■deal with both adequacy and data controller/data processor obligations?]
• Force majeure clauses – do you wish to clarify in your contracts going forward that Brexit will not amount to a force majeure event so that it is clear that your supplier cannot seek to wriggle out of its obligations by invoking a vaguely drafted force majeure clause?
• Disputes – enforcement of the judgments of the English courts in an EU member state following Brexit may not be as simple as is currently the case. You may wish to consider whether it would be better to provide for arbitration in a particular situation.
• Additional supplier costs and expenses – if you have potential liability for additional costs and expenses that might be incurred by a supplier (eg travel and subsistence costs) consider whether Brexit is likely to result in an increase in those costs, for example the costs of obtaining necessary visas to travel to the UK.
• Commercial Agents Regulations – do you engage commercial agents? Have you considered the impact that Brexit might have on the agreements under which your agents operate? If you have an agent who operates outside the UK under an agreement which is currently governed by English law, have you considered whether the UK Regulations (and, for example, a potential choice to indemnify the agent on termination) will continue to apply post Brexit, or will the law of the EU Member State in which the agent is operating apply?
• Termination rights – are you about to enter into new long-term contracts? If you have any concerns that following Brexit the commercial landscape may be such that you might not wish to remain bound by that contract have you considered including appropriate termination rights whether break clauses, early termination clauses or other more focussed rights of termination?
• Hardship and Material Adverse Change clauses – do your contracts include hardship or material adverse change clauses which might be invoked by the supplier? How would the effect of those clauses affect your business? Would you prefer to have a discussion now about the potential Brexit impact on your supplier rather than leaving it to be dealt with under those clauses?
• Euratom – if you are a customer for nuclear material, do you have sufficient stockpiles to keep your business afloat until we manage to negotiate new relationships with the European Atomic Energy Community and other international agencies as a replacement for the benefits we currently enjoy under the Euratom Treaty?
• Applicable laws – is compliance by the parties with all applicable laws likely to be affected by Brexit. Who will bear the costs of any additional compliance burdens? For example, if the supplier will bear additional costs in employing a workforce with the right to work in the UK, are those costs passed onto you under the contract?

Other Brexit issues to consider

• Territorial definitions – have you checked any contracts with Territorial definitions (such as a trade mark licence or master franchise agreement)? Do they include references to Europe, the EU, the EEA, the members states from time to time of the European Union etc? Brexit could well have adverse consequences depending on the definitions actually used. Do you need to consider clarifying this with your contractual counterparty now?
• IP licensing – do you need to clarify whether any intellectual property licence to which you are or may become a party includes any national UK rights into which any EU rights (eg an EU trade mark or Community design) are converted following Brexit?
• Agents for service – if you are contracting with overseas businesses, should you be requiring them to appoint an agent for service in the UK to ease any issues with service outside the jurisdiction following Brexit?