IP in the future UK-EU relationship deal

Introduction

The Trade and Cooperation Agreement (the “Agreement”) between the UK and the EU was agreed on 24 December 2020 and came into effect on 1 January 2021. The Agreement sets out the future of UK-EU trade relations. Despite being well over 1,000 pages in length, the Agreement remains a framework agreement and therefore does not cover all possible matters (such as data transfers). Therefore, the implications of the Agreement have not fully crystallised and certain aspects of the issues discussed below may remain in flux. 

For our purposes, Title V deals with intellectual property and runs to a mere 23 pages. This has been achieved through a combination of cross-referencing to other overarching agreements (for example, TRIPS, as shown in Article IP.4 of the Agreement). The objectives of Title V of the Agreement are to:

(a) facilitate the production, provision and commercialisation of innovative and creative products and services between the Parties by reducing distortions and impediments to such trade, thereby contributing to a more sustainable and inclusive economy; and

(b) ensure an adequate and effective level of protection and enforcement of intellectual property rights.

Importantly, the Agreement does not prevent the UK from seeking to increase the level of protection for rights holders, provided it does not contravene Title V itself. This is welcome news given the rather particular rights and remedies available in the UK, such as the common law action of passing off, the UK unregistered design right, and the Arrow jurisprudence. We return to this later.

Below we provide brief tabular summaries, the first being specific IP rights, the second being  ancillary matters, including the primacy of courts and position in relation to key IP treaties.

We will primarily consider the potential benefits (and loopholes) arising from the Agreement and how this may be beneficial for rights holders.

IP rights summary table

Patents

The patent system exists on a supranational basis, and therefore little within the patent system has been directly impacted by Brexit. One notable exception is the membership to the Unified Patents Court (“UPC”). The issues relating to this new court are outside the scope of this article, but at present, the position is that no non-EU member state is permitted to join the UPC.  Further complexities have arisen due to the constitutional law challenges in Germany and the UK government’s confirmation that the UK will not be part of the system. It remains to be seen what impact these issues will have on the philosophical underpinnings and appetite for the UPC system.

The UK Patents Court is still seen as a leading forum in Europe for patent disputes. Its specialised judiciary with scientific expertise regularly addresses some of the most complex issues in the patent sphere. Recent examples of the UK judiciary leading the way on jurisprudence include Unwired Planet (determination of global FRAND terms) and the Arrow declarations (a forward-looking declaration of invalidity which impacts on ungranted divisional patents). Moreover, territories such as the Netherlands have looked to the UK for guidance on issues such as those dealt with in the recent pemetrexed patent decision on the doctrine of equivalence.

The UK remains a critical territory both within the European Patent Convention (“EPC”) countries and globally, with over 90 percent of patents filed under the EPC system specifically designating the UK.  In our view, the UK will remain an important patent jurisdiction post-Brexit. 

Designs

In respect of design rights, the position remains that all EU or international design rights (designating the EU) are preserved by “converting” these into separate UK and EU registered rights. Such rights retain the priority dates and filings dates of the original applications and registrations. Most recently, the UKIPO has confirmed it has created a re-registered UK design for every international design (EU) registered before 1 January 2020. These re-registered designs are now available to be searched and viewed on the UK register.

Notably, the UK unregistered design right (“UKUDR”) regime is not overridden or otherwise prevented by the terms of the Agreement. Article IP.29(2) acknowledges that protection shall last “at least three years from the date the design was first made available to the public in the territory of the respective Party”. The 15-year maximum term of the UKUDR is therefore not in conflict with this provision.

Significantly, in respect of unregistered rights, only companies or individuals who are resident or established in the relevant territory can accrue these rights. As such, a UK limited company cannot obtain unregistered Community design right protection. Only a UK limited company (or individual) can obtain a UKUDR upon first marketing in the UK.

Trade Marks

In summary, the position remains that all EU trade marks (EUTMs) and EU designations of international registrations that were registered before the end of the transition period are now recognised as separate EU rights, with comparable UK rights. For these comparable UK rights, the original EUTM filing date and original priority date have been retained, but the right is now a fully independent UK right that can be challenged, assigned, licensed and renewed separately from the original EUTM.

The EU and the UK have agreed to maintain certain standards concerning IP rights which are already in place in EU and UK law. For trade marks, this includes the definition of signs which may constitute a trade mark, grounds for revocation proceedings, and certain exceptions to the rights conferred by a trade mark. The Agreement also maintains the requirement to allow for third-party oppositions as part of the registration procedure.

We anticipate that little will change in the short term and that the law will remain consistent between the EU and the UK. Over time, there may be diversification between the two jurisdictions, particularly as the UK can no longer refer issues to the Court of Justice of the European Union (“CJEU”) for determination.

Copyright

Other authors again have speculated about the wider implications of Brexit on copyright protection, so we do not go into detail on this here. By way of brief summary, copyright was not addressed in the EU/UK Withdrawal Agreement. International treaties on copyright assure continued protection for copyright works between the UK and the EU. The Agreement also sets out the basic requirements which must be met for copyright protection in Articles IP.7 to IP.17.

There are aspects of current UK law which are derived from EU directives. We understand that these will be incorporated into UK law, so there will not be any short-term change. One aspect that is changing, however, is the EU Copyright Directive. The UK government has indicated it does not plan to implement the directive, which was approved by the European Parliament in April 2019, into national law. As such, this may give rise to some immediate divergence between the UK and the EU.

Ancillary matters summary table

Exhaustion of rights: the pros and cons

A fundamental issue for rights holders following the separation of the UK and the EU is the principle of exhaustion of rights. The Agreement is not specific on the terms of exhaustion (Article IP.5 of the Agreement). Therefore, from 1 January 2021, the standing terms between the UK and the EU was that goods put on the market in the European Economic Area (“EEA”) will be exhausted in the UK, but goods put on the market in the UK will not exhaust the IP rights in the EEA. This is true for all IP rights, including patents.

Clearly, the lack of reciprocity which IP rights holders were used to in the past will require a change in practice, and a new appreciation of the risks of grey importing. As such, there is potential that companies based in the EEA can increase their prices when selling into the UK, but UK rights holders cannot avail themselves of the same. There will be a potential negative impact on the UK consumer, who may find that UK retailers seek to place their goods on the UK market, at a higher price than in the EEA to avoid the loss of revenue from resellers flooding the EEA with goods originally purchased in the UK, (thereby increasing competition for the UK rights holder when they try to sell into the EEA).

Additionally, sellers from the EEA may sell their goods at a higher price in the UK, as a sale of its products in the EEA will not allow resellers to import products sold into the UK for sale at a marginal mark-up. Those who specialise in economic theory will be best placed to determine the long-term impact of these arrangements, but from an IP perspective, we may see more actions taken against resellers in the UK by EEA-based enterprises, should such resellers try and take advantage of a lower price in the EEA.

As a result of these existing arrangements, and as indicated in the UKIPO guidelines on Exhaustion of IP Rights and Parallel Trade, businesses exporting IP-protected goods from the UK to the EEA might need the EEA rights holder’s consent. We discuss border enforcement and Customs watches in the latter sections of this article.

As part of managing clients’ portfolios, we also seek to determine whether these changes can provide clients with opportunities rather than simply encountering constraints.  For clients with multi-jurisdictional corporate structures, it may be that this change in the law of exhaustion provides additional benefits. Although untested, it appears to the authors that clients with separate corporate entities may be able to maximise the benefits of unregistered design rights across the UK and the EU.

In our proposition, where a group has a UK entity and an EEA-based entity (for example, a GmbH in Germany), those two separate companies should be able to launch their product on their respective websites targeted at their own jurisdictions simultaneously. This, in principle, should satisfy the requirements for each of those entities (separately) to have “first marketed” their design in the UK and an EU member state respectively. This being the case, the UK limited entity should be entitled to UKUDR protection in respect of that design, having first marketed this in the UK. By the same token, the GmbH should be entitled to register the same design as a Community design right (“CDR”). On the basis that there had been simultaneous launch, neither design should pre-date the other for the purposes of novelty.

Therefore, assuming the above facts, a group could then utilise its CDR and UKUDR to take enforcement action against each of the following:

• Unauthorised users of the design in the UK, with the UK limited company taking action for infringement of its UKUDR;

• Unauthorised users of the design in the EU, with the GmbH taking action for infringement of its CDR;

• Unauthorised resellers of items made to the design purchased in the UK and sold in the EU, with the action being brought by the GmbH which benefits from the lack of exhaustion of rights, and therefore being entitled to bring an action for infringement of its CDR; and

• Although this is (so far as we are aware) untested, the UK limited company should be able to take action against an unauthorised reseller of items made to the CDR and sold in the EU. Our hypothesis (and support) for this is as follows:

o    the UK limited company is the holder of a UKUDR, which can only accrue to a UK entity or individual. The item itself was made to the CDR, for which the holder was the GmbH. As such, only the CDR holder’s rights to prevent the sale in the UK are exhausted;

o    on the basis that the UKUDR is a separate right held by a separate entity, it should grant the UK entity an independent right of enforcement against infringers. In our view, failure to allow the UK entity to enforce its UKUDR against a reseller would be in breach of Article IP.30(1) of the Agreement, which states (emphasis added):

“Each Party may provide limited exceptions to the protection of designs, including unregistered designs, provided that such exceptions do not unreasonably conflict with the normal exploitation of designs, and do not unreasonably prejudice the legitimate interests of the holder of the design, taking account of the legitimate interests of third parties”;

o    if, as we understand it, the UK and the EU have concluded the Agreement on the basis that entities established in the other “territory” cannot avail themselves of their own registered and unregistered rights, it would be inconsistent for a UK court to hold the UK entity’s rights are “exhausted”, despite the fact that no sales have taken place in the UK under the UKUDR in this example.

If the UK courts interpret the provisions of the Agreement consistently with the above, it may be possible for a multi-jurisdictional company to effectively mitigate the effects of exhaustion of rights in the UK by virtue of a sale in the EEA.

The UK government has stated that it plans to publish a formal consultation in early 2021 on what the UK should do about exhaustion and parallel trade in the future. It is not clear whether the government will opt for national exhaustion of rights or international exhaustion. Brand owners and IP rights holders in the UK may well benefit from the former, but all implications will be carefully analysed.

Address for service

Following the conclusion of the transition period, UK-based attorneys can no longer represent their clients before the EU Intellectual Property Office (EUIPO). This means that many EUTM or RCD holders will need to request new representation or have their UK-based representatives use an EU-based intermediary. UK IP firms with offices in the EU or EU-based representatives will continue to represent clients before the EUIPO whilst retaining specialist representation before the UKIPO, provided by their UK-based attorneys. In addition, EUTM proceedings, which are based solely on the UK registered or unregistered right, have been terminated following the expiry of the transition period, as the earlier rights will no longer be relevant.

From 1 January 2021, new patent, trade mark and design applications as well as oppositions and cancellations, filed after 31 December 2020, require a UK, Gibraltar or Channel Islands representative and address for service (“AfS”). Notably, this will not include the “cloned” rights, mirrored from the EU trade marks and designs registers, since these are not considered new applications. In addition, processes which have not traditionally required a valid AfS will be unaffected by the new requirement. These include:

• renewing your trade mark, design or patent right
• surrendering your trade mark or design
• adding details of a licence agreement you have made with third parties to a trade mark or design registration
• changing your address if you are the design or trade mark holder
• correcting an error or omission in the trade mark or design register

Whilst you may renew a patent without a valid AfS, all other actions will require an AfS based in the UK, Gibraltar or the Channel Islands.

The benefits to having specialist advisers in the UK capable of handling both filing and prosecution, as well as litigation and licensing matters are considerable. The need for this is likely to increase post-Brexit, as the UK begins to diverge from the EU. The UK courts have always maintained a level of judicial independence historically, and this is likely to continue post-Brexit.

Border enforcement and Customs procedures

The Agreement retains key parts of the border enforcement and customs procedures already enshrined in UK and EU law. It also indicates that the UK and the EU shall cooperate in respect of international trade in suspected goods. In particular, both Parties shall, as far as possible, share relevant information on trade in suspected goods affecting the other Party.

Following the expiry of the transition period, Applications for Action by the UK Border Force must be lodged with UK Customs. The required information and procedure remain very similar to the procedure pre-Brexit, albeit the application is now lodged electronically. EU Applications for Action must be lodged with an EU27 Customs authority.

Given the current arrangements on exhaustion of rights and parallel trade discussed above, rights holders should continue to review their border enforcement strategies. Given the changes, and as indicated above, we may well see more actions taken against resellers in the UK by EEA-based enterprises.   

The common law advantage

As mentioned above, the England & Wales High Court (and the Patents Court in particular) is a leading forum for IP litigation in Europe. The UK courts have always maintained a level of judicial independence historically, and this is likely to continue post-Brexit for two key reasons:

• The UK is a common law jurisdiction, meaning that decisions produced by the judiciary constitute binding precedent in respect of the facts in issue. This means that English law is consistently evolving without the need for legislative change.  Local practitioners are consequently the most familiar with the current state of the law pursuant to this dynamic judicial decision-making process.

• The UK courts are renowned for having specialist judges, including judges with science background, who preside over IP cases. According to a report published by the EUIPO in July 2018, the UK is the only jurisdiction with this degree of IP specialism at the first instance and appellate level.

These unique features help to explain why the UK is a preferred jurisdiction for litigating important IP disputes. Post-Brexit, it is therefore likely that the UK courts will show some divergence from EU law. For example, the common law action of passing off remains uncodified in the UK, whereas in certain EU countries unfair competition action is codified. Whilst providing for a baseline of protection for IP rights holders, the Agreement, does not prevent “more extensive protection and enforcement” (see Article IP.6(1) read alongside Article IP.2(2)) for rights holders.

Recent judgments demonstrate how the UK courts are innovative in IP enforcement and remedies. In Unwired Planet v Huawei[2020] UKSC 37, the UK Supreme Court confirmed that the English court had the discretion and power to determine the terms of a global FRAND licence, as it had been suitably seized with the action in the first instance. The Arrow v Merck [2007] EWHC 1900 (Pat) jurisprudence was expanded beyond its original pharmaceutical beginnings, for example, in Mexichem UK Limited v Honeywell International Inc [2019] EWHC 3377 (Pat).

Conclusion

We consider there is likely to be a gradual diversion between the EU27 and the UK on IP laws and an increase in UK-only disputes. Whilst UK courts can no longer refer questions to the CJEU and are not bound by its decisions, they are likely to continue to pay close attention to CJEU jurisprudence and the actions of EU entities and the EU.

Rights holders may well need to litigate twice (in the EU and the UK) to enforce their rights, and conflicting judgments could arise, particularly when there are judgments on validity and infringement. Such rights may experience greater divergence compared to copyright, for example, where there is better international harmonisation. Fortunately, the Agreement complements other international agreements which the EU and UK are both party to.

Crucially, UK patent law should remain aligned with European law, owing to the UK’s undisrupted membership to the EPC. The unique features of the UK’s legal system should enable the UK courts to lead the way in extending and innovating the remit of IP protection.

This article was submitted for publication in March 2021. The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice. Please contact the author(s) if you have any questions about this article.

Authors

Dave Holt (Senior Associate, IP Solicitor)

Dave is a member of Potter Clarkson’s litigation and licensing team. He specialises in both contentious and non-contentious IP work.

Lucy Mills (Senior Associate, Chartered Trade Mark Attorney)

Lucy is a member of Potter Clarkson’s trade mark team and specialises in all aspects of brand protection and portfolio management in multiple market sectors, including clothing, consumer goods, life science and service sector businesses.

Potter Clarkson is a pan-European intellectual property law firm with offices and attorneys in the UK and in several EU member states. The firm is perfectly placed to continue to advise on pan-European IP issues. Potter Clarkson will be leading a cross-jurisdictional webinar on the UPC (in Q2 of this year) to provide both a UK and EU perspective on the subject.