In a June 23, 2016 referendum, the combined electorates of the United Kingdom (UK) and Gibraltar voted in favor of leaving the European Union (EU).

According to Article 50 of the Treaty on European Union (TEU), the UK will leave the EU two years after formal notice to leave is given unless this term is extended by unanimous agreement of all EU members. Any such extension seems politically unlikely. There is some legal argument as to whether once notice has been given it can be withdrawn. The majority view seems to be that it cannot.

The British Prime Minister, Teresa May has stated that notice of intention to leave will be given before the end of March 2017 and negotiations on the terms under which the UK leaves the EU will then begin. Two political “hot potatoes” are associated with this:

1. whether terms of a future relationship between the UK and the EU can be discussed as part of the “divorce proceedings” and
2. whether the British government can give notice under Article 50 without the consent of the UK Parliament. ¹

TERMS OF FUTURE RELATIONSHIP

On the first of these, hard liners on the European mainland have read Article 50 as simply providing for discussions on issues such as the relocation of the European Medicines Agency and who pays what as pensions to British employees of various EU authorities, saying that discussions on any future trade agreement between the UK and the EU have to wait until the UK has actually left the EU. This position is seen as part of a program to deter other countries from leaving the EU but is likely to leave such a long period of uncertainty that industries having integrated supply chains with some parts of production in the UK are likely to apply pressure to bring about some measure of discussion about a future relationship while the Article 50 negotiations are proceeding. One cannot, however, be certain about this since the British government has indicated that it wants a sui generis “close relationship” with the EU after Brexit occurs, which does not fit into any current model such as the European Economic Area or the Single Market.  This means that all remaining EU countries will have a say in negotiating and a veto right over any final agreement that is reached. Indeed, the difficulties encountered over the EU’s proposed free trade agreement with Canada as a result of resistance in Wallonia indicates that not only the member states of the EU but in some cases even regions within countries having devolved power may have a right of veto. In any case, negotiations are likely to be difficult not least because no consensus has yet been reached within the UK government on whether a trade-off is possible between the competing aims of reducing immigration to the UK and maintaining access to the EU single market, particularly in the financial services sector, let alone persuading the remaining member states of the EU that such a trade-off is in their interest.

NOTICE WITHOUT PARLIAMENTARY CONSENT

The second of these “hot potatoes” is a UK domestic one. Traditionally, the UK government has taken the view that it does not need parliament’s approval in matters of foreign affairs and that it can use the residuum of monarchical power referred to as the royal prerogative that is in practice wielded by the government of the day. This view was challenged in court on an application for a declaration that notification of an intent to leave the EU may be validly exercised only by an Act of Parliament. On November 3, 2016, the Queen’s Bench Divisional court (the Lord Chief Justice, the Master of the Rolls and Lord Justice Sales) held that the government “did not have power under the Crown’s prerogative to give notice pursuant to Article 50 of the TEU for the United Kingdom to withdraw from the European Union”. The claimant argued that since the seventeenth century, exercise of royal prerogative had been limited by statutory law and since the adoption of EU law in the UK had been through statute law (the European Communities Act 1972), this position could only be reversed by statute. Since giving notice under Article 50 would inevitably lead to an end to the application of EU law in the UK, the claimant argued this could only be effected by statute. The Government argued that nothing in the European Communities Act or other acts (such as the Constitutional Reform and Governance Act of 2010) contained any provision that expressly limited the use of royal prerogative as proposed and parliament had the opportunity to impose limitations on when to give notice when it had passed the European Referendum Act (the act authorizing the Brexit referendum) and had chosen not to do so. The Court’s basis for its judgment was that it was fundamental to the British constitution that parliament was supreme and that the Crown prerogative operates only on the international plane. The claimant was therefore entitled to relief. By an 8-3 majority, on January 24, 2017, the Supreme Court upheld the Divisional Court ruling and two days later the government introduced legislation in the form of the European Union (Notification of Withdrawal) Bill to obtain authorization to start the process of withdrawal from the EU. This received initial approval in the House of Commons from an overwhelming number of members of parliament on February 1 and now moves on to be considered in committee, where amendments may be proposed, and the House of Lords. In view of the constitutional implications of any rejection of the bill by either House, it is likely that the legislation will pass reasonably quickly, but there is a significant possibility that amendments will be made to require more parliamentary involvement in the negotiations than the government would like. The day after the vote in the House of Commons, the government published a white paper outlining its objectives in the negotiations which can be found at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_Kingdoms_exit_from_and_partnership_with_the_EU_Web.pdf

APPLICATION OF EU LEGISLATION IN THE MEMBER STATES

In general, EU legislation has effect in member states through one of two mechanisms:

• a regulation that is directly applicable throughout the EU or;
• a directive that sets out the objectives and main features of what has been adopted, but leaves implementation to the legislatures of the member states.

EU law is effective in the UK through the European Communities Act of 1972. This provides that all UK legislation has effect “subject to” directly applicable EU law as set out in an EU regulation or decisions of the Court of Justice and that EU Directives are to be transposed into UK law by laying regulations before Parliament, which will in general take effect automatically unless disapproved of by Parliament. Mrs. May has stated that a “Great Repeal Bill” will repeal the European Communities Act with effect from the date on which the UK actually leaves the EU, but will leave in place all EU legislation effective on that date so that Parliament can address the need to repeal specific legislation on a more measured basis.

How does all this affect IP rights?

PATENTS

The European Patent Convention is NOT a creation of the EU. Indeed the creation of the European Patent Office was a result of pressure by industry to reduce the costs of securing patent protection across Europe when an EU (then European Common Market) solution to this problem seemed insurmountable after France had twice vetoed applications by the UK to join the Common Market and industry sought to achieve its objectives without being subject to the political whims of one country.

Consequently, the Brexit vote does not affect the right to designate the UK in a patent application filed in the EPO. The EU has, however, adopted a number of patent-related provisions including regulations on compulsory licensing ² and supplementary protection certificates ³, directives on human and veterinary products, and a directive on the protection of biotechnological inventions ⁴ implemented in the UK by regulations made under the authority of the European Communities Act of 1972. Withdrawal from the EU will result in repeal of that act, but it seems likely that legislation effecting such repeal will maintain the validity of regulations that have been made under it for at least a while. However, the requirement to maintain conformity with the EU law will cease. While it is unlikely that there will be any early change to the UK law on compulsory licensing,  the law on “Bolar exemptions” or biotechnology inventions (indeed the EU directive on biotechnology has effectively been incorporated into the rules of the European Patent Office ⁵), the regulation on Supplementary Protection Certificates is poorly worded and has led to inconsistent decisions by the European Court of Justice and hence is likely to be an early target of those who wish to break away from EU precedent in the IP field.

The vote also has implications for implementation of the EU Unitary Patent Regulation ⁶ and the Unified Patent Court Agreement ⁷  . Under the terms of the regulation establishing the unitary patent, this will come into force on the date on which the Unified Court Agreement comes into effect. Under Article 89 of the Unified Court Agreement, the Agreement comes into effect when ratified by thirteen countries including “the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement takes place.” At the time of signature, the three countries with the highest number of European patents had effect were Germany, France and the United Kingdom. On November 28, 2016, the United Kingdom announced its intention to proceed with ratification notwithstanding the Brexit vote. The objective was apparently to make sure that other countries could proceed without further delay (there is renewed hope that the system could come into effect before the end of 2017) and to increase the chances that an arrangement could be made whereby the UK could remain a party to the Unitary Patent Convention (which is at present limited to EU member states) even after the UK leaves the EU. If it does not, it would seem that an amendment to change the language of Article 89 of the Unitary Patent Convention would be necessary or implementation would be delayed until after the UK has actually left the EU. Furthermore, Article 7 specifically provides that a section of the central division shall be in London. This again is likely to need amendment (The Hague and Milan are currently the favored alternatives). It seems therefore that the vote in favor of departure from the EU is likely to delay entry into force of the Regulation on the unitary patent and the Agreement on the Unified Patent Court for a while and indeed recruitment of judges for the new court has been put on hold until the situation is clarified.

DESIGNS

The EU has adopted both a regulation ⁸ creating EU-wide rights, registrable at the European Union Intellectual Property Office in Alicante and a directive ⁹ setting out norms for design protection in national law. The directive was incorporated into UK law by the Registered Design Regulation 2001. ¹⁰ EWCA Civ 1191, but upheld by the Court of Appeal.] When the withdrawal of the UK becomes effective, it will no longer be possible to register designs in Alicante that will encompass the UK, unless the withdrawal negotiations reach an agreement for cooperation in this field. Whether registrations secured in Alicante will require re-registration in the UK or just some form of renewal in the UK will similarly be a matter of negotiation and/or UK legislation. Similar issues could arise with respect to the EU unregistered design right. The EU directive on harmonization of design law was implemented in the UK by amendments to the Registered Designs Act of 1949 and regulations laid before parliament. The effect of UK national design registrations is therefore unlikely to be affected by the decision to leave the EU, but divergence between EU and UK law could occur. The EU directive (unlike the regulation) did not address the question of unregistered design rights and so the UK’s 15 year unregistered right will not be affected by withdrawal from the EU. New post-Brexit applications for design protection where it is desired to cover the UK should therefore be registered in the UK as well as in EUIPO and it may become prudent to make a UK national filing for any application already filed in EUIPO which was published less than one year ago and so still meets the novelty requirements of the UK legislation.

TRADEMARKS

The European Union has adopted both a regulation ¹¹ creating EU-wide rights, registrable at the European Union Intellectual Property Office in Alicante and a directive ¹² setting out norms for trademark protection in national law. When the withdrawal of the UK becomes effective, it will no longer be possible to register trademarks in Alicante that will encompass the UK, unless the withdrawal negotiations reach an agreement for cooperation in this field. Whether registrations secured in Alicante will require re-registration in the UK or just some form of renewal in the UK will similarly be a matter of negotiation and/or UK legislation. The UK government has recognized this issue and it does, however, seem likely that EU rights will be able to be transformed into UK national rights relatively simply. There may, however, be a question of whether it will still be possible to enter a seniority claim upon registration of a mark in the EU based on an earlier pre-Brexit UK registration. The EU directive was implemented in the UK by the Trademarks Act of 1994, an act of the British parliament and so will survive a withdrawal from the EU unless it is itself amended by a subsequent act of parliament. As and when the arrangements for the UK exiting the EU are complete, applications for trademark protection where it is desired to cover the UK will need to be filed in the UK rather than in the EUIPO.

COPYRIGHT

There are no EU regulations relating to copyright, but there are a number of directives including directives on:

• what is protectable by copyright and possible exceptions (the copyright directive) which implements aspects of the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty and provides, inter alia that transient or incidental copying as part of a network transmission is not a copyright infringement and sets out other exceptions to copyright that member states may adopt; ¹³
• the duration of copyright protection (normally 70 years from the death of the author); ¹⁴
• the extension of the duration of protection for fixations of performances and for phonograms from 50 to 70 years after the performance; ¹⁵
• harmonization of copyright law relating to software computer programs (the software directive) which provides that software shall in general be protected as a literary work but provides for limitations on enforcement of copyright in software needed for interoperability with other programs; ¹⁶
• the resale right directive providing for a droit de suite in which the creator of a work protected by copyright might be entitled to a royalty if there were subsequent sales of the work; ¹⁷
• the database directive which defines the conditions under which a database may qualify for copyright protection and provides a sui generis right for databases that do not qualify for copyright protection if there was “qualitatively and/or quantitatively [a] substantial investment in either the obtaining, verification or presentation of the contents.” ¹⁸
• Most of these have been implemented in the UK by regulations made under the European Communities Act. As noted above, withdrawal from the EU will result in repeal of that act, but it seems likely that legislation effecting such repeal will maintain the validity of regulations that have been made under the European Communities Act for at least a while. However, the requirement to maintain conformity with the EU will cease. In this context it should be noted that the resale right directive was highly controversial in the UK (it was opposed by the big auction houses) and that concerns have been expressed over the database directive and so modification of the law on these issues is a possibility.

DOMAIN NAMES

There is no EU-wide legislation on domain names but there is a “.eu” top level domain. This will no longer be available to registrants in the UK once Brexit occurs.

OTHER ISSUES

Technology Transfer Regulations

At present the United Kingdom is bound by the EU’s Transfer of Technology regulation (Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements) which limits the application of the EU’s law on restriction or distortion of competition within the internal market to certain types of technology license as long as they do not contain specific anti-competitive provisions. Since this is a regulation, it will cease having direct effect when the United Kingdom leaves the European Union, although it will be converted into UK domestic law by the Great Repeal Act. It is unlikely that there will be any early change in its provisions after the UK’s departure from the EU.

Free Flow of Goods Doctrine

International exhaustion of IP rights remains a hot topic world-wide. Within the EU it is currently black letter law that if the owner of an IP right puts goods protected by IP on the market within the EU or consents to others putting such goods on the market within the EU, the right to enforce such IP rights is exhausted throughout the EU. There is no harmonized EU law with respect to goods first put on the market outside the EU. Unless this issue is addressed in the exit negotiations between the EU and the UK, it would seem that on exit from the EU, the position under UK law would revert to that which existed before the UK joined the EU, which in England for patents at least held that there was international exhaustion when the goods were first put on the market by the patent owner anywhere in the world, but that if first marketing was by a licensee, the patent owner could enforce its rights in England unless the licensee had permission to sell in England.
Regulation on Jurisdiction and Enforcement of Judgments

Regulations (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters replaced an earlier regulation and prior conventions on this subject. The basic provisions of the earlier conventions were incorporated into UK domestic law by Civil Jurisdiction and Judgments Acts of 1982 and 1991. However, negotiations on departure of the UK from the EU are likely to have to address issues of both jurisdiction and enforceability.

Directive on Enforcement of IP Rights

Directive 2004/48/EC on the enforcement of intellectual property rights requires member states of the EU to provide for the measures, procedures and remedies necessary to ensure the enforcement of the intellectual property rights which are fair and equitable and not unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays. A number of specific provisions are set out to implement these objectives. The directive was incorporated into UK law by the Intellectual Property (Enforcement, etc) Regulations 2006. The directive has been widely criticized as over-kill and it is possible that some relaxation of its provisions will follow Brexit.

Customs Actions Relating to IP infringements

EU Regulation 608/2013 concerning customs enforcement of intellectual property rights sets out the conditions and procedures for action by the customs authorities where goods suspected of infringing an intellectual property right are, or should have been, subject to customs supervision or customs control within the customs territory of the EU. As a regulation at present it has direct effect in the UK. It is likely that most of its provisions will be kept in place as part of the UK’s domestic law after Brexit.

CONCLUSION

Brexit, if it occurs, will cause disruption of the European Intellectual Property environment, but compared to the upheavals that are likely in other areas, these seem relatively manageable.