The UK has voted Brexit!
Brexit will no effect at all on the European patent system, which owes its name only to the patent office (the European Patent Office is not an institution of the EU) and because the Munich Convention is not a European Union instrument. It currently has 38 Contracting States and some of them (for example Switzerland, Norway and Turkey) are not members of the European Union. On the other hand, the “Unitary Patent” is a creation of the European Union and Brexit will have heavy consequences on the system.
But there will be serious consequences for owners of Community trademarks and designs.
Community trademarks (now EUIPO Trademarks) were created by Council Regulation (EC) No 40/94 of 20 December 1993, and the regulation in its current form does not say a word about what happens when a Member State leaves the Union. The same applies to « Community/EUIPO Designs ».
The main feature of EU trademarks is that they are not a bundle of various national rights, but trademarks with their own regime (with a “unitary character”): the owner obtains a single right valid in the 28 Member States.
(i) As a consequence, Brexit means that EU trademarks will no longer be recognized in the United Kingdom.
(a) In this context, the UK will have to find a legislative solution to facilitate the conversion of EU trademarks into UK national trademarks. This conversion could either be automatic or upon an application. What will have to be decided is the cost of this conversion, in particular the fees that will have to be paid to the UK Intellectual Property Office.
(b) New EUTMs filings post-Brexit will thus not cover the UK. An applicant would have to apply for a separate UK national trade mark. That means that an applicant will incur increased trademark protection and maintenance costs as a result of having to make two separate applications to achieve the same geographical coverage as a EUTM currently offers.
(ii) The IP rights could be preserved in these ways, but their protection would be very different from the one originally sought.
(a) In terms of requirements of use: National trademark owners should prove the genuine use of their trademarks in the relevant country while, given its unitary nature, the territorial borders of the Member States should be disregarded in the assessment of whether a Community trade mark has been put to “genuine use in the Community”, i.e. the requirement of a “serious use” is satisfied if the trademark is used in a substantial part of the European Union, including use within a single Member State.
Please keep in mind the hypothesis:
– What will happen to trademarks which were used mainly in the UK?
They could be challenged as no longer in “serious use” in what is left of the European Union
– What will happen to trademarks which were not used in the UK but mainly in another State?
There could be a transitional period… but this is presumably a matter for the UK legislature…
(b) There will also be consequences upon trademark licenses/coexistence agreements/IP valuation/++….: When the geographical scope is the “European Union,” will this be interpreted as meaning all the member countries at the time the agreement was signed, or all the member countries at the time the contact is being interpreted?
(c) Is UK will join the EEA?
- In terms of exhaustion of rights
A key factor in the enforcement of IP rights in the EU is the effect on trade between EU Member States, as one of the fundamental principles underpinning the EU single market is the free movement of goods. Currently, a trademark owner cannot object to the further dealing of goods it has placed on the market within the European Economic Area (EEA) (unless it has legitimate reasons to do so), as the trademark rights in those goods will have been « exhausted ».
If the UK leaves the EU, these considerations preventing the partitioning of the internal market would no longer apply.
If Britain exited the EEA, EUIPO trademark and design rights could be used to prevent imports
– into the EU from the UK,
– into the UK from the EU
as « exhaustion » rules would no longer apply.
From a general point of view, parallel trade into and out of the UK could decline as a result.
- In terms of Customs seizure
EU legislation empowers IP owners to partner with customs authorities in EU member states to seize, detain and ultimately destroy imported goods which infringe their rights.
This is a particularly important tool for trademark owners in the fight against counterfeits.
This practice is unlikely to change if the Norway exit model is chosen as the EU legislation on customs seizure would, most likely, continue to bind the UK. However, under a WTO model, the UK is free to reject the EU legislation and determine its own border controls.
(d) In terms of enforcement, a further consequence of a Brexit is that UK courts would no longer have jurisdiction to grant EU-wide injunctions, such that separate proceedings would need to be taken in the courts of another EU country if such an EU-wide order is required. On the other hand, an EU-wide injunction granted by the court of another EU country would no longer extend to the UK.
Moreover, from a purely theoretical point of view, is actual pan-EU injunctions/or decisions can be amended?
(iii) What are the next steps?
Under Article 50 of the TEU, the UK has now an initial period of two years to negotiate the terms of its exit, which could be extended by agreement.
This would likely give us with your clients some time to review and optimise their IP protection and enforcement strategies.
However, we recommend to:
– Review your clients’ IP agreements (licenses, franchises and coexistence agreements) where the EU, or the countries in which the licensor has valid IP rights, is the defined territory.
– Begin to use EUTMs as widely as the business will allow and, ideally, in a EU member state other than the UK.
– Tack ongoing infringements now while they are sure of the enforceability of their IP rights and of the applicable law.
We are at your disposal.