UK Government agrees elements of the European Commission's proposals for post-Brexit protection of EU-wide IP rights in the UK in the latest draft of the Withdrawal Agreement

In the latest draft of the Withdrawal Agreement (19 March 2018) the UK Government and European Commission negotiators appear to have agreed text providing for the replacement of EU-wide IP rights having effect in the UK with equivalent UK rights at the end of the transition period post-Brexit (until 31 December 2020). Further, during the transition period, EU-wide rights will still apply to the UK due to the effect of Article 122 which provides that EU law will be applicable to the UK during the transition period and that it will produce the same legal effects in respect of and in the UK as those which is produces within the EU and its Member States and shall be interpreted and applied in accordance with the same methods and general principles, and that during the transition period, any reference to Member States in EU law shall be understood as including the UK.

Other IP related measures include provision for dealing with: exhaustion of rights, pending applications, international registrations designating the EU and the effect of invalidity proceedings that are "on foot" at the end of the transition period, (see Articles 50-57).  Certain provisions (highlighted in green) are now listed as agreed between negotiators, whilst others are still just proposals from the Commission (those un-highlighted) including those on GIs, SPCs and who pays the administration costs involved.

There are still unresolved issues for those who hold IP rights in the EU and those who license (in or out) EU-wide IP rights or have agreements linked to the "EU" as territory, which we discuss below.

Despite the areas of current agreement, there remains the possibility of a "no deal" scenario in relation to the whole agreement, in which case none of the areas agreed would stand (although the UK Government could make separate arrangements to create equivalent rights at the moment of Brexit). Anything agreed between the Commission and the UK under the Withdrawal Agreement needs European Council approval and then European Parliament approval. Thus, although a good start has been made on agreeing the post-Brexit fate of EU-wide IP rights currently having effect in the UK, the final arrangements are still far from certain. Indeed, if the Withdrawal Agreement is not accepted then there will be no transition period at all and a "hard" Brexit will come into effect on 30 March 2019, with all that implies for IP rights (see our comments from January 2017 here).

In summary, the proposals in the revised Withdrawal Agreement, and problems associated with them, are:

Proposals agreed at negotiator level:

• Automatic transition for EU-wide registered IP rights into UK rights granted before the end of the transition period: This will apply to EU trade marks (EUTMs), Community registered designs and Community plant variety rights (CPVRs). Trade mark filing, renewal and priority dates as well as seniority, registered design and plant variety rights filing dates and priority dates, the terms of the replacement rights and their extent would be maintained as identical to the EU-wide rights they are replacing. Reputation in the EU will count as reputation in the UK for these new UK TMs, although after transition their continuing reputation will be based on their use in the UK.
• Invalidity/revocation proceedings:  With respect to proceedings involving EU-wide rights already in progress prior to the end of the transition period, if the right is declared invalid or revoked, then the equivalent UK one will also be held invalid/revoked and at the same date (except that the UK will not be obliged to make such a declaration where the grounds for invalidity or revocation of the EU TM or Community registered design do not apply in the UK).
• Genuine use: The potential problems for genuine use for UK trade marks generated to replace EUTMs in the UK, where the use that supported the EUTM was not in UK, are resolved by provisions which say that this should not be a ground for revocation of the replacement UK trade mark right if the EUTM was not put to genuine use in the UK before the end of the transition period. Nevertheless the reciprocal problem where use in the UK supported the EUTM right, is not provided for in this draft. This may be addressed by the EU IPO in a separate measure, but the draft Withdrawal Agreement is silent upon this.
• International registrations designating the EU: The UK will take measures to ensure that trade marks and registered designs protected in the UK prior to the end of the transition period, by virtue of international registrations designating the EU via the Madrid/Hague systems, will continue to enjoy protection post-transition. Those using the Hague Agreement system to apply for design registration in multiple jurisdictions via one application can currently get registered design protection in the UK by virtue of it being part of the EU. In fact the UK has now completed the final ratification stage in order to independently acceded to the Agreement in its own right. The instrument of ratification was deposited on 13 March 2018 and there now follows a 3 month period before the ratification comes into effect, following which the UK can be selected as a jurisdiction for protection under this international application procedure for design registration. The UK was already an independent signatory to the Madrid Protocol which provides a centralized application procedure for the registration of trade marks in multiple jurisdictions.
• Unregistered Community designs: Equivalent rights will be provided in the UK with the same level of protection and for at least the same term for all unregistered design rights arising before the end of the transition period.
• Database rights: Those database rights already in place in the EU before the end of the transition period, will continue to apply in UK via the creation of an equivalent right by the UK. Compliance with the qualification requirement (EU state nationality, residency, business location etc) should be satisfied by the equivalent UK status in respect of these rights. However, no reciprocal provision is set out in this draft.
• Pending applications for EUTMs, Community registered designs and Community plant variety rights (CPVRs) :
  • Where an application has been filed for an EUTM or Community registered design before the end of the transition period, the applicant will have the right to file an application in the UK for the exact same trade mark (with identical goods/services) or same design, during a period of 9 months from the end of the transition period. Such an application will be accorded the same filing date and priority as the corresponding application filed in the EU (and where appropriate seniority (trade marks)).
  • For CPVR applications made in the EU before the end of transition, for the purposes of filing an application for the same plant variety right in the UK, the applicant will have an ad hoc right of priority for 6 months from the end of the transition period. This right of priority will have the effect that the date of priority of the application for the CPVR counts as the date of application for a plant variety right in the UK for the purpose of determining distinctness, novelty and entitlement to the right.
• Exhaustion of rights: IP rights that are already exhausted within the EU including the UK, before the end of the transition period, will remain exhausted in the UK and EU post-transition. The draft agreement is silent on exhaustion principles post-transition. Whilst exhaustion within the EU (as it is then constituted) will continue, the UK courts will be able to exercise local or international exhaustion as they see fit. Historically the UK has taken an international exhaustion approach pre-EU membership.

Proposed by the Commission but not yet agreed:

• Costs and administration: That there should be no charge for the automatic transition of EU-wide rights set out in a) above into new equivalent UK rights and the administrative burden should fall on the UK's registries.
• SPCs: The SPC Regulation should apply to applications for SPCs made before the end of the transition period and where the administrative procedure for the grant or extension of duration are still on-going.  The same level of protection should be granted as would have been under the EU system.
• GIs: The holder of a GI, PDO etc should, as from the end of the transition period, be entitled to use a new right in the UK with the same level of protection, generated by the UK.  However, there is no provision in the current draft for any reciprocal recognition of UK based GIs or PDOs etc in the EU post transition.

Problems associated with these proposals are likely to be:

• A cluttered register (some IP right holders may not want UK rights);
• Lack of reciprocal protection provision, in particular in relation to database rights and GIs, but also the unregistered community design right which is triggered by first marketing in the EU and may therefore cause the relocation of product or fashion launches from the UK to other EU Member States post-Brexit.
• No bona fide intention to use  UK trade mark registration requires a declaration to be made that there is a bona fide intention to use the mark. Such a declaration will not be there for these replacement rights, so some adaptation of the application of the law here will be needed.
• Genuine use  As referred to above, reliance on use outside the UK to maintain the EUTM is solved by the provisions above but reliance on use in the UK to maintain the EUTM may still need to be addressed by EUTM owners.

Licensing

Although there is provision in the Withdrawal Agreement for the EU to be "understood" as including the UK in any interpretation of EU law during the transition period, the same does not directly apply to individual contractual and other arrangements and nothing is agreed as to how to approach this post-Brexit. The effect of the territory of a licence being specified as the "EU" or whether a licence of EU-wide right covers the replacement right in the UK post-transition, will be a matter of contractual interpretation. For clarity, those who license (in or out) EU-wide IP rights or have the EU as a designated territory in any agreement where the UK is a key territory, should take every opportunity to ensure that all parties are in agreement as to what this means during the transition period and importantly beyond. New agreements should provide specifically for the effect of Brexit.

Unitary patents

There is no provision made for creating equivalent rights should the unitary patent (UP) be in effect prior to the end of the transition period. The Unified Patent Court (UPC) needs to be in place before UPs can be granted.  Progress towards a functioning UPC has been curtailed recently by the complaint in the German Constitutional Court and the UK is yet to ratify the UPC Agreement, (both states must do so before the new system can commence). It seems that UPs have not been included in the Withdrawal Agreement as it is far from clear that the new patent system will be up and running before the end of the transition period.

The likely continued approach of the UK Government

As an indication of the likely final form of this agreement, in a Technical Note published on 6 March 2018, the UK Government stated that "The EU position, as set out in its paper "Intellectual property rights (including geographical indications)", published on 21 September 2017 is that the protection of certain EU and EU-derived intellectual property rights (including geographical indications) should continue in the UK and the EU after exit" and said that the UK's approach would be (emphasis added):

" … Where the UK and EU agree that intellectual property rights are within the scope of separation discussions, the UK’s overall objective is to provide maximum clarity and legal certainty for users, applicants and right holders by agreeing arrangements appropriate to each of the different types of right.

In the future, where the UK does not have existing domestic legislation to protect certain types of rights, it will establish new schemes. This approach will help form the basis for a strong ongoing cultural and economic relationship with the EU."

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