Despite the UK’s recent Brexit decision it is likely to be business as usual in the immediate future, as the UK government comes to terms with the magnitude of the decision and begins to think about implementation. The decision has been a significant shock not only to the financial markets, but also Europe’s IP community is struggling to work out the potential consequences and way forward. Of all the different types of law practiced in Europe, Intellectual Property ranks among the most integrated and the “most European”, and was set for yet further integration in the coming months in the form of the Unified Patent Court (UPC) and the unitary patent (“the UPC-unitary project”). As the dust begins to settle after a few dramatic days, IP practitioners are beginning to ask if the UPC-unitary project can continue, perhaps in amended form, or whether the UPC and unitary patent are now off the table. Similarly, it is unclear how the status of other EU rights in the UK, such as Community Trade Marks (CTMs), EU design rights and SPCs, might be maintained after implementation of Brexit.
Neither the UK government nor the EU institutions have answers to these questions at the moment, and may not for some time, but this article speculates about possible scenarios.
European patents are granted under the European Patent Convention (EPC), which is a treaty outside the EU framework, a treaty to which 38 states have already acceded, many of which are not EU states. The UK decision has no impact per se on this arrangement and the granting by the EPO of European patents, with validity in the UK, if desired by the owner, will continue as before. European patent attorneys, including British nationals among them, are qualified under the EPC to obtain European patents in any EPC contracting state, not just their home state. To that extent the Brexit decision has no bearing on EPC matters.
However, the European patent reform package (the UPC-Unitary project) envisages a new type of patent, the unitary patent, which in essence is a species of European patent but providing unitary protection over the relevant EU states, instead of a bundle of national patent rights, as well as a new patent court for Europe, the UPC. The UK was close to ratifying the UPC Agreement in the coming weeks, and it was likely that the court would have become operational at the start of 2017. As only EU member states are eligible to ratify the UPC Agreement in its current form and be part of the unitary patent, the burning question now is whether the UK can continue to participate in the UPC-unitary project. In the current environment of instability and uncertainty, it is impossible to predict how these things will develop, but it seems likely that in the forthcoming exit discussions with EU states the UK government may attempt to preserve post-Brexit participation in key parts of the Single Market, but we shall have to wait to see if their priorities include the UK’s involvement in the UPC-unitary project. A speculative view of the outcome might include the following:
The UK does not ratify the UPC Agreement, but the threshold number of 13 ratifications (the number of national ratifications required for the UPC to come into effect) is not reached by the remaining states. The UPC and the unitary patent do not become operational. Further integration at least in respect of the patent system is abandoned: Europe perpetuates the current bundle patent system, with patent disputes judged by national courts as at present.
The UK does not ratify the UPC Agreement but at least 13 other EU states seek to go ahead and establish the UPC without the UK, amending those elements specifically related to the UK (eg the siting of the Biotech/pharma part of the UPC Central Division in London). Patent protection in the UK would still be available from the EPO as old-style European patents, eg alongside unitary protection for EU states, but pan-European patent disputes involving also the UK would require parallel litigation at the UPC and the UK courts.
The UK presently remains an EU member state and will continue to be one for the two years following invoking Article 50 of the Lisbon Treaty, during which time it ratifies the UPC Agreement, which it is entitled to do. During this period and as part of the UK’s negotiations on the Single Market and access to European markets, the EU may amend the UPC Agreement and the unitary patent regulation, extending both instruments to EPC states outside the EU, thereby preserving the eligibility of the UK (as well as possibly Switzerland and others) to join the UPC system and extending the geographical scope of unitary patents to the states in question.
Scenario 1 represents no change to the current system, but seems unlikely: although a delay in starting the UPC is inevitable after Brexit, the UPC-unitary project is itself the result of the “enhanced cooperation” legislative procedure, which allows dissenting states not to participate. Britain’s withdrawal is unlikely to result in complete abandonment of the UPC-unitary project, especially if Germany goes ahead and ratifies the UPC Agreement, and momentum among EU states to push ahead with the UPC becomes irresistible. Moreover, because it covers the vast majority of EU countries, support among patent users for the UPC, especially in Germany, may remain high despite Brexit.
Scenario 2 presents a challenging outlook for the UK patent profession, especially those focused on patent litigation rather than prosecution. It would leave the UK outside the new UPC-unitary project, with disputes on UK patents still being heard before UK courts. In the face of the supranational jurisdiction of the UPC, potentially representing - in time - a market of about 440 million people against the UK’s 64 million, some litigants may question the need to bring disputes before a UK court. Despite this, the attraction of the UK outside the EU, both as a patent dispute forum and a validation state for European patents, will ultimately be linked to the UK’s economic performance.
Scenario 3 paints a more favourable picture for patent users, and the UK profession is pressing for this solution, with considerable support from elsewhere in Europe. In essence this scenario proposes that the UPC-unitary project covers also non-EU member states. There are two precedents which may support such an arrangement: (i) the many EPC “Extension Agreements”, by which the validity of European patents was extended to non-EPC states, used successfully in the past as a first step to full EPC accession; and (ii) the European Economic Area, which extends some rules and benefits of the Single Market to non-EU states. The UK government fought hard in 2013 to locate the biotech/pharma part of the UPC’s Central Division in London, seen at the time as a boost to the biotech/pharma community, and the premises have already been leased for this purpose, so the UK government may be keen on supporting the sector by preserving this advantage. The UK’s science community, concerned by a potential termination of EU funding and cooperation, may also back this. Secondly, there is an argument that restricting eligibility of the UPC to EU member states was always unnecessary, being adopted originally to accommodate a decision by the CJEU which criticised the referral mechanism regarding EU law in the then draft of the UPC Agreement. One option would be to drop the restriction on eligibility to EU member states, allowing other EPC countries to join, but maintaining the current mechanism for referrals to the CJEU in respect of questions on EU law. The scope for such referrals already excludes most substantive patent law, so perhaps any non-EU states adhering to the system could tolerate the current referral mechanism. Finally, one should note that, in the early years of discussions on the UPC-unitary project the EPLA (European Patent Litigation Agreement) was a serious contender to the UPC. The EPLA is a system which went beyond just EU member states, being open to all EPC states, underlining that the UPC restriction on eligibility to only EU states is purely political and not based on any technical reasons.
It is clearly in the interests of the UK government to protect the UK’s involvement in the UPC-unitary project and to promote the UK’s expertise and contribution to its success.
The economic fallout from the referendum may impact heavily on the expected negotiations between the UK and the EU. In relation to expected discussions about the Single Market, IP may not be at the very top of the agenda of the parties, but is nevertheless likely to be a significant priority.
Supplementary Protection Certificates (SPCs)
SPCs for medicinal or plant protection products will remain valid and enforceable in the UK, and new SPCs can be obtained, until Brexit takes effect. Moreover, Brexit should have no effect on the existing SPC system in other European countries. However, since SPCs are rights that are derived from EU Regulations they will not continue in their current form in the UK post-Brexit. We anticipate that the UK will legislate to allow for the maintenance of existing SPCs and to introduce a regime for new SPCs in the UK.
As for patents, the current regime for trade marks in the UK is not going to change for the time being. Trademarks granted under the EU Community Trademark Regulation are currently valid in the UK. It has been suggested that, after leaving the EU, re-registration may be required with the UKIPO, although it is not clear that this option will be adopted: another approach would be for the UK to enact a transitional regime which recognizes the validity of those CTMs granted pre-Brexit, even without UK re-registration, perhaps with a new registration required at the time of the CTM’s first post-Brexit renewal. Once the UK has left the EU subsequently filed CTMs will not be valid in the UK, unless negotiations with the UK produce a result extending the validity of the CTM system to the territory of the UK.
The position of the UK’s EU trade make courts to hear cases against CTMs once the UK has left looks currently uncertain, but again the UK may negotiate to preserve their status.
Looking further ahead, it is questionable whether the new EU Trade Marks directive 2015/2436 will ever be implemented into UK law.
The status of EU design rights after the UK leaves may be similar to CTMs as described above. Existing rights obtained under the Community Designs Regulation may require re-registration to be valid in the UK after Brexit or may be automatically recognized. The UK government may seek to negotiate some sort of extension of EU design rights to the territory of the UK.