What an eventual Brexit might mean for IP rich businesses operating in the UK

With the dust of the UK’s leave vote settling, the conversation is turning to what the post-Brexit business environment might actually look like.

While the referendum itself has limited immediate impact, in the absence of further developments we can expect the UK to leave the EU around 2018.

The eventual Brexit (and the two years of negotiations leading up to it) will likely bring legal, regulatory and policy change across the spectrum.

From an intellectual property perspective, a consideration for many businesses will be how their IP creation, protection and exploitation rights could be affected.

Griffith Hack’s experts have weighed in on what an eventual Brexit might mean for IP rich businesses operating in the UK.

Could the Brexit affect the protection afforded by UK trademarks?

Trade mark and legal rights won’t change simply because of the referendum. However, prior to leaving the EU, there will likely be substantial debate as to whether the UK will remain part of the EU trade mark registration system.

If the UK is excluded from the EU trademarks regime (which is probable), companies doing business in the UK will need to file a separate UK trade mark. For those companies that already hold EU trade mark registrations, there will be a transition period during which rights holders can apply for rights in the UK, usually upon payment of a fee.

Will the Brexit jeopardise the enforceability of licensing arrangements?

From a legal perspective, businesses already involved in licensing or co-existence agreements that make territorial reference to the EU should review the terminology used. For example, some agreements may have a definition of the EU, which will automatically exclude the UK if it is no longer a member of the EU, and this may not be the intention of the parties.

In drafting new agreements, parties should take care when drafting clauses referring to the EU and assess whether it should be defined as the state of the EU at the time of signing, or at the time of reading.

How will the Brexit change the European patent landscape?

After the UK exits the EU, it will remain a member state of the European Patent Convention, which is completely independent of the European Union. So, it will still be possible to designate the UK in a European patent application, or to seek protection via a UK national application. Hence, the mechanisms for obtaining patent protection in the UK will remain unaffected.

Having said this, a Brexit would almost certainly affect the introduction of the Unitary Patent System, which is based on the European Patent System but requires that only EU member states participate. There will likely be a significant delay in its entry into force, or it may fail to come into existence following the UK’s “leave” result.

How will Brexit affect the UK’s transfer pricing rules for intangibles?

There are no immediate ramifications for the UK’s transfer pricing rules as a result of Brexit. Despite this, the uncertainty that surrounds the economic and tax implications of Brexit are mirrored in the world of transfer pricing, with uncertainty surrounding the transfer pricing policies of multinationals with UK operations.

Brexit may also impact transfer pricing planning projects involving the UK. Multinationals must begin to consider the possible reaction of a separate EU to the UK’s low targeted company tax rate (of 17% by 2020). This could lead to reactionist policies such as a diverted profits tax, targeting the UK.

Where will the Brexit leave the UK Patent Box regime?

There are currently around a dozen patent box style regimes in force across Europe, one of which is the UK’s highly competitive and highly publicised program. While the EU initially raised concerns about how the UK’s patent box regime interacted with EU rules, a different international body (the OECD) has since become the driving force behind program reform.

As a result, the new approach to the UK’s program (namely, linking the substantially reduced tax rate to R&D that takes place in country) is likely there to stay, and will continue to provide a significant incentive for smart businesses to create and exploit IP in the UK. We can also expect to see changes in similar programs from other European nations to bring them into line with the OECD’s suggested approach.