It is difficult at this stage to assess what will be the impact of Brexit on the UK’s intellectual property (IP) system since much will depend on whatever bilateral arrangements the UK enters into post its departure. However, because of both the unitary nature of some European wide intellectual property rights and the international nature of intellectual property systems, in all likelihood even with certain specific bilateral arrangements being put in place, such as those that already exist between Norway and the EU, it is safe to say that the effects in this area of the law are likely to be profound.

European Union trade marks and community designs

The European Union trade mark (EUTM) and Community design (CD) systems are unique property rights that spread across the EU. The rights, which are very much a creature of the EU, provide the opportunity for applicants to file a unitary trade mark or design that covers all 28 member states, including as of today, the UK. The laws that currently govern the EUTM and CD systems are the EU Community Trade Mark Regulation (207/2009) (EUTM Regulation) and the EU Community Design Regulation (6/2002) (CD Regulation) respectively.

Article 1(2) of the EUTM Regulation states that “…A Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered…save in the respect of the whole Community….” The CD Regulation contains an identical provision at Article 1(3) in relation to the unitary character of CDs.

Given the wording of these provisions, following Brexit, by definition EUTM and CD registrations will narrow in geographical scope and no longer have any effect in the UK. In the event that owners of EUTMs or CDs do not have corresponding UK trade mark or design registrations, subject to any bilateral transitional arrangements that might be put in place, Brexit may leave them devoid of any registered rights. However, unregistered rights could remain, such as the Berne Copyright Convention, which would allow UK companies to enforce certain rights across the EU.

This scenario is unchartered territory, although by analogy there have been a number of instances where the EU has expanded its membership, such as when the Czech Republic, Cyprus and Croatia acceded to the EU. However, while the EUTM and CD Regulations do specifically carve out provisions for what is to happen when countries become members of the EU, the legislation is silent on the effects of a member state leaving the EU.

It is unlikely that the EUTM and CD rights will continue to cover the UK since if they were to do so, such an arrangement would fly in the face of the unitary nature of such rights. One possible bilateral agreement would be for the EU and the UK to give mutually reciprocal recognition of the national and EU wide rights.

Given the absence of a provision in the legislation detailing the impact and effects of countries leaving the EU, a possible option would be for either the UK or EU to introduce transitional provisions to allow owners of EUTM and CD registrations to obtain corresponding rights in the UK. This was previously seen in 1921 when Ireland left the UK. In this instance, provisions were introduced to enable owners of UK trade mark registrations to maintain their UK mark while also converting the registration into a national Irish mark. This allowed owners to maintain the filing date of their earlier UK registration on the payment of a fee.

A new EUTM Regulation came into effect on 23 March 2016, which brought about various changes, both legally and procedurally, to the EUTM system. The changes proposed in the new regulation have to be adopted by all member states by 2019 and implemented in to their national law. Following the UK's exit from the EU, there will be no obligation for the UK to adopt the new regulation. However, given that the process of EU trade mark reform has been ongoing for a number of years, it is unlikely that the UK would reject the new regulation and not implement the changes into national law. The implementation of the new EUTM Regulation is a matter that will need to be monitored throughout the negotiation stage.

Brexit will probably result in increased costs for the obtaining of registered rights for trade mark and design owners. It is likely that any transitional provisions, converting a EUTM or CD into a national UK right, would carry a fee, as was the case when Ireland left the UK. Also, given the high prospect that EUTMs and CDs will no longer cover the UK, trade mark and design owners will need to apply to register in two territories, the UK and EU, thereby paying two separate fees to enjoy the same protection as they have under the current system. Further, this cost will increase if Scotland were to separate from the UK after Brexit and then not subsequently re-join the EU (as discussed below), as rights holders might need to obtain a Scottish national right, again to obtain the same protection they currently have.

Exhaustion and parallel imports

At present, IP owners can, under the principle of regional exhaustion, prevent the importation and resale into the EEA, which comprises all EU member states in addition to Norway, Iceland and Liechtenstein, of genuine goods which were not put on the market of the EEA by the IP owner or with the owner’s consent (parallel imports). Once the goods are in the EEA with the owner’s consent, the owner cannot prevent their resale and importation across the EEA. This principle of regional exhaustion flows directly from the EU’s principle of the free movement of goods.

It is unclear to what extent after Brexit the UK will restrain parallel imports from the EEA. Much will depend on the extent to which the UK signs up after its departure to the principle concerning the free movement of goods.

Unitary Patent and Unified Patent Court

The European patent system is currently being reviewed and the proposed changes are likely to have a significant effect for all users of the current system, with the possible introduction of the unitary patent (UP) and unified patent court (UPC).

The benefits of a UP include the possibility of reduced costs for those who currently, or have future wishes to, acquire European patent protection. The reduced costs are caused by the loss of the high number of translations that are currently needed (one for each country where languages differ) and the ability to be able to renew the patent for a single annual fee. Under the present system, separate annual fees are required for each country.

Another positive aspect of the UP is that it has the possibility to provide patent protection in 25 out of 28 EU countries (Croatia, Spain and Italy are currently not participating). In the case of a single infringement in any member state, the claimant would be able to recover damages from any EU country where an infringement was present. This is possible through the creation of a new UPC, which would have jurisdiction over all countries who are participating in the UP system.

On 2 March 2016, the Government fully approved the statutory instrument that will implement the UP and UPC in to UK law. This was one of the two statutory instruments required to enable the UK to fully ratify the UPC agreement. Edward Vaizey, Minister for Culture and the Digital Economy, stated that the "new court and patent will be ready for business in early 2017".

Brexit will have little impact on the legality of the UPC and UP system, as it does not need the UK to be a party in order to operate in the long term. As the UK has not fully ratified the UPC and UP system, the decision to leave the EU may mean that the UK never signs up to the new system.

Edward Vaizey has speculated that, "if we left Europe as a result of the referendum, I suspect it would be a decision for the UK Government whether they wanted to re-join the European patent court. Of course, we would have to rely on our European partners to decide whether the UK could be a member."

There will now be a lengthy period of negotiation during which the role of the UK in the UPC and UP system will be uncertain. The UK is currently one of the three countries (along with France and Germany) required to ratify the UPC agreement, therefore during the negotiation period, the UPC and UP system will effectively be in limbo. On the official exit of the UK, it will be replaced by the Netherlands as one of the mandatory signatories of the regime, however again this will not be in the near future.

As with the EUTM and CD system detailed above, patent holders are likely to be impacted by additional costs when the UK leaves the EU, without joining the proposed UP and UPC system. The UK will be an entirely distinct jurisdiction, in which right holders will need to obtain a separate patent registration and therefore pay separate fees.

When the UK leaves the EU, the progression of the UPC and UP system is another area that should be monitored throughout the process of the exit.

Scotland

The Scottish Government has indicated that, if the UK were to leave the EU, it would campaign for another Scottish independence referendum. This will pose even greater uncertainty surrounding the national UK, EUTM and CD system, as well as the UK patent system. There are a number of ways in which this could play out. First, Scotland could remain part of the UK, which would not alter the status quo between Scotland, the UK and EU.

The second option is if Scotland left the UK and then subsequently rejoined the EU. There would be many questions arising from this situation, such as in the interim between Scotland leaving the UK and then joining the EU, would UK national trade marks, designs or patents extend to Scotland? Also if Scotland were to join the EU, EUTMs and CDs would automatically extend to Scotland. In this case, would Scotland have its own national trade mark, design and patent system and law?

The third option is if Scotland left the UK but then did not join the EU. Again, it would need to be clarified whether UK national trade marks, designs or patents would extend to Scotland. It is likely that similar transitional provisions would be implemented to those that applied when Ireland left the UK in 1921. In any event, it is probable that a Scottish national trade mark, design and patent system would need to be established.

Even though these are important considerations, as stated previously, when the UK leaves the EU it will not be instant but rather a lengthy process of negotiation. The Scottish referendum would be after the definite exit of the UK from the EU, therefore it would not be taking place in the near future. However, this is one aspect that needs to be monitored throughout the Brexit process.

Conclusion

As detailed above, there will be a significant impact on UK and EU IP rights and laws. At the moment it is unclear how the rights will be affected and to what extent the scope of current and future rights will be narrowed or altered.

However, there are a number of issues that IP rights holders will need to monitor throughout the negotiating process, as any transitional provisions or decisions on the scope of the protection of rights are likely to have major implications.