The European Commission has today (7 September 2017) released its initial position paper on intellectual property matters, for discussion with the “EU 27” remaining Member States. It represents an attempt to begin reducing the uncertainty which, as we have previously explained, may affect holders of various EU IP rights once the UK ceases to be a Member State.

Geographical indications

Although the British press appears to have found it surprising that the EU will want the UK to carry on protecting geographical indications of origin such as “champagne” and Parma ham post-Brexit, in fact the protection of these rights has been a central tenet of the EU’s free trade agreements with third countries for decades, and was identified as a likely point of tension for the EU-US Transatlantic Trade and Investment Partnership, while that was under negotiation.

Territory-specific food and drinks are one of the most valuable agricultural assets of key Member States such as France, Spain and Italy and there has been litigation worldwide as the producers’ associations sought to maintain the exclusivity of their products. It will therefore be an inevitable component of the Brexit withdrawal deal.

Unitary rights

The principle that unitary rights such as EU trade marks and designs should continue to be given protection within the UK was likewise an obvious requirement and one the UK government was certainly expecting. Indeed, the UK Intellectual Property Office has been working on possible mechanisms to achieve this result, since to do otherwise would have deprived the holders of such rights, including British as well as continental and other companies, of legal property rights – something contrary to the principles of natural justice and certain to have triggered judicial review of the government’s actions. So this point too is likely be readily accepted.

Database rights

The position paper seeks to achieve the same on-going protection for holders of database right, which is not a unitary right in the same way as trade marks and registered designs, but does stem from the implementation of an EU Directive. The issue here is that database right is only available to persons (including companies) established in the EU, so that there could be a risk of British companies losing rights to EU databases on Brexit as well as EU 27 businesses losing those rights in the UK. This can be fixed by a relatively simple amendment to the Copyright Designs and Patents Act 1988, and again is almost certainly something the Intellectual Property Office has already begun drafting.

Exhaustion of rights

Perhaps most economically significant is the Commission’s final point, on exhaustion of rights. The paper proposes that where a right, such as a trade mark, was ‘exhausted’ in relation to a batch of goods before Brexit by having been put on sale anywhere within the EEA, those rights should remain exhausted after Brexit.

This, if accepted, will mean that such goods can be parallel traded between the UK and EEA even after Brexit, so continuing to give UK consumers the benefits of lower prices for a temporary period until no such goods remain in circulation – but also likely to give rise to on-going legal disputes as to whether or not such goods had in fact been on sale before Brexit. The parallel traders’ businesses will be hard hit by the loss of profits from re-sales into the UK, providing an obvious incentive to try to keep the flow going using goods in fact put on sale in the period after Brexit. Supply chain audit trails may have to come in for some serious scrutiny!