March 5, 2018

European Commission Draft Withdrawal Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.

On 28 February 2018, the European Commission published its draft text for the Withdrawal Agreement that, once in agreed form, will govern the UK’s withdrawal from the European Union and Euratom.  The text is especially interesting for the proprietors of EU intellectual property (“IP“) rights because this may not be far off the position ultimately agreed and is the first formal draft legislation to have been put forward by either side in the EU and UK Brexit negotiations on the future of EU IP rights in the UK.  The European Commission’s draft text proposes a transition from 30 March 2019 until 31 December 2020.  This would mean that ‘true Brexit’ would start on 1 January 2021.

In summary, the European Commission’s draft favours holders of EU IP rights (which could still include UK businesses after Brexit), with proposals for automatic and free conversion of both registered and unregistered rights into the UK, effective on the expiry of the transition period.  The Commission’s proposals would place the burden firmly on the UK Intellectual Property Office (“UKIPO“) and other UK authorities (including ones that do not currently exist) to enable this to happen.

Registered EU rights, including trade marks, designs and plant variety rights

• Automatic protection for proprietors of EU trade marks (“EUTMs“), Community registered designs (“CRDs“) and Community plant variety rights (“CPVRs“). At the end of the transition period, such proprietors shall automatically become the proprietors of a separate and equivalent UK trade mark, UK registered design or UK plant variety right.[1]  International trade mark registrations designating the EU must be grandfathered across to the UK register in the same way as for EUTMs.[2]
• No application by proprietors of a EUTM, CRD or CPVR is necessary.  The UKIPO and UK Plant Variety Rights Office must carry out the conversion work based on the data held at the EUIPO and the Community Plant Variety Office.[3]  No re-examination of the UK equivalents of the EUTMs, CRDs and CPVRs will be required or permitted.^[4]
• No fees would be payable by rights holders to the UKIPO or Plant Variety Rights Office until the renewal date.[5] No correspondence address in the UK is required until the first renewal date.
• Priority dates, seniority dates and renewal dates unaffected for EUTMs, CRDs and CPVRs.[6]
• Duration of CRDs and CPVRs also unaffected.[7]
• Pending EUTM and CPVR applications at the end of the transition period will not be converted, but a further 6-month priority period will be granted from the end of the transition period to allow for corresponding UK applications.[8] No such priority period is awarded for CRDs, probably because the registration process is usually a matter of days with no substantive examination.  Opponents of pending EUTM or CPVR applications would need to file a separate opposition against any new UK applications.
• Successful cancellation proceedings against an EUTM or CRD will also cancel the new equivalent UK right automatically created, provided such proceedings are continuing at the end of the transition period. This has tactical implications for brand clearance, as those considering taking action to remove EU registered rights from the register would probably benefit from initiating those proceedings before the end of the transition period as a form of central attack.
• Revocation of converted EUTMs not permitted based on a lack of genuine use in the UK, provided there has been genuine use elsewhere in the EU in the relevant period.[9]
• Reputation of converted EUTMs can similarly be based on (non-UK) EU reputation and need not rely on a UK reputation alone.[10] It is not clear from the current draft whether such rights would be limited in time, e.g., to five years after the transition date.
• Geographical indications, designations of origin and designations of traditional specialities will be grandfathered to become equivalent UK rights.[11] As the EU will continue to recognize non‑EU GIs, businesses relying on UK geographical indications (e.g., Scotch whisky or Yorkshire Wensleydale cheese) may continue to benefit from protection in the EU system.
• Exhausted IP rights in both the EU and the UK at the end of the transition period will remain exhausted.[12]

Unregistered Community Designs

• Automatic protection for existing unregistered Community design right at the end of the transition period, as if a UK version of such a right existed and for the same duration.[13]
• No provision for equivalent protection of new designs after the transition period, unless the UK introduces new legislation. As the UK already has a standalone unregistered design right under the Copyright, Designs & Patents Act 1988, it may choose not to do so.
• Copyright in designs will be unaffected, as this is implemented into national law.  There are no provisions in the draft Withdrawal Agreement relating to copyright.

Databases

• Automatic protection for existing databases protected by sui generis database right arising out of Directive 96/9/EC at the end of the transition period, for the same duration.[14]
• No provision for equivalent protection for new databases after the transition period.  But the UK would arguably be required to amend the Copyright and Rights in Databases Regulations 1997/3032 (“Database Regulations“) to amend references to the EEA to stop new database rights arising after the transition period.
• Databases created by UK nationals and companies protected by deeming UK nationals and companies to constitute “EEA” nationals under Regulation 18 of the Databases Regulations.[15] Otherwise, without amendment to the Database Regulations, technically EEA nationals and companies could benefit from database right in the UK, but not UK nationals and companies!
• Copyright in databases will be unaffected, as this is implemented into national law.

Supplementary protection certificates

• Applications for supplementary protection certificates for patented plant protection products and medicinal products pending at the end of the transition period shall continue to be governed by Regulation (EC) No 1610/96 and Regulation (EC) 469/2009 [16]
• Pending applications subsequently granted in the UK should continue to provide the same level of protection provided under Regulation (EC) No 1610/96 and Regulation (EC) 469/2009.[17]
• European and UK Patents otherwise unaffected, as they are a creature of the European Patent Convention and other international treaties separate to the EU treaties. The draft text contains no provision for SPCs already granted in the UK, presumably on the basis that UK SPCs are granted by the UKIPO and it seems unlikely that the UK would interfere with such rights already granted.

Comment

Of the various models that have previously been discussed in the IP community, the European Commission appears to favour the so-called ‘Montenegro’ (automatic protection) model over alternatives such as the ‘Tuvalu’ (opt-in) and ‘Jersey’ (as if) models.  The exception is for pending EUTM and CPVR applications, which require a form of opt-in.  In respect of trade marks alone, with over 1 million EUTMs on the EUIPO’s register, this will place a heavy burden on the UKIPO.  Some would argue that the result will be many rights automatically being converted to the UK registers that will never be used in the UK, creating ‘clutter’ that will unreasonably stifle competition and place an unnecessary burden on businesses operating in the UK after Brexit; others would say that Brexit was the UK’s decision and EU rights holders should not be prejudiced by it in any way.

Intellectual property did not feature in the joint report from the negotiators of the EU and the UK Government on progress in December 2017 during phase one of the Brexit negotiations, although the European Commission had previously set out its general position in relation to some issues on IP in its Position paper transmitted to EU27 on intellectual property rights (including geographical indications).  But the UK has not responded in such a formal way or yet provided its own draft and it is therefore still unclear to what extent the IP provisions set out above have been discussed or agreed with the UK Government.

While IP may not be at the top of the UK Government’s priority list, there appears to be a reasonable chance that it will try to reduce the overall burden on the UKIPO and other UK institutions proposed by the Commission and to limit the UK register clutter discussed above.  For example, the UK Government may argue that an application should be made or a fee paid by rights holders to obtain a UK right based on their EUTM, CRD or CPVR (the ‘Tuvalu’ model).  A radical departure from the draft text seems unlikely, however, partly owing to a lack of available Government attention and resource and partly owing to pressure on the UK not to impose procedures or costs that will unfairly prejudice EU rights holders who have already taken the necessary steps and paid for a right that extends to the UK.  It is believed that talks between the European Commission and the UKIPO are continuing at the time of writing.

Finally, while there are protections in place under the draft Withdrawal Agreement for existing holders of unregistered Community designs, a UK version of such rights will not exist for new designs after the transition period under current proposals.  Unlike EUTMs, CRDs and CPVRs, there is no direct national equivalent to unregistered Community designs.  While a UK unregistered design right exists, it pre-dates the Community design regime and is different, in particular, by not protecting surface decoration or 2D designs.  As unregistered Community designs are a creature of the Community Designs Regulation 6/2002, which will cease to apply following the transition period, the UK would need to legislate to replace such rights, although the time remaining is now short.

[1] Article 50(1)

[2] Article 52

[3] Article 51

[4] Article 50(1)

[5] Article 51(1)

[6] Article 50(4), Article 50(5)(a) and Article 50(6)(b).

[7] Article 50(6)(a)

[8] Article 55

[9] Article 50(5)(b)

[10] Article 50(5)(c)

[11] Article 51(2)

[12] Article 57

[13] Article 53

[14] Article 54(1)

[15] Article 54(2)

[16] Article 56(1)

[17] Article 56(2)