Yesterday, the European Commission published its first draft of an agreement governing the UK's withdrawal from the EU. The draft agreement has not been agreed by the UK and many parts of it are contentious. However, it is another step along the road towards clarifying the UK's future relationship with the EU.
This is the first time that either negotiating party has set out a specific and detailed position on intellectual property. However, the Commission did provide a general indication of its stance last autumn when it published a position paper (see our blog here).
The key IP provisions of the draft agreement are set out below. Most of them are in line with our preferred outcomes for IP during Brexit. However, it remains to be seen how far the UK government will be willing to accept these mechanisms.
In all cases, the point in time at which the provision will take effect is the last day of the Brexit transition period. This suggests that the Commission expects the IP position to remain unchanged during any transition period.
Registered pan-EU IP rights
There are three unitary IP registered rights provided in directly effective EU law: the Registered Community Design (RCD), the Community Plant Variety Right (CPV) and, of course, the widely used European Union trade mark (EUTM).
The draft agreement provides that holders of registered RCDs, CPVs and EUTMs will receive an equivalent right under UK law which will have the same effective date of priority. This will be granted without any re-examination and the grant will happen automatically and free of charge. IP owners will also not be required to provide a UK address for service in order to benefit from the grant of successor rights. This is essentially the 'Montenegro' solution that has been discussed in position papers by CITMA and others. We consider this to be the optimal solution for registered EU IP rights.
However, the draft agreement also adds a few nuances to the position:
- The first relates to cases where a given EUTM, RCD or CPV is subject to pending cancellation proceedings on the last day of the transition period. In this case, if the EU right is subsequently invalidated, then the successor right in the UK will automatically be declared null and void.
- In regard to renewals, the first renewal date for a UK successor right will be simultaneous with the renewal of the parent right. This makes sense since resetting the renewal period for the UK successor rights would lead to some rights receiving unnaturally extended protection in the UK, even if the proprietor has no interest in that market or intention to renew.
- A related concern arises in relation to proof of use. The draft agreement provides that a UK successor trade mark will not become subject to cancellation on the grounds of non-use where the parent EUTM had been used within the EU during the five years preceding the end of the transition period. Again, this seeks to smooth out anomalies that may arise, if a right that had been enforceable due to wider EU use, abruptly ceased to be enforceable following transition. A similar rule is set out as regards evidence of reputation, which is required for some grounds of trade mark infringement.
Regarding International Registrations for designs or trade marks, the UK will be obliged to provide comparable protection in a similar way.
Pending applications for pan-EU IP rights
In the case of pending applications for CPVs and EUTMs, there will be no grant of automatic UK successor rights. However, during the six months following the end of the transition period, the owners of such applications will be able to file an equivalent UK application and claim priority from the earlier European application. The UK application will therefore enjoy the same effective date of priority.
This priority mechanism is clear and proportionate and is essentially in line with recommendations that we and other firms put forward at the outset of the Brexit process. If attempts are made to transfer applications to the UK while in process, it is highly likely that complications and unforeseen anomalies will result.
Unregistered Community Designs
Unregistered Community Design (UCD) right is heavily relied upon by design-oriented businesses, particularly in fast moving fields such as fashion. While the UK does have a system of unregistered protection for design rights, it operates in a very different way to UCD and provides a different scope of protection. The draft agreement provides that the UK will create an additional right which is equivalent to UCD. We believe that this is a sensible approach, particularly given the large number of UK businesses who rely extensively on UCD at present.
EU law creates a number of directly effective rights that protect geographical indications, such as Prosciutto di Parma, which are widely used in Europe particularly by agricultural industries. The draft agreement also provides that holders of these rights will also receive equivalent protection under UK law following transition.
This provision will be far more contentious. At present, the UK does not have equivalent systems of protection and so it will be necessary to create new UK rights. Historically, the UK has been far less inclined to protect collective rights in the agricultural sphere and the few producer groups who have achieved success, e.g. in relation to the Champagne appellation, have relied upon niche forms of passing off. It remains to be seen how willing the UK government will be to implement forms of legislative protection that are overwhelming geared towards the protection of agricultural producer groups in continental Europe. These provisions may also be opposed by the UK's large supermarket groups, several of which have found themselves on the sharp end of geographical indication protection in the past.
Exhaustion of rights
One of the most contentious IP questions connected with Brexit is exhaustion of rights. The draft agreement provides that where IP rights have been exhausted prior to the end of the transition period, because a shipment goods marked with a given trade mark had already been put on the market in the EEA, then those rights will remain exhausted. An IP owner will not, post-Brexit, be able to use its IP rights to challenge the sale of goods in the UK which it put onto the EEA market before the end of the transition period.
While this provision relates solely to the exhaustion of rights where goods are put on the market before Brexit, a bigger question will remain as to the rules for exhaustion when goods are put on the market in the EU or UK after the end of the transition period. This question will form a key IP consideration when the negotiating parties come to consider the future trading relationship.
One area on which the draft agreement is silent is the question of whether IP practitioners in the UK can continue to represent rights-owners before the EU IP Office and the Community Plant Variety Office. This is a significant concern for the IP profession in the UK. It may be that the UK government is able to secure an additional provision on representation in exchange for agreeing to implement potentially contentious national protection connected with geographical indications.
Despite a few potentially contentious areas, such as the treatment of geographical indications and representation rights for the UK IP profession, overall the mechanisms set out in the draft agreement are sensible and aim to produce a smooth, predictable and low impact transition for IP owners. The provisions are also closely aligned to recommendations that we and other IP firms put forward during the early days of the Brexit process. It is our hope that most of the provisions set out will be accepted by the UK government in due course and will be implemented smoothly and effectively.