Drama of Brexit Decision Won't Bring Clarity For IP Owners

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By Peter Leung

June 22 — The debate over whether the U.K. will leave the European Union has dominated headlines, but the effect of a “Brexit” on intellectual property (IP) law will be unclear for months—even years—following the June 23 vote.

That is because a vote to leave would be followed by a two-year negotiation period between the U.K. and EU about the terms of their future relationship. During that time, the U.K. is also likely to pass legislation to deal with transition issues.

Once Expanding, Now Shrinking?

On the IP front, that could include how to handle EU-wide rights, such as EU Trademarks and Community Designs.

In the past, when countries joined the EU, the scope of already granted EU-wide IP rights would automatically expand to cover those countries . A Brexit could possibly result in those rights contracting to exclude the U.K.

However, as Michael Edenborough, a barrister who specializes in IP law has said previously in an article for Bloomberg BNA, such a change could be viewed as an unfair deprivation of property rights without compensation (30 WIPR 32, 3/1/16).

One option might be for the U.K. to pass legislation automatically creating analogous rights to replace lost EU protections for IP. For instance, it could automatically grant a national trademark registration to those with EU trademarks that no longer cover the U.K.

Such solutions, however, would still cause headaches for brand owners with licensing agreements that refer only to EU Trademarks, leading to disagreements over handling new U.K. rights under such contracts.

Also, as Priya Nagpal an IP litigator with Olswang LLP wrote, under that scenario, companies that have EU Trademarks only used in the U.K. may find their marks attacked for non-use.

Losing those options could also increase costs, as rights holders would likely have to file lawsuits in the U.K. to enforce national rights there, in addition to EU actions.

Patent Problems

One likely outcome of a Brexit may be a significant delay to the start of the Unified Patent Court (UPC) and European Patent with unitary effect.

The UPC and unitary patent will be a patent right and court system that will cover most of the EU. It will take effect after it has been ratified by 13 EU countries, including the “big three” of France, Germany and the U.K. A withdrawal by the U.K. might force a renegotiation of the underlying treaty.

What's more, one of the Unified Patent Court's specialist divisions is to be seated in London. There may be similar problems with U.K. judges who have already been selected for the new court.

However, Margot Frohlinger, principle director of patent law at the European Patent Office, suggested that such concerns are overstated (30 WIPR 7, 3/1/16). In a March speech, she dismissed concerns over a U.K. exit, calling them the product of “wishful thinking of some of those who still prefer the Unified Patent Court not coming into operation.”

Interestingly, the existing European Patent system will likely be unaffected by a Brexit. As Edenborough explained, this is because the European Patent is governed by a separate agreement, the European Patent Convention, which has both EU and non-EU members. Presumably, the U.K. will continue as a non-EU member, even if it votes to leave.

A European Patent is a patent examined by the European Patent Office, and then validated in the member countries of the applicant's choosing, resulting in individual national rights in those countries. This is different from the planned unitary patent, which will result in a single patent right covering all the ratifying EU countries.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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