Latham & Watkins Discusses IP in the UK After Brexit

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On September 28, 2020, the UK government made the Intellectual Property (Amendment etc.) (EU Exit) Regulations 2020 (IP Regulations 2020), which amend the intellectual property (IP) regime in the UK to reflect Brexit-related changes once the transition period ends. The IP Regulations 2020 overlap somewhat complexly with existing UK and EU IP rights. In particular, exhaustion of rights principles seem to have fallen into a lacuna and as a result parallel importation from the UK into the EU may be significantly impacted. Owners of existing registered IP rights and pending IP applications under EU law should carefully consider the incoming legislation to inform their ongoing business operations.

The UK left the EU on 31 January 2020 (Exit Day) under the terms of a withdrawal agreement negotiated with the EU. The transition period ends at 11 p.m. (UK time) on 31 December 2020. At that point, all EU law that was enacted before Exit Day is “created” and applies in the UK as if it were national law. This is referred to as “IP completion day” in the EU (Withdrawal) Act 2018 and the EU (Withdrawal) Act 2020.

The UK published the draft IP Regulations 2020 in July 2020 and made them, without amendment, in September 2020. The IP Regulations 2020 amend the following IP-related statutory instruments (No-Deal SIs), which were made in 2019 and designed to come into force in the event of a no-deal Brexit:

The IP Regulations 2020 amend references to “exit day” in the No-Deal SIs to “IP completion day” to ensure they take effect at the correct time. The material provisions of each of the No-Deal SIs (as amended) are discussed below. All references to the No-Deal SIs below are to the statutory instruments as amended by the IP Regulations 2020.

Trade Marks

Currently, parties may register national trade marks in the UK (UKTMs), which are governed by national legislation, and supra-national trade marks in the EU (EUTMs), which are governed by EU legislation. The EUTM is a valuable IP asset, as it offers brand protection across all EU Member States and a centralised system of application, maintenance, and dispute resolution through the EU Intellectual Property Office (EUIPO). As such, many companies have opted to obtain and maintain the more expensive EUTM rather than a patchwork of national filings.

From and following IP completion day, an owner of an existing, valid EUTM that has been registered before IP completion day will be treated as if their EUTM had always been registered nationally under the UK Trade Mark Act 1994 (TMA 1994), without payment of any initial registration or administration fees. Such trade marks are referred to as “comparable trade marks” under the TM Regulations. The dates of filing the application for, and the registration of, the original EUTM are carried over into the UK trade mark registry, thereby preserving the mark’s seniority. Thereafter, all matters relating to comparable marks in the UK, including maintenance, renewal, and dispute resolution, will be subject to the authority of the UK Intellectual Property Office (UKIPO). Any assignments or licences of or security interests in the underlying EUTM that have not expired as of IP completion day are deemed to include the comparable mark.

An existing EUTM that expires within the six months prior to IP completion day will be treated as if it were an expired comparable mark, which can be renewed separately with the UKIPO within the relevant grace period upon payment of the relevant fees. This treatment will be particularly useful if the grace period runs past IP completion day. If an application for an EUTM has been filed but not yet granted as of IP completion day, the owner of the EUTM application has a grace period of nine months to apply for registration in the UK upon payment of national registration fees. If granted, the comparable mark will have the same filing, priority, and seniority dates as the underlying EUTM.

The continued protection of their UK brands will undoubtedly bring relief to many companies. However, the regime change effectively decentralises management of part of the trade mark portfolio. This change brings with it an increase in administrative costs and a new set of national fees for maintenance of the comparable mark, which could be considerable if it is registered in multiple classes. Parties conducting transfers of IP in the near future should consider whether their transactions and post-closing strategies account for the change of regime and fee system.

If the owner of an existing EUTM wishes to opt out of this scheme and abandon the proffered protection of its brand under UK trade mark law, it may serve an opt-out notice on the UKIPO on or after IP completion day. However, certain actions will effectively forfeit the right to serve an opt-out notice if taken on or after IP completion day. An opt-out notice cannot be served if a comparable trade mark has been “put to use” in the UK by its owner or with its owner’s consent, e.g., by affixing the mark to goods or to the packaging of goods in the UK solely for export purposes; if the comparable mark has been made the subject of an assignment, licence, security interest, or any other agreement or document; or if proceedings based on the comparable mark have been initiated by its owner or with its owner’s consent. Alternatively, owners who do not wish to remain in the UK national trade mark regime could simply allow the registration of the comparable mark in the UK to expire.

Designs

In the context of Brexit, national and EU-level regimes for the protection of designs give rise to a similar set of concerns as for trade marks. The Designs Regulations address these concerns in a similar way as the TM Regulations: European Community (Community) designs that are registered before IP completion day will be treated as if they were national designs registered under the UK Registered Designs Act 1949 (Designs Act 1949) as of IP completion day. Such Community designs will have the same renewal dates and take the same filing and priority dates as the underlying Community designs.

Notably, the Design Regulations create a new unregistered design right. Unregistered Community designs (UCDs) arising before the end of the transition period will take effect as “supplementary unregistered designs” in the UK from IP completion day and will offer equivalent rights with the same term of protection as the UCD. The intended effect of the new regime is that first disclosure of a design in either the UK or the EU will not destroy the novelty requirement for establishing an unregistered design right in either territory. However, whether the EU will agree to the proposed equivalence is not yet clear.

Supplementary unregistered designs will sit alongside the existing UK regime for unregistered design rights, which requires different criteria for establishment of the right and provides a different term of protection. As such, the Design Regulations create a complexly overlapping regime of registered and unregistered rights in the UK and the EU. Right holders should perform careful analysis before disclosing new designs to ensure that they are clear on the effect of the disclosure.

Patents and Supplementary Protection Certificates

Patent law is largely governed by national laws, and there is little harmonisation at the EU level. As such, the systems governing the registration and enforcement of national UK patents (which fall under the authority of the UKIPO) and European patents designating the UK (which fall under the authority of the European Patent Office (EPO)) have been largely unaffected.

Changes to the supplementary protection certificate (SPC) regime are also relatively minor. SPCs permit holders of patent rights to obtain an additional period of protection beyond the expiry of patents for pharmaceutical products. Currently, the UKIPO accepts applications for and grants SPCs as national rights on the basis of a valid UK patent, which can be granted by the UKIPO or the EPO. The UK Medicines and Healthcare products Regulatory Agency (MHRA) or the European Medicines Agency (EMA) can grant a marketing authorisation (MA) for the UK.

On IP completion day, MAs granted by the EMA will be converted into equivalent UK MAs so that existing SPCs will not be affected. The same applies to SPC applications that are pending as of IP completion day and granted after IP completion day. New SPCs must be applied for, and will be granted, in the same way as they are today: by submitting an application to the UKIPO. SPCs granted by the UKIPO will have the same term of protection as European SPCs. The six-month paediatric extension for SPCs currently available under EU law will continue to be available in the UK after IP completion day on the basis of equivalent provisions in the UK Human Medicines Regulations 2012.

Therefore, the main change is that, after IP completion day, a UK MA must be separately applied for in order to obtain an SPC for a patent designating the UK. Manufacturers of pharmaceutical products will be pleased to see that the IP Regulations 2020 amend the Patents Regulations to introduce an equivalent right to the manufacturing waiver introduced by the EU in 2019. Regulation (EC) 2019/933, which amends Regulation (EC) No 469/2009 governing the grant of SPCs, allows third-party manufacturers to make SPC-protected medicines for export outside of the EU and allows for the manufacture and storage of medicines during the last six months of an SPC ready for sale in the EU once the SPC expires. Its purpose is to promote the competitiveness of the EU market for generics and biosimilar pharmaceutical products. Following consultation, the UK government confirmed that third parties should be allowed to manufacture SPC-protected products in the UK for export to countries outside of the UK and the EU and, in the final six months of the SPC term, to store in the UK for sale in UK or EU markets after the SPC expires. The amending language is included in the IP Regulations 2020.

Exhaustion of Rights

IP rights that are exhausted both in the EU and the UK on IP completion day shall remain exhausted. Therefore, the rules affecting the import of goods into the UK will not change, so that parallel imports (i.e., non-counterfeit imports for which the IP rights in that product have been exhausted) from the EU can continue.

However, it remains unclear whether goods placed on the UK market by or with the permission of the right holder as of IP completion day will be considered exhausted in the EU. UK government guidance states that UK businesses conducting parallel imports “might need the right holder’s consent” to export goods into the EU. The same guidance advises that UK businesses may need to review their business arrangements, business model, and supply chain depending on the outcome of any discussions with such right holders.

Therefore, absent any private agreement between business owners or agreement at an international level, EU right holders will be able to block the entry of parallel imports from the UK into the EU. UK right holders who conduct parallel imports should urgently examine their relationships and consider whether they can continue trading as usual following IP completion day.

Conclusion

Owners of IP rights that are currently pending registration or registered in the EU can take some comfort from the protections afforded by the incoming post-Brexit IP regime. However, in order to avoid administrative or financial burdens in future, they should carefully consider the complexities of the incoming regime to determine whether it is compatible with their corporate, commercial, and IP strategies. Parties that are contemplating or are in the process of transferring EU-registered IP rights relating to a UK business should consider the impact of the incoming regime on the transaction. Businesses should take extra care around disclosure of new designs in the UK and, to the extent that they currently export IP-protected goods to the EU, take immediate steps to ensure that they can continue to do so — or else adjust their business model and supply chains as necessary.

This blog post discusses registered IP rights and applications only. However, companies should also urgently consider their copyright and other unregistered IP assets, which will also be affected by Brexit. The position here is similar to EU design rights in that there are overlapping national and EU-level laws. Brexit should be less impactful on copyright since there is even less harmonisation of relevant laws. However, the UK government has stated that it does not intend to create a mirrored national law for the incoming copyright directive, which will create an interesting but murky landscape for copyright holders that work across the UK and the EU.

This post comes to us from Latham & Watkins LLP. It is based on the firm’s memorandum, “IP in the UK After Brexit: What Does It Mean for UK Business and Trading With the EU?” dated December 2, 2020, and available here.