The implications of a Brexit vote on 23 June are being hotly contested. However, one area not yet the subject of much general public debate is that of intellectual property rights (IPRs), despite the fact that a “leave” vote would impact seriously on the UK and Scottish IP regime.
When the UK joined the EU in 1973, corporate value was more directly related to tangible assets, and businesses tended to be more manufacturing-based. The significance of brands had not yet been realised and IPR protection was not a priority.
UK companies could, post-Brexit, be sued for trademark infringement for dealing in genuine branded goodsGill Grassie
Now, of course, we have a knowledge-based economy where IP assets can be worth even more than the tangible items on a balance sheet. The health of the economy is directly affected by IPRs, and safeguarding creativity arguably enables businesses to be better financially rewarded and generates employment and investment.
The UK system of protection for IPRs underpins this. Since 1973, UK IP law has been shaped by EU legislation aimed at harmonising the legal position EU-wide. As a result, we have some very effective and popular systems of pan-European protection for registered IPRs. A new pan-European patent right – the unitary patent – is set to go live in 2017.
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In addition, within the EU, there is the concept of the free movement of goods and services, meaning that IPRs cannot be used to block the importation and resale of genuine branded goods within the EU or European Economic Area (EEA). Also, a new EU Trade Secrets Directive was agreed by the EU Council just this week.
Regime change – and its effects
In the event of Brexit, much negotiation would be needed over the likely two-year period before the UK actually left the EU. The system that emerges may well be a very different one.
For example, the UK currently benefits from the EU trade mark (EUTM) and EU design (EUD) systems that allow pan-EU coverage using one central application process. This streamlines administration and reduces costs of filing individual national trademarks in member states. They also offer potential for pan-EU relief in one national designated court, which avoids the need to enforce in individual national courts. National trademarks and design in contrast have a perceived disadvantage in that their coverage is limited to the member state concerned.
These benefits could be lost in the event of Brexit. Unless a successful negotiation allowed the UK to continue to participate, there is a risk that UK and ex-UK businesses would not be able to obtain protection for their trademarks/designs here using EUTMs and EUDs. Instead, they would have to apply for a national (or Madrid Protocol) UK trademark/design right at extra cost. While they could still obtain EUTM/EUD registrations in addition, the coverage would not include the UK. This would add costs of administration and potential enforcements in two sets of courts; national and EU.
Regarding the free movement of goods, UK companies could, post-Brexit, be sued for trademark infringement for dealing in genuine branded goods in the EU/EEA. Similarly, EU companies exporting to the UK could be sued for infringement here too.
Patents: on the cusp of unity
We presently have two patent systems – the national patent system, and the European Patent Convention (EPC) system for EU patents (EPs). In the event of Brexit, the UK would continue to benefit from the EPC during a seven-year transitional period. However an EP is only a bundle of national patent rights and not a true pan-EU right.
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Additionally, the UK is one of 25 signatories to the Unitary Patent Court (UPC) agreement and has been very much at the forefront of shaping this new system. It has even been allocated a central division and local division court. The UPC will introduce a true pan-EU patent system for the first time, with its own courts and patent judges.
However, following Brexit, the UK would risk not being part of this, although given the potential upside it seems likely that there would be the political will to secure negotiated participation. If the UK were no longer to be in the UPC following Brexit, companies would be forced to patent in the UK separately via the EPC or UK national patent system – at extra cost in terms of administration and enforcement.
While the detail of a post-Brexit IPR regime remains uncertain, change would be inevitable and with it the potential for businesses to incur greater costs as a consequence of a less streamlined approach overall to UK-applicable IPRs and the protections available to EU member states.
• Gill Grassie is a partner in the IP and technology team at Brodies LLP