Brexit and Brands – update on the consequences of ‘No Deal’

As the Brexit process remains in flux, the UK government has pressed on with its task of publishing draft legislation setting out what will happen in the event of a ‘No Deal’, i.e., with the UK leaving the EU at the end of March 2019 without an agreement being reached. The most recent draft Regulations cover a number of IP issues, including EU trade marks (registrations and applications), patents and exhaustion of IP rights. Draft Regulations relating to designs, including the proposal to create a new supplementary unregistered design right (which will mirror the characteristics of the existing EU unregistered design right), are yet to be published. Some aspects of the proposed ‘No Deal’ arrangements will also apply in the event of an agreement being reached but it is, of course, important to note that the draft Regulations only relate to a No Deal situation and can only govern the position in the UK.

This article focuses on the proposals in relation to EU trade marks (EUTMs) and exhaustion of IP rights.  We discussed the government’s proposals in relation to copyright in a ‘No Deal’ scenario in an earlier edition.

EUTMs in a No Deal situation

Creation of a new UK right

On exit day, the UK Intellectual Property Office (UKIPO) will create over 1.2 million comparable UK rights from existing EUTM registrations.  This will happen automatically, and no fee will be payable. The UKIPO has confirmed that a UK comparable right will also be created in relation to existing International Registrations designating the EU (we await details on how this will operate).

For EUTM applications, however, there will be a 9 month “priority” window to file new UK applications based on the original EUTM. A fee will be payable at this point and no notification will be given to applicants of the need to file a new application.

The new marks created from existing EUTM registrations will be fully independent UK trade marks, and can be exploited or enforced separately from the EUTM registration. Each new UK right will be treated as having been on the UK register at the date of exit, and as having the same filing date (or any priority date) as the corresponding EUTM.  Where the owner of an EUTM registration has claimed seniority from earlier UK marks, this claim to seniority will be transferred to the new UK right.

There may be limited circumstances in which the owner of an EUTM registration does not wish to obtain a comparable right in the UK – for example, if they would be in breach of certain obligations if they held a UK right. Accordingly, owners of EUTM registrations will be given the opportunity to opt out on or after exit (subject to certain limitations) of being granted a UK right.

The decision whether to file a UK application alongside an EUTM application or registration needs to be considered on a case by case basis and businesses planning applications in the short term should monitor developments in relation to any agreed transition period.

Renewal of the new UK right

The renewal date of an existing EUTM registration will be retained for the comparable UK right – this opens up the possibility that a comparable UK right may need to be renewed immediately or shortly after exit.  The UKIPO will not be able to send reminder notices in advance to such owners (although of course the EUIPO will have sent one in relation to the EUTM registration). Accordingly, the UKIPO will send a renewal notice once the UK right has been created, giving the owner up to six months from the date of that notice to renew.

Effect on licence / security interests and other agreements

We discussed the issues that arise in relation to existing transactions affecting EU IP rights, such as EUTMs, in our recent bulletin. The government has confirmed that, subject to any agreement to the contrary, existing licences and security interests affecting an existing EUTM registration will also apply to the comparable UK right (and sets out provisions relating to registration of such a transaction at the UKIPO).

Unless the proprietor decides not to maintain protection in the UK, references to existing EUTMs in any document made before exit day will be read as including references to the comparable UK right, unless there is evidence that the document was not intended to have effect in the UK (it is not clear what level of evidence may be required here).  Further, subject to any agreement to the contrary, any consent granted before exit day by the owner of an existing EUTM to the doing of an act in the UK which would otherwise infringe the comparable UK right, will be treated as a consent to the doing of that act.

It remains the case that businesses to transactions involving IP rights should review the arrangements they have in place with other contracting parties, in case they identify the need to renegotiate certain aspects.

Effect on existing disputes

Where there are ongoing disputes before the UK courts relating to existing EUTM registrations as at the date of exit, these cases will continue – however, the UK Court will only be able to grant remedies, or for example revoke or invalidate, in relation to the comparable UK right that is created after exit.

As for injunctions that apply in relation to an existing EUTM concerning acts that may be done in the UK, these will be extended to the comparable UK right.

It is not clear what will happen in relation to existing invalidity/revocation proceedings at the EUIPO, in terms of whether there will need to be separate proceedings relating to the comparable UK right that is created on exit. However, brand owners involved in disputes should take steps to ensure that they are monitoring the UK register and taking the necessary steps to challenge any UK rights that are created post Brexit.

Genuine use and reputation

Where in any proceedings post-exit, it is necessary to consider the use or reputation of a UK mark that is based on an existing EUTM registration in relation to a period prior to exit, it will be possible to take into account use that has been made, or reputation, of the existing EUTM registration anywhere in the EU in that period. For any period after exit, however, the only relevant use or reputation will be in the UK.

Exhaustion of IP rights in a No Deal situation

As we discussed in our October edition, the future treatment of parallel imports is a complex issue for the government to resolve. It has therefore ‘fudged’ the issue for now, applying a temporary fix whereby the UK will unilaterally align to the EU/EEA regime from exit day, so that IP rights in goods will be exhausted in the UK if they have been put on the market in the EEA by the rights owner or with their consent. This will allow goods legitimately put on the market in the EEA to continue to be imported into the UK without infringing IP rights.

However, the draft Regulations can only govern the situation in relation to goods imported into the UK form the EEA. It cannot govern the situation where goods protected by an EU trade mark are put on the market in the UK, and then imported into the EEA, where trade mark rights will not have been exhausted – this will depend on how the EEA countries deal with the situation. It is worth noting in this context that, if a withdrawal agreement is reached, the agreed Political Declaration confirms that the UK and EU27 should ‘maintain the freedom to establish their own regimes for the exhaustion of IP rights’.