Major advance on Brexit and pan-EU IP rights

The UK and EU Commission announced earlier today that they have agreed, in principle, a transitional period from 29 March 2019 to December 2020 during which time the UK will remain a member of the EU. They also announced that they have agreed a "large part" of the draft Withdrawal Agreement, which had been issued by the Commission on 28 February 2018. This includes key provisions on the protection and enforcement of IP in the UK after the end of the transitional period. Helpfully, the parties have also published a revised version of the draft agreement highlighting which elements have and have not been agreed - view the UK draft and the EU draft. The terms are conditional on a final agreement being entered into in the Autumn of 2018.

The Commission's 28 February draft Withdrawal Agreement had set out the key terms the Commission wanted to see the UK implement in areas ranging from citizens' rights to the Northern Ireland border. It was 119 pages long and included one chapter on IP. The latter had largely mirrored the proposals set out in the Commission's Position Paper on IP and Brexit published last September. In fact, there are some differences between today's highlighted draft and the 28 February version. These differences relate, for example, to the proposed extended protection for rights based on reputation and the period (increased from six months to nine months) during which priority can be claimed for a pending EU application. These changes are the fruit of negotiations since the 28 February draft was published. It is also worth noting that the draft agreement only sets out the minimum requirements for the UK to implement post-Brexit; the UK could and presumably will wish to include additional provisions to ensure IP rights are adequately protected in the UK after the transitional period.

Nonetheless, there is at least now some level of certainty on how IP rights will continue to be treated in the UK at the end of the transitional period. Some will welcome this; others will argue that there is still significant detail to be filled in. At least now there is more time to do so. Some may also question whether it is appropriate for the UK government to agree all these provisions without obtaining certain assurances in return from the Commission on how it will continue to treat unitary IP rights in the EU27 Member States going forwards. Or it may be that such assurances will be provided by the Commission shortly.

Either way, the key IP provisions appear to have been agreed with two main exceptions. First, discussions are still on-going around the continued protection of geographical indications and similar rights in the UK post-transitional period. Secondly, there is, as yet, no agreement on the precise mechanics surrounding how registered unitary rights (such as EUTMs and RCDs) will continue to be protected in the UK, post-Brexit. It means the following:

• EU trade marks (EUTMs) and Registered Community Designs (RCDs) that are granted before the end of the transitional period will continue to be protected in the UK by a UK "comparable" right. This should now reduce the numbers of new UK applications that are being filed to mirror existing registered EUTMs and RCDs. Some applicants have been doing this out of an abundance of caution but it may now prove to have been an unnecessary step to take.
• Filing, priority and seniority dates and claims will be preserved and the first renewal dates will remain the same as the "parent" EU right. Presumably, UK rights that have been allowed to lapse will be capable of resurrection to allow seniority claims to be preserved. The agreement does not require registration dates to remain the same (which have relevance to the date on which the right can be enforced and to non-use periods). However, the UK can still provide for this anyway. Only the first renewal date must remain the same which, presumably, allows for divergence down the line. Whether the UK will want such divergence remains to be seen. Certainly, it is not something that IP owners will want. In addition, IP owners have made it clear that it would be preferable for registration numbers to be mirrored across into the "comparable" right (perhaps with a prefix).
• The UK and Commission are still discussing the mechanics surrounding the creation of the UK "comparable" right, including whether there will be a charge, any application or administrative procedure, whether a UK correspondence address will be required and how the information will be ported across from the EU to UK IPOs. IP owners will be hoping that no additional financial or administrative burden will be imposed upon them. Given that there are over one million registered EUTMs alone, it seems unlikely that the UKIPO could cope with any administrative requirements anyway. There will also be additional revenue on the horizon for the UKIPO from future national filings that would previously just have been filed as EUTMs or RCDs. It is hoped that this extra revenue can offset additional costs at the time of Brexit so that no fee need be imposed.
• If an EUTM or RCD is declared invalid or revoked in the EU as a result of an administrative or judicial procedure that was on-going at the end of the transitional period, the "comparable" UK right shall also be declared invalid or revoked, with effect from the same date. This was a new provision in the 28 February draft not contained in the Commission's Position Paper and was subject to criticism in that it did not allow for the UK right to remain in force if the grounds of invalidity or revocation did not apply to the UK. The version published today is different and now allows for the UK right to remain in force in such a situation. Nonetheless, even with this carve out, the validity of UK "comparable" rights may be in question for some years until the results of on-going EU proceedings are known. There is also likely to be debate about who decides whether the grounds for invalidity or revocation apply to the UK and whether the UK will be bound by EU decisions on this point. It is also worth noting that, on the law as it stands, the UK will not have the equivalent power to continue to hear on-going actions involving EU-wide rights. Some will question whether the UK government should have agreed to this provision without first obtaining reciprocity on this and other issues from the EU.
• "Comparable" UK marks will not be liable to revocation for non-use on the ground that the corresponding EUTM had not been put into genuine use in the UK before the end of the transitional period. This means that UK "comparable" rights will be given an additional period of time in which to be put to genuine use in the UK before they can be revoked. However, it will be for the UK government to specify how long that period will be and the precise rules since the draft agreement is silent on the point. Most IP commentators have argued that the UK "comparable" right should be revocable five years after it was last used anywhere in the EU, including if that was in any EU27 Member State. However, that could mean revocation shortly after the transitional period if the last use was in the EU27 almost five years previously. Such an outcome does not seem wholly compatible with the draft agreement. Those who have rights that have been used in either the UK only or the EU27 only will wish to watch the situation carefully in the lead up to the end of the transitional period. They may wish to make some additional filings and/or plan for genuine use in either region to maintain their rights. Again, some may wonder if the UK should have obtained greater clarity from the EU as regards the ongoing validity of EUTMs that had only been used in the UK pre-Brexit.
• UK "comparable" trade marks will seemingly be able to benefit from reputation acquired through use of the "parent" EUTM in the EU27 before the end of the transitional period but thereafter continuing reputation will be based on the use of the right in the UK. The wording of this section has been changed and is now somewhat unclear. It appears that any reputation acquired as at the date of the end of the transitional period may still be ported across to the UK "comparable" right but for how long and on what basis is difficult to discern. Hopefully any final agreement will be worded to add further clarity on this point.
• EUTMs and RCDs accorded a filing date will benefit from a right of priority in the UK for a period of nine months from the end of the transitional period. During this time, EU applications pending at Brexit can be re-filed as UK applications and have the same filing, priority and seniority dates and claims as the "parent" EU rights. The inclusion of RCDs and the lengthening of the priority period from six to nine months in this version of the draft agreement will be welcome by IP owners. However, given that there are currently over 82,000 pending EUTMs, IP owners may wish to file both UK and EU trade mark applications simultaneously closer to the end of the transitional period to avoid the inevitable rush at the UKIPO. A number of user associations had pressed for pending applications to be automatically split into EU27 and a "comparable" UK application. The introduction of a human process has the downside that SMEs, who may not have professional representation, risk missing the re-filing date and losing their UK priority by default. It may also lead to additional costs for rights owners, something that all rights owners have sought to avoid.
• Those who have obtained protection for international trade marks or designs designating the EU will be able to continue to benefit from such protection in the UK. The detail will need to be filled in by the UK government and negotiated and implemented with input from WIPO and the WTO.
• Unregistered Community Designs (UCDs) in existence before the end of the transitional period will continue to have the benefit of a right having "the same level of protection" in the UK after the end of the transitional period. This is good news for designers but only protects those rights existing at Brexit until they also expire in the EU27, ie for a maximum of three years. It is hoped that the UK government will be enact legislation to allow the protection of UCDs in the UK (since current UK unregistered design law is quite different to EU unregistered design law).
• Rights exhausted in the UK and EU before the end of the transitional period under EU law will remain exhausted after the end of the transitional period in both territories. This makes sense. However, if the UK decides to adopt either international or UK-only exhaustion of rights after the end of the transitional period then it is going to be difficult for those in the supply chain unless stocks have been run through. Care would then be needed to identify if the goods had been first put on the market in the UK or EU27 before or after the end of the transitional period.

Whilst today's developments represent a significant step forward in terms of understanding how unitary rights will continue to be protected in the UK after the end of the transitional period, the detail remains to be worked out. Perhaps more importantly, there is still considerable uncertainty as to how unitary rights will be dealt with by the EUIPO and EU courts once the transitional period is over. The EUIPO recently published a Q&A document setting out the answers to a number of questions around this. Reading the answers to some of those questions alongside the draft Withdrawal Agreement highlights a number of areas in which the UK will (if the Withdrawal Agreement is formally agreed) have much greater obligations than the EUIPO / EU courts. This is particularly so for pending disputes. Whilst the UK is agreeing to implement post-transition decisions of the EU on matters of invalidity and revocation, the Q&A states that UK courts will no longer be able to hear actions involving EUTMs and EU designs once the transitional period is over. It also states that UK prior rights will not be taken into account in post-transition decisions (since the right has to be in existence as at the decision date). Notwithstanding this apparent lack of reciprocity at this stage, IP owners will at least now be able to start planning their strategies for ensuring their rights are protected once the transitional period is over.