Brexit and Intellectual Property Implications for Global Business

Published June 12, 2017

Thomas P. (Tip) O’Neill was known for the quote “All politics is local”. For businesses today, the motto is “All business is global”. The rise of e-commerce has made many companies global businesses with worldwide sales, marketing, as well as research and development activities. Often, global companies carefully consider where to pursue patent and trademark protection for their key ideas and products. The “Brexit” vote in the UK may change this decision making process for global businesses.

Many global businesses decide where to protect their intellectual property based on sales, business climate, and production. For many companies, sales in the region are a key driver, however, some countries have also actively sought business investment with economic development initiatives. Ireland is an example, with many global businesses basing European activities out of Dublin. London has long been a business center, particularly for intellectual property and patents. The first patent in England was issued in 1331 to John Kempe and his company to provide a limited monopoly. Given this long history, the recent vote in the UK to leave the European Union is even more perplexing and has serious implications for global patent and trademark decision making.

After the UK voted to leave the European Union on June 23, 2016, the Prime Minister stated that the country would serve notice of withdrawal under Article 50 of the Treaty on European Union by the end of March 2017. The Supreme Court determined that Parliamentary approval is required to serve the formal notice that is necessary to leave the European Union. While the approval is expected to be given by Parliament, the required notice period means that the actual exit date is not likely before 2019. It is likely, however, that a negotiated exit with a phased transitional period will ensue, a period that may last several years beyond 2019.

Article 50 provides that the European Union treaties will cease to apply to the UK from the date of entry in force of the negotiated withdrawal agreement, acting through the European Council; or two years after the UK notifies the European Council of its intention to withdraw, unless the European Council, in agreement with the UK, unanimously decides to extend the period. Of the two scenarios, the second appears most likely.

Intellectual property has been governed by a plethora of EU regulations and directives. These regulations and directives operated to bind the UK to the European Union. Because intellectual property laws are harmonized greatly across Europe, global companies have found it straightforward to patent ideas in the European Patent Office (EPO). This thorough patent examination process results in strong patents that are respected throughout Europe and the world. Through the EPO, companies have been able to obtain patent protection in multiple countries efficiently and cost-effectively. This option allows a company to determine where to develop and market products independently of the IP regulatory climate. In many cases, companies seek protection where the products will be fabricated and also where there is a greater likelihood of sales volume. With Brexit, this may create significant difficulties and confusion.

Much of the UK legal framework in intellectual property is composed of directly effective European Union regulations and transposed European Union directives. If those European Union regulations directly applicable to intellectual property law are transposed into English or Scottish law, a regulatory vacuum could be created. For patents, this could mean the first lack of substantive legal protection in over 700 years, especially for life sciences and pharmaceuticals.

This regulatory vacuum may be mitigated by proposals of Prime Minister Theresa May. She has proposed a “Great Repeal Bill” which would end the 1972 European Communities Act that gave European Union law primacy over UK law. The Great Repeal Bill would reinstate all enactments previously in place in the UK. Parliament would then review each law and amend or repeal on a piecemeal basis. While this may ease the transition issues, as well as allow relevant IP regulations and directives to remain in force, it does not provide the unity of protection currently afforded to IP rights.

In the European Union, the Unified Patent and the Unified Patent Court were expected to start at the beginning of 2017. Despite the Brexit vote, on November 28, 2016, the UK announced its intention to ratify the UPC Agreement, which allows the Unified Patent and Unified Patent Court to proceed. The UPC system is anticipated to begin in December 2017 with initial registration beginning in September. However, the implications of Brexit may complicate this issue. The Prime Minister has previously stated that the UK will likely refuse to accept the supremacy of the European Court of Justice, which would complicate UK participation in the UPC system. The UPC system would preserve the unified system that global business has come to rely on.

Without the UPC system, companies seeking to operate or sell in the UK could find that multiple national filings would be needed. The EPO patent or trademark filing would be made, while separate UK filings may need to be performed on top of that. For companies focusing on the British market, whereas in the past only one filing was needed, complications could also ensue. Those companies would find that separate filings for the UK and for Ireland and Scotland may be needed, with a potential tripling of IP costs. Over time, the UK intellectual property laws would begin to diverge from the patent laws of the European Union, making matters even worse.

Given the uncertainty that is occurring and will continue to occur, patent owners should identify which of their IP assets may be affected and which IP rights should be sought by filing or registering in additional jurisdictions. We are happy to answer any further questions about Brexit’s IP implications and can advise you how to prepare your global business for Brexit.

© 2017 Roberta Young, Intellectual Property Partner at Loza & Loza LLP

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