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EU Commission Draft Withdrawal Agreement sets out Proposal for Treatment of EU IP Rights in the UK post-Brexit

2018-03-12

On 28 February 2018, the EU Commission published its first draft proposal[1] as to the terms of withdrawal of the UK from the European Union, outlining how existing EU trade marks and designs will be treated vis-a-vis the UK following Brexit.Although this is a draft document that is yet to be ratified by the UK government or UK Intellectual Property Office, it clearly sets out the EU's preferred stance as to the treatment of IP rights. It will now be sent to the EU parliament Brexit Group before then being transmitted to the UK government and bodies.

Transition Period

Whilst the UK is set to leave the EU by 30 March 2019, the proposal assumes there will be a transition period to allow the relevant rules to be put into place, where the status quo will remain. The length of this period proposed in the draft would expire 31 December 2020 but the UK government has been suggesting a period of around two years may be necessary.

Given this expected transition period, it is very unlikely existing EU IP rights will be transposed to national UK rights immediately following 30 March 2019. Therefore, EUTMs and Registered Community Designs (RCD) will continue to be recognised and enforceable in the UK and UK based attorneys will continue to be able to represent clients before the EU Office during any transition period. However, it is interesting that the draft proposal is silent on the issue of the rights representation of UK attorneys before the EU Office after any transition period.

Key Points- Treatment of existing registrations

The draft includes certain key points as to the treatment of registered EU IP rights in the UK following the expiry of a transition period. Essentially, it is envisaged there will be no loss of rights and the process will be automatic. Some of these main proposals are that:

·         Existing registered EUTM and RCD rights shall automatically become equivalent UK rights without any re-examination

·         The process should be free of charge and rights holders should not have to complete any application or administrative procedure. In addition, rights holders won't be required to have a UK address for service at least until the first renewal of the UK mark is due

·         The resulting UK registered rights shall enjoy the date of filing and any priority date of the corresponding EU registration(s). For trade marks, any seniority claim made in respect of the UK will also be retained

·         The first renewal date of the resulting UK trade mark or registered design will be that of the corresponding EU registration(s)

·         For a resulting UK registered design, the remaining term of protection shall be at least equal to the period of protection that was left for the corresponding RCD

·         The holder of an EU trade mark with a reputation in the EU can continue to exercise rights in the UK based on its reputation in the EU in respect of the resulting UK registration

·         The UKIPO need to ensure that any existing International Registration for a trade mark under the Madrid Protocol or a design under the Hague Agreement that designates the EU, shall enjoy equivalent protection in the UK

Validity Issues

The draft agreement also sets out important proposals as to the validity of any resulting UK registration in terms of a) ongoing actions attacking the validity of the corresponding EU rights and b), the issue of revocation on the grounds of non-use.

Firstly, in terms of a), if an EU right is declared invalid or revoked as a result of a procedure that was ongoing on the last day of any transition period, the corresponding UK right would also be invalid/revoked.

With regard to b), non-use in respect of trade marks, the resulting UK registration will not be vulnerable to revocation on the grounds that the corresponding EU right was not used in the UK before the end of the transition period. This is an important point and would effectively give the resulting UK registration a new five year non-use period from the end of any transition, providing rights holders with time to put their marks to use in the UK if they wish to do so. This is in line with the current law on conversion and is a side effect of the fact that under Art 139 EUTMR converted marks become new national applications. However, it is at odds with the EUIPO’s practice, which has been to refuse to process the surrender/ conversion of an otherwise use-vulnerable mark which is the subject of non-use cancellation proceedings where this would create a new national 5-year grace period.

By way of an example, let’s assume Mark A is an EUTM subjected to non-use cancellation today. It hasn’t been used anywhere, so to avoid a loss of rights the owner tries to surrender it and convert to the UK and all other EU Member States in the hope of getting a new 5-year grace period. EUIPO will refuse to process the surrender/conversion until the cancellation has been finally determined. Since Mark A hasn’t been used, the effect will be that the cancellation will succeed and the surrender/ conversion will be refused. Whether or not EUIPO has the power to take this stance has not been questioned but is open to debate.

However, if we now imagine the cancellation starts one day after the expiry of the transition period, attacking the resulting UK mark and separately, the EUTM. The resulting UK mark will not be vulnerable to non-use cancellation by reason of a lack of genuine UK use prior to Brexit Day. In contrast, the parent EUTM, will be cancelled and any surrender/conversion will be refused. Only the corresponding UK mark will survive.

The effect seems to be that the resulting UK marks deriving from EUTMs which have not been used in the UK prior to the transition date will be in a better, stronger position than UK national rights and indeed a better position than under the parent EUTM, had it been attacked.

Ad hoc Priority Claim

Article 55(1) of the draft proposal provides for a situation where a right holder has filed an EUTM before the end of the transition period and wishes to use that EUTM to claim priority for a UK application within 6 months of the end of the transition. EUTM rights which are still pending at the end of the transition will not be automatically migrated to UK national rights. Instead, the applicant has 6 months to file a corresponding UK national application, with the benefit of the EUTM application’s priority date. Provided the usual priority rules are met (identical mark, the same goods/services or goods/services contained within the first filing), the right holder shall have this 'ad hoc' priority right - The date of priority of the EUTM shall then count as the date of filing of the resulting UK mark. This is not to be confused with standard “convention” priority – It is a sui generis right which, again, is closer to the conversion process. This acts as a preservation of the right to priority after any transition period. It should be noted, however, that the opportunity to keep the priority only lasts for 6 months so there is likely to be a rush to file UK national marks within that period.

What if there is 'no deal'?

It remains to be seen whether the UK government and Office will agree to these points or whether they may seek alternative solutions such as a rights holder having to take some positive steps, like submitting a simple request form (likely free of charge), if they wish their EUTM to be transposed to a UK right.

The UK government has issued an initial response[2] to the EU's draft Withdrawal Agreement which includes a statement that "the UK’s overall objective is to provide maximum clarity and legal certainty for users, applicants and right holders by agreeing arrangements appropriate to each of the different types of right."

This aside, in the event of a 'no deal' outcome, the proposals in the current EU draft Withdrawal Agreement would not apply. At present, if there was no deal agreed upon, the manner in which EU IP rights will then be treated in the UK is unknown. A previous communication[3] from the EU in December 2017 made reference to EU rights ceasing to have effect in the UK after Brexit, subject of course to any agreement and stated such rights "will continue to be valid in the 27 EU Member States but will no longer have effect in the United Kingdom as from the withdrawal date."  This hints that there may be no transposing of rights to the UK if the outcome turns out to be 'no deal'.

The situation will be closely monitored and updates will be provided when relevant.

[1] https://ec.europa.eu/commission/sites/beta-political/files/draft_withdrawal_agreement.pdf

[2] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/685748/Other_Separation_Issues_Technical_note_March_2018.pdf

[3] https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/contentPdfs/news/Brexit_preparedness_notice_on_IP.pdf

Written by Rob White and Philip Harris

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