We all know that the UK has left the European Union. And, we all know that there is a transition period (also called the implementation period) during which divergence between the laws of the UK and those of the EU ought not to occur.[1] After the transition period, there is a spectrum of certainty/uncertainty regarding the impact of Brexit on intellectual property rights (as in other areas).
This article addresses some important aspects about: how things currently stand for the post-transition period; efforts made to alleviate uncertainty; and opportunities for the UK that may arise by being able to diverge from EU law.
First though, is there any uncertainty about the duration of the transition period? The starting position is that it ends on 31 December 2020.[3] However, the “Joint Committee” of representatives of the Union and of the United Kingdom “may, before 1 July 2020, adopt a single decision extending the transition period for up to 1 or 2 years.”[4] Once that deadline has passed, there is no mechanism for an extension.[5]
The UK Government has laid down a marker about such an extension by legislating that a government minister cannot agree to extend the transition period.[6] Of course, that legislative provision could itself be repealed by further legislation and, in that regard, Covid-19 is now upon us. Will that force the Government to change its mind? So far, it appears not. Michael Gove (a Government minister and on the Joint Committee) has been reported as having flatly ruled out any extension on 11 March 2020[7] and a similar statement was attributed a few days later to a “source close to the Prime Minister”.
The basic principle is that existing EU law will still be in force in the UK after the transition period and Section 6 of the 2018 Act provides for the retention of existing case law of the CJEU (the relevant cut-off date now being the end of the transition period). In relation to IP (as with other areas), the UK Supreme Court has been given the power to depart from existing EU case law in the same circumstances as when it could depart from its own previous decisions.
As to when that power of the UKSC is currently exercised, in Actavis v Eli Lilly [2017] UKSC 48 (pemetrexed litigation), Lord Neuberger, in introducing equivalents into UK patent infringement[8], said: “In these circumstances, given the weight that has been given by courts in this jurisdiction (and indeed in some other jurisdictions) to the three “Improver questions”, I think it must be right for this court to express in our own words our reformulated version of those questions.” (Paragraph 66.) And, in relation to modifying what had been said in the previous leading case about prosecution history estoppel: “In the absence of good reason to the contrary, it would be wrong to depart from what was said by the House of Lords.” (Lord Neuberger at paragraph 83.) Whilst the test might seem a bit nebulous, the power is exercised sparingly by the UKSC.
Further, of course, not many cases come before the UKSC and it takes time and money for the cases that do come before it to be heard. Probably reflecting a more Brexiteer-oriented UK government, Section 26 of the 2020 Act introduces powers for it to pass regulations setting out circumstances in which retained case law can be departed from by other (junior) courts and the relevant test for the court to apply. No doubt with concerns in mind about the government instructing the judiciary how to interpret the law, such regulations can only be made after consultation with leading judges and the power to set the relevant test can be delegated to one or more of those judges.
On the one hand, it might be said that the exercise of these powers to depart from retained case law will introduce uncertainty. On the other hand, it provides an opportunity for UK courts to adopt interpretations of retained EU legislation that will themselves provide greater clarity and certainty than those sometimes provided by the CJEU.
An illustration in the IP field of that potential opportunity is provided by the number of references to the CJEU on essentially the same points about interpreting the SPC Regulation and the resulting guidance given. It is not the purpose of this article to give a critique of all those CJEU decisions and, for present purposes, the following extracts from the A-G’s Opinion of 23 January 2020 in Santen (Case C-673/18) probably suffice to make the point.
And, consider too the number of references made concerning the interpretation of “the product is protected by a basic patent in force” in Article 3(a).[9] A move away from the teleological approach of the CJEU could introduce greater certainty in the UK in an area of IP protection of such importance.
It is not just freedom to depart from CJEU case law that may be relevant here. After the transition period, it will be open to the UK to pass legislation that diverges from that of the EU. SPCs may be an area in which the UK wishes to follow that path in order to provide a clearer legislative framework for the availability of SPCs in relation to, amongst other things, inventions concerning second medical uses, formulations and dosage regimes.
This area of law is often highly contentious and it provides illustrations of where there is certainty and what has been done to alleviate uncertainty.
EEA exhaustion. The effects of the relevant EU exit SI[11], are that the UK has provided that rights in goods put on the UK or EEA markets after the transition period will be exhausted in the UK.
So, domestic provisions corresponding to EU Directives on exhaustion (e.g., Section 12 of the Trade Marks Act 1994, corresponding to Article 7 of the Trade Mark Directive) are proposed to be amended under the relevant EU exit SI. In the case of Section 12, the proposed amendment is the underlined text below:
“A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the United Kingdom or the European Economic Area under that trade mark by the proprietor or with his consent.”
There is no relevant EU Directive in relation to patents and the post-transition period situation is dealt with by paragraph 2 of the relevant EU exit SI (which covers all IP rights). Sub-paragraph (1) provides:
„Anything which –
has the same effect on and after [the end of the transition period], despite the United Kingdom not being a member state, as it had immediately before [the end of the transition period].“
The effect of this provision is that, again, patent rights in goods put on the market in the EEA will be exhausted in the UK.
However, the EU has not (at least yet) provided for exhaustion the other way around. No doubt for that reason, the UK government website contains a warning to parallel exporters of IP-protected goods to the EEA.[14]
International exhaustion (not including patents). In Silhouette v Hartlauer (Case C-355/96) and Laserdisken v Kulturministeriet (Case C-497/04), the CJEU held that it was not open to Member States to provide for international exhaustion in relation to trade marks and distribution rights (Directive 2001/29, Article 4). And the same reasoning in those cases would appear to apply to other EU harmonised rights (which do not include patents). Whilst UK domestic provisions corresponding to relevant articles in EU Directives are proposed to be amended (see above), they are otherwise to remain in force. Accordingly, under Section 6 of the 2018 Act, Silhouette and Laserdisken seem to qualify as “retained EU case law” that will apply to “retained EU law”. In other words, UK exhaustion will not occur when goods are put on the market outside the EEA (subject to domestic judicial or legislative intervention, mentioned earlier).
International exhaustion (patents). The reasoning in Silhouette does not apply to patents, there being no relevant Directive or case law. So, UK law relating to an implied licence being granted to the purchaser of patented goods, dating back to Betts v Willmott [1871] 6 Ch App 239, ought to continue to apply. Such a licence will not be implied if there is an express contrary agreement; and it may be made subject to express conditions. Note that issues may arise about whether notice of such a contrary agreement, or express conditions, was drawn to the attention of third party recipients further down a supply chain.[15] (See earlier re imports from the EEA.)
Leaving the EU means that the re-cast Brussels Regulation[16] will no longer apply after the transition period. However, the UK intends to seek consent to accede to the Lugano Convention[17] and intends to accede to the Hague Convention[18].
Lugano. Accession requires the agreement of the EU, Denmark, Iceland, Norway and Switzerland.[19] The UK has so far received statements of support from Norway, Iceland and Switzerland.[20]
An illustration of the significance of the UK obtaining the requisite agreement is that Articles 4(1), 7(2) and 24(4) of Brussels and Articles 2(1), 5(3) and 22(4) of Lugano are substantially the same. So, for example, the same jurisdiction over EEA companies, with the same restrictions,[21] to obtain declarations of non-infringement of foreign designations of European Patents ought to be retained if the UK accedes to the Lugano Convention. Absent Lugano, different restrictions (concerning service out of the jurisdiction and forum non conveniens) may well arise in respect of proceedings against EEA companies, just as they currently do against non-EEA bodies.[22]
Hague. This Convention concerns “… exclusive choice of court agreements between parties to commercial transactions” and “governs the recognition and enforcement of judgments resulting from proceedings based on such agreements.” (Third preamble.) Excluded from its compass under Article 2 are:
“n) the validity of intellectual property rights other than copyright and related rights;
The agreement of other contracting states is not required for accession.
On 31 January 2020, because of the Withdrawal Agreement and the consequent application of the Hague Convention to the UK during the transition period (due to the EU being a party), the UK withdrew its 2018 instrument of accession. However, it declared at that time:
“The United Kingdom attaches importance to the seamless continuity of the application of the Agreement to the United Kingdom. The United Kingdom therefore intends to deposit a new instrument of accession at the appropriate time[23] prior to the termination of the transition period.”
On re-joining, relevant UK judgments should be enforceable in the EU under the Hague Convention.[24]
Many of the areas covered above would warrant one or more articles in their own right and there are other important IP issues raised by Brexit that have not been covered. Some examples of the latter are briefly described below.
The Digital Single Market Copyright Directive (2019/790). A UK government minister pointed out, in January of this year, that the Directive’s implementation date comes after the transition period and stated that the UK has no plans to implement it. More generally, there is the question as to what agreement the UK and the EU will reach concerning broadcasting, e-commerce, data protection and so on.
The UPC. Although there has yet to be an “official” announcement, the UK government has let it be known that it will not be participating in the UPCA. That is consistent with the UK government’s stance on there being no future jurisdiction of the CJEU[25], which is to be contrasted with the UPCA’s recognition of the primacy of Union law (Article 20). However, on 10 March 2020, the House of Lords EU Justice Sub-Committee heard evidence from Julia Florence (former President of CIPA) and Daniel Alexander QC, about (amongst other areas of discussion): “the impact on the UK and on the Court if the UK does not participate” (underlining added). Nonetheless, assuming that the UK does (as seems probable) officially announce that it will not participate, that is most likely the end of its proposed involvement. Any legal niceties about ratification withdrawal are unlikely to pose a practical impediment.
Cofemel-Sociedade de Vesturário SA v G-Star Raw CV (Case C-683/17). There is a live issue as to whether Section 4(2) of the UK Copyright Designs and Patents Act 1988 complies with Article 2 of the Copyright Directive (2001/29), as interpreted most recently in Cofemel,[26] in relation to whether aesthetic appeal is needed for copyright subsistence. A UK Court might deal with this matter by applying the Marleasing principle[27] concerning interpretation of domestic legislation in conformity with the corresponding Directive; or the Government might legislate.[28]
Grace period and the EPC. A leaked 451-page leaked dossier about UK/US negotiations does reveal that, as one would expect, the US would like to see the introduction of a 12 month grace period in the UK. Such a move by the UK would be incompatible with the EPC. However, to suggest that the UK would leave the EPC as a means of securing a trade deal with the US, is firmly in the realms of speculation. And, withdrawing from the centralised procedures available under the EPC would not seem to be in the interests of either the US or the UK.
Some IP issues relating to Brexit are reasonably clear now and others will become clearer as the transition period progresses. After the transition period, the UK legislature and courts will have new freedoms that will present opportunities for providing greater clarity and coherence. Here, the author borrows from Guy Verhofstadt: „Brexit is not a liability. I see it more as an opportunity.“[29] The author will keep his friends and colleagues at Preu Bohlig informed.
[1] Withdrawal Agreement, Article 127(1): “Unless otherwise provided in this Agreement, Union law shall be applicable to and in the United Kingdom during the transition period.” Union law is defined in Article 2(a).
[2] Withdrawal Agreement, Article 54(1) and some corresponding domestic secondary legislation contained in “EU exit SIs”.
[3] Withdrawal Agreement, Article 126.
[4] Withdrawal Agreement, Article 132(1).
[5] The House of Lords European Union Committee has concluded: „Should that deadline pass without an extension being granted, we can see no other legal mechanism, under the terms of the Withdrawal Agreement, whereby an extension could be achieved, even if the two sides so desired.“
[6] Section 33 of the 2020 Act 2020 introduced Section 15A to the 2018 Act: “A Minister of the Crown may not agree in the Joint Committee to an extension of the implementation period.”
[7] During questioning by the House of Commons‘ Future Relationship with the European Union Committee.
[8] Thereby effectively overruling the House of Lords, the forerunner of the UKSC, in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9.
[9] See paragraph 1 of the A-G’s Opinion of 11 September 2019 in Joined Cases C‑650/17 and C‑114/18.
[10] Article 61 of the Withdrawal Agreement: “Intellectual property rights which were exhausted both in the Union and in the United Kingdom before the end of the transition period under the conditions provided for by Union law shall remain exhausted both in the Union and in the United Kingdom.”
[11] The Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2019.
[12] The Treaty on the Functioning of the European Union. Articles 34-36 deal with the Prohibition of Quantitative Restrictions between Member States.
[13] Agreement on the European Economic Area. Articles 11-13 again deal with quantitative restrictions.
[14] In part: “Check whether you currently export IP-protected goods to the EEA (for example, goods branded with a trade mark) that have already been placed on the UK market and where the rights holder’s permission to export those goods is not currently required.”
[15] See, for example, Roussel Uclaf SA v Hockley International Ltd & Anor (1996) RPC 441, referred to recently in Parainen Pearl Shipping Ltd v KGJS [2018] EWHC 2628 (Pat) at paragraph 198 onwards.
[16] Regulation 1215/2012.
[17] 2007 Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters.
[18] 2005 Hague Convention on Choice of Court Agreements.
[19] Lugano Convention, Article 72(3): “Without prejudice to paragraph 4, the Depositary shall invite the State concerned to accede only if it has obtained the unanimous agreement of the Contracting Parties. The Contracting Parties shall endeavour to give their consent at the latest within one year after the invitation by the Depositary.” Paragraph 4 provides: “The Convention shall enter into force only in relations between the acceding State and the Contracting Parties which have not made any objections to the accession before the first day of the third month following the deposit of the instrument of accession.”
[20] Ministry of Justice statement published on 28 January 2020.
[21] Validity not being in issue is one. See too the difficulty in founding jurisdiction on the basis of Lugano 5(3) in Parainen Shipping Ltd v KGJS EWHC 2570 (Pat).
[22] Those issues were unsuccessfully raised by the Defendant in Eli Lilly v Genentech [2017] EWHC 3104 (Pat).
[23] Allowing for the three-month period of Article 31 of the Hague Convention and assuming no extension to the transition period (see earlier), “the appropriate time” is before the end of September.
[24] Note that the Hague Convention only applies if there is an exclusive jurisdiction clause that has been entered into after the Convention came into force in the relevant state. After the UK joins in its own right, the Convention might not apply to a UK exclusive jurisdiction clause entered into whilst it was in force in the UK due to EU membership (from 1 October 2015).
[25] “Our overriding objective in the [Brexit] negotiations is by 1 January to have taken back control and we won’t agree to anything that doesn’t deliver that. Which means no rule-taking from the EU and no role for the European Court of Justice.” (A senior government source quoted in the press on 24 February 2020).
[26] At paragraph 56: “Article 2(a) of Directive 2001/29 must be interpreted as precluding national legislation from conferring protection, under copyright, to designs such as the clothing designs at issue in the main proceedings, on the ground that, over and above their practical purpose, they generate a specific, aesthetically significant visual effect.”
[27] Marleasing SA v La Comercial Internacional de Alimentación SA (1990) C-106/89.
[28] The issue was recently referred to in Response Clothing Limited v The Edinburgh Woollen Mill Limited [2020] EWHC 148(IPEC).
[29] Guy Verhofstadt, one of the European Parliament’s Brexit Negotiators, 14 September 2016.
