Brexit and innovative businesses

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Triggering Article 50 has started the two-year process of negotiations that will end with a deal, an untidy departure or (maybe) an agreement to keep talking. Since our first analysis of what Brexit will mean for businesses we have learned more about what the UK intends to keep and discard. How are things looking now for innovative businesses?

Triggering Article 50 has started the two-year process of negotiations that will end with a deal, an untidy departure or (maybe) an agreement to keep talking. Since our first analysis of what Brexit will mean for businesses we have learned more about what the UK intends to keep and discard. How are things looking now for innovative businesses?

Patents

The long-planned European Unitary Patent, and its associated Unified Patent Court, looked at serious risk after last June’s vote. Although the creature of separate agreements, the Unitary Patent is closely interlinked with the EU. But the UK has repeatedly stated that it intends to press ahead with ratification and has taken steps to get this done. The UPC’s Preparatory Committee is targeting December 2017 as the start date, so it seems that the system will commence before Britain’s departure, with the UK considering ways to remain a part of it into the future. With one of the Central Court locations in London, and the UK as a major patent filing economy, there is a lot of enthusiasm across the European IP community to keep the UK in the system. And disentangling the UK post-Brexit would be complicated. But a major concern from a UK perspective is the role of the European courts as final arbiter of Unified Patent Court disputes. “Taking back control” was one of the key messages of the 2016 Leave campaign. As the Unified Patent Court will be a creature of an international agreement, and not a UK court, this is not the same as UK courts having to treat the Court of Justice of the EU as determining UK law. But, politically, a system where ultimate decision making remains with an EU institution will be difficult to square with the “control” objective.

Fortunately, the European Patent Convention is separate from the European Union and so businesses can rely on that tried and tested route to protection until the dust settles. Opting patents out of the Unitary Patent - patent owners should have this on their to-do list before the opening of the new Court - may be the wiser course until it is clear where we will end up.

EU registered rights: trade marks, designs, and protected food and drink registrations

Trade mark protection, for brands, and design protection, for innovative designs, operate on parallel national and EU tracks. The national routes to registered protection in the UK will remain unaffected, but the widely used EU Trade Mark and Community Registered Design (EUTM and CRD) will no longer cover the UK. It is likely that existing EUTMs and CRDs will be given protection within the UK, discussed below. Also, the EU’s Protected Geographical Indication system (giving registered protection to the names of foods and beverages such as Melton Mowbray pies, Stilton cheese, Scotch whisky, Parma ham and Champagne) may no longer apply to the UK. As there is no parallel UK system these names are vulnerable to loss of protection within the UK, as are the names of UK produce elsewhere in Europe, and it is not at all clear what, if any, system will be put in place to protect these names.

The UK Government promises to transpose EU law wholesale into UK law through a Great Repeal Act. We expect to see the proposed text soon. But, as the Great Repeal Bill White Paper recognises, a straightforward copy and paste of existing EU law will not work. The Government intends to use delegated powers to tidy up the many areas of detail where a simple replication will not make sense. There will be a good many devils lurking in the details.

We have yet to learn what will happen to existing EUTMs and CRDs. The UK could adopt a model of automatic conversion of any existing EU registrations to UK registrations. But this would crowd the UK register with a substantial number of registrations that are used only in other parts of the EU. For example, a brand that is used in Eastern European countries but not in the UK could form the basis of an opposition to future applications for UK marks that look or sound the same or similar. However, if these registrations are not renewed in the UK (which is likely if the owners have no interest in the UK market), then they will cease to have effect here.

The UK could actively require all owners of EUTMs and CRDs to apply to convert their registrations to corresponding UK registrations (subject to payment of a fee and within a specific time). There has also been talk that any such EUTMs will be subject to re-examination by the UK Intellectual Property Office for registrability (eg, to check that they are sufficiently distinctive), but this would be onerous and potentially unfair to those owners, and would put a huge burden on the UK IPO.

Another approach might be simply to extend UK protection to existing EUTMs and CRDs, without taking these onto the UK register, and for them only to be registered as UK rights when they fall due for renewal. But this raises its own administrative and regulatory issues, with the UK then outside the EU.

Businesses may want to seek parallel national and EU protection for their key rights. Doing this for all registrations, though, may be going too far until we know more about the future arrangements, and we would suggest taking stock a year into the Article 50 negotiations. The IPO is alive to the issues and is “exploring various options” to find solutions. Moreover, new issues will arise in relation to those EU rights in relation to protection in the EU, on areas such as trade into the EU and whether such rights remain valid in the EU.

Data protection

International data flows are a feature of modern life. If the UK is to retain its place as an leading innovator in sectors like FinTech and gaming, data protection that meets EU requirements will be vital. For the personal data of EU citizens to be processed, or for services to be targeted at them, the UK will be looking for a formal decision recognising that its law and procedures come up to scratch. And with data protection law becoming tougher in May 2018, compliance with those higher standards will also be necessary.

The UK has said that it intends to implement the General Data Protection Regulation in time for the 2018 deadline, but this implementation will not by itself be enough. The formal recognition required to acknowledge equivalence of the UK regime will have to be in place by the time of Britain’s exit from the Union. And if things are getting tricky in the negotiating process, there’s no reason why the EU Commission should feel compelled to play ball. What’s more, activist individuals or groups can use legal proceedings to challenge recognition of a non-EU country’s data laws. As those following the saga of the US Safe Harbor and its successor, the EU-US Privacy Shield will be aware, it can take years to get a settled arrangement in place to permit international data flows.

That said, alternative arrangements are available for many types of data transfer. Individuals can be asked to give their informed consent to transfer, for example, or standard contractual clauses can be inserted into contracts between the sender and recipient of the data. So it should be possible to find a way to continue operating, by following alternative procedures.

Regulated industries - life sciences, transport, etc

For the life sciences sector, a major threat remains the upheaval of the regulatory landscape. European approvals processes for pharmaceutical, medical device, veterinary and crop protection products are closely integrated. While it is still possible to use UK procedures for sale on the UK market (with some exceptions), for most products the efficiency of using one of the EU systems is highly desirable. Some commentators are concerned that separating the UK from the EU systems will mean delays to the clinical testing or marketing of novel products in the UK. And the current London home of the EU pharmaceuticals and veterinary products regulator, the European Medicines Agency, seems likely to change. Countries around Europe have expressed interest in taking over the role of host.

Similar concerns arise in other heavily regulated sectors like automotive and aviation. Recent reports suggest that Britain will aim to retain access to at least some EU regulatory agencies for a transitional period to avoid the need to establish new ones within a two-year period.

Research funding

The UK has offered a short term guarantee for EU funding for research projects agreed while the UK remains a member. While this is aimed to encourage UK research businesses and institutions to continue to apply for competitive funding it offers little comfort for the longer term. In the future, research funding is more likely to come from UK projects and initiatives like those announced in the Industrial Strategy Green Paper.

Steps towards greater certainty

It is difficult at this stage for businesses to plan for the future with the legal outlook so uncertain. We have not touched on some of the wider issues for industry as a whole – immigration restrictions and trade barriers for example. What business needs is certainty, and this can only develop as the “divorce” negotiations begin in earnest, and the UK’s approach to tidying up the legal mess that Brexit involves becomes clearer.

This is an edited version of an article first published on our technology blog.

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