Brexit – more downside than up

Abstract

By the end of 2017, the UK will have voted in a referendum on the UK’s membership of the EU and some form of UK exit, or ‘Brexit’, is a real possibility. Despite irritations with the existing systems of rights and enforcement, there is little to suggest that EU businesses or their IP advisors would ultimately be happy with that result. It is hard to say what Brexit would look like in any detail. The EU’s arrangements with Switzerland or the European Economic Area (EEA) might provide a model for future collaboration, but much would depend on what the newly single UK wanted and the EU were prepared to agree. The referendum process is likely to see much mud and the occasional rock thrown. The terms of a Brexit will depend how bruised everyone feels afterward. However, there are some general principles that ought to apply whatever the final deal. Unitary EU rights such as Community trade marks and Community design rights would ultimately cease to apply in the UK. Dealing with that would be fiddly but not impossible. It seems safe to predict that businesses everywhere would dislike the costs of obtaining new UK registrations. The current system under the European Patent Convention should not be affected—it already has non-EU members. But the new unitary patent system and Unified Patents Court (UPC) are expected to be up and running by 2017 and will only apply to participating EU Member States. Brexit would leave the UK outside, so that the unitary patent would not be enforceable in the UK and the UPC would not have jurisdiction over UK patents (including conventional EP(UK)s). Brexit may not hold up the implementation of the UPC. The UPC Agreement will enter into force once it has been ratified by thirteen Member States, including the three in which the highest number of European patents were in force in 2012, ie France, Germany and the UK. If the UK were no longer a Member State, this compulsory ratification would be likely to fall to Italy as the Member State with the next highest number. The UPC Agreement names London as a seat of the UPC’s central division. Changing that would require an amendment to the UPC Agreement and repeated ratifications. No one is going to enjoy that, but it is hard to see the UPC keeping a London centre at that point. That would be a significant loss to those hoping to see the London market develop further. EU legislation harmonising national laws, eg in respect of national trade marks, copyright and database rights, would cease to bind the UK. The UK legislature and judiciary would be free to depart from EU law and CJEU jurisprudence. As IP laws in the EU become more harmonised, eg with the proposed introduction of the Trade Secrets Directive and unitary patent system, the UK’s laws would probably diverge, not least as UK courts are unlikely to see legislation in quite the same way as the Court of Justice of the European Union (CJEU). Pan-EU remedies, like injunctions, currently available in respect of unitary rights and, in limited circumstances, national IP rights, would no longer apply to the UK or be available in UK courts. It is unclear whether orders issued by UK courts would remain enforceable in the EU. UK data protection law may also diverge from EU law. The General Data Protection Regulation, expected to come into force in 2018, may be significantly more onerous than the current regime and the UK may decide not to match it. Not matching would avoid new onerous obligations but might adversely affect any adequacy assessment for international data transfers. Enforcement presents the greatest risk of loss of business to the UK. The UK’s IP courts have benefitted greatly from being seen as a good, if expensive, EU destination, through a combination of language, clearly argued decisions and (some) predictability. While the UK outside the EU would be free of the CJEU and its more unexpected or opaque judgments, all businesses would have far less reason to be interested in the views of UK courts. The UK is a big market, but decisions of courts in a harmonising EU will be of greater interest to businesses. Legal harmonisation has allowed practitioners across Europe to speak a closer, if not the same, language. The obvious advantage of the London patent court would disappear. Brexit would thus result in the UK being a less attractive place for IP enforcement. While IP seems unlikely to be a major determinant in the debate on ‘Brexit’, it is not too early to have a view. So far, it looks as if the IP answer is to remain ‘in’.