Brexit is generating a huge range of questions about how businesses will operate in the UK and the European Union after the split, with the required regulatory and legal separations for governments and businesses representing some of the most complex we have ever faced.
By Charlotte Tillett (Partner) and Kate Maguire (Trainee Solicitor) at Stevens & Bolton LLP
The footprint and supply chains of companies in the pharmaceutical sector are typically spread right across Europe, which means the required separation between UK and EU laws and regulations is having a significant impact on the European business of the pharmaceutical industry as a whole.
While it hasn’t been at the forefront of negotiations, the issue of how intellectual property rights (“IPRs”) will be affected by Brexit is a major question.
Following an intense period of negotiation, the two sides reached a consensus on a draft Withdrawal Agreement on 19 March 2018, which secured a transition period for the UK. Draft Articles 121 and 122 envisage a transition period from 29 March 2019, the date of the UK’s formal departure from the EU, to 31 December 2020, during which time EU law will continue to apply in the UK and any reference to a Member State shall be understood to include the UK. As such, IPRs will be protected and enforced in the UK in the same way during the transition period as they currently are.
So how will this affect IPRs? A number of provisions regarding the protection and registration of IPRs in the UK following the end of the transition period are set out at Articles 50 to 57 of the draft Withdrawal Agreement, and certain of these have been agreed in principle. This should provide some degree of certainty about the likely outcome of Brexit for the pharmaceutical sector, however even those provisions which have been “agreed” are subject to technical legal revisions during the ongoing negotiations, and there are still a number of issues in the draft which are unresolved, as discussed below.
The key provisions of the draft Withdrawal Agreement relating to IPRs which have been agreed in principle (as at 19 June 2018) can be summarised as follows:
Continued protection of EU-wide registrations: After the transition period, the holder of a European Union trade mark (“EUTM”), Community registered design (“CRD”) and/or Community plant variety right (“CPVR”) granted before the end of the transition period shall, without any re-examination, automatically become the holder of a comparable registered and enforceable IPR in the UK.
Continued protection of international registrations designating the EU: The UK shall take measures to ensure that those who have obtained protection for international trade marks or registered designs designating the European Union prior to the end of the transition period will continue to benefit from protection in the UK.
Continued protection of Unregistered Community Designs: Those benefitting from Unregistered Community Design rights which arose before the end of the transition period shall become the holder of an equivalent right in the UK, with the same level of protection and for at least the same term (i.e. 3 years).
Continued protection of database rights: The holder of a database right which arose before the end of the transition period shall maintain an enforceable IPR in the UK that affords them the same level of protection.
Right of priority for pending applications: Those who have filed applications for an EUTM or CRD before the end of the transition period shall have a right to file an identical application in the UK for a period of 9 months from the end of the transition period, with the same filing date and priority date as the corresponding EU application. An application for a CPVR filed before the transition period will have an ad hoc right of priority in the UK for 6 months after the end of the transition period.
Pending applications for SPCs: The UK will grant or extend SPCs in line with existing regulations where valid applications are made before the end of the transition period and the administrative procedure is ongoing at the end of the transition period.
Exhaustion of rights: IPRs which have already been exhausted within the EU (including the UK) before the end of the transition period shall remain exhausted following the transition period in both territories. The position thereafter is not addressed in the current draft.
Invalidity/revocation proceedings: Where such proceedings involving EU-wide rights are in progress before the end of the transition period, any subsequent ruling that a right should be declared invalid or revoked will apply to the equivalent UK right.
Genuine use: Comparable UK rights which are granted to replace EUTMs will not be liable for revocation on grounds of “non-use” if the relevant EUTM had not been put to genuine use in the UK prior to expiration of the transition period. However, further clarification is required on the reciprocal issue where an EUTM had only been used in the UK prior to expiry of the transition, and how this may affect validity of the rights outside of the UK.
The points above reflect the UK and the EU’s agreement to provide for the continuity of IPRs post-Brexit. As mentioned above, draft Article 50 in particular confirms that all existing registered EU IPRs will be duplicated as comparable UK national rights at the end of the transition period. This paints an encouraging picture for pharmaceutical organisations, and is in line with the proposal made by the Life Science Industry Coalition in its December 2017 Position Paper that ensuring continuity of existing IPRs at the moment of Brexit is of great importance. However, in the event of a “no deal” situation for the UK, even the provisions currently agreed upon in the draft Withdrawal Agreement would not apply.
Further, despite the notable progress, the draft Withdrawal Agreement lacks certainty regarding how comparable rights will be transposed in practice, specifically the costs and administrative burden associated with doing so. More generally, there are two key areas in relation to IPRs which have not yet been agreed upon between the UK and the EU. These are: (i) geographical indications, designations of origin and similar rights after the transition period and (ii) the registration procedure for certain IPRs (such as EUTMs, CRDs and CPVRs) in the UK.
The draft Withdrawal Agreement confirms that discussions in relation to the outstanding issues are ongoing. While the precise result of these negotiations is difficult to predict, one potential outcome to consider is the text already proposed by the EU, but not yet agreed by the UK. For example:
Geographical indications: Draft Article 50(2) provides for the continuity of geographical indications, designation of origin and similar rights after the transition period. However, reciprocal recognition of UK geographical indications and designations of origin is not provided for in the draft.
Registration procedure in the UK: Draft Article 51 proposes that the registration and grant of the equivalent national rights listed above should be carried out free of charge by the relevant entities in the UK, using data from EU registries. The holders of these rights shall not be required to introduce an application or undertake any particular administrative procedure.
The UK Government has confirmed that the UK and EU negotiating teams are aiming to finalise the entire Withdrawal Agreement by October 2018. In the meantime, increased lobbying in respect of the provisions requiring agreement is anticipated, including both the IP-specific arrangements and, more generally, other provisions affecting major UK industries. Commentators in the Life Sciences sector, for example, have indicated that medicines regulation should be a priority for the UK and EU in upcoming negotiations in order to ensure that Brexit does not have a negative impact on public health and patient safety.
Patents
The draft Withdrawal Agreement does not make any reference to patents. As the European Patent Organisation (“EPO”) is independent of the EU, protection for European patents granted in the UK will continue to be available through the EPO post-Brexit, even in the event of a “no deal” situation.
Developments in relation to the Unified Patent Court (“UPC”) will be of great interest to pharmaceutical organisations at this time. Although the UK and France have now ratified the UPC Agreement, Germany’s approval is required for it to come into force, and progress towards this has been delayed by a claim pending before the Federal Constitutional Court. This obstacle creates a significant degree of uncertainty because the Agreement will need to be implemented prior to Brexit and, if the UK is to remain within the UPC, subsequently amended to create a legal mechanism allowing UK participation following its withdrawal from the EU.
Licensing
Also of relevance to the pharmaceutical sector is the impact of Brexit on IP licensing. Current licence agreements which specify the EU as their territory or license an EU-wide right will be subject to contractual interpretation as to whether the UK forms part of that territory, and whether post-transition UK replacement rights are included. Agreements which are already in place should be reviewed to ensure clarity among all parties about which IPRs have been licensed, and in which territory. Future licence agreements should be drafted to specifically address the effect of Brexit on any relevant provisions.
Conclusion
In summary, the post-Brexit landscape for IPRs is difficult to predict in detail, and will largely depend on the outcome of the UK and EU’s ongoing negotiations. In the meantime, rights holders in the pharmaceutical industry should work closely with their legal advisors to assess how their IPRs may be affected and to keep up-to-date with any new developments.