Brexit: The real no-deal

If British Prime Minister Boris Johnson is to be believed, the new UK cabinet, packed full of hard-line Vote Leave campaigners, remains committed to striking a deal with the EU ahead of its scheduled departure on October 31.

Writing to Donald Tusk, president of the European Council, in August, Johnson said that a negotiated exit from the EU was his government’s “highest priority”; and gave a “personal commitment that this government will work with energy and determination to achieve an agreement”.

Yet Johnson’s first week at number 10 was characterised by gearing the entire civil service Brexit machine towards preparing for leaving without a deal.

The impact of Brexit on IP has been analysed under various scenarios and eventualities in great depth, not least in this publication. Despite the UK government’s formal commitments to leaving the EU with a deal, many in the sector are bracing themselves for a hard landing.

“A no-deal Brexit is probably the reality for now,” says Piotr Dynowski, partner at Bird & Bird’s Warsaw office.

He is not alone in wondering how the two sides can reach a solution by October 31. Flip Petillion, founder of Petillion law firm in Belgium, seems resigned to the prospect of a no-deal scenario. “There has been a constant hope that this would be solved but it looks like it’s not going to be,” he says.

"In order to minimise any risk for UK business, the UK government should commit to protecting all products currently registered under the EU GI scheme, not just UK products." - Kate O'Rourke, Mewburn Ellis

The EU, including its leading members Germany and France, still seeks a deal. That position has been made clear repeatedly by German Chancellor Angela Merkel and French President Emmanuel Macron as well as other top EU officials. But, in the wake of the UK’s change of Prime Minister, the EU has been forced to acknowledge it as an increasingly likely outcome.

It is no surprise that the eyes of many in the IP industry are turning towards the impact no-deal may have on their rights with more attention than ever, so it is worth reviewing the issues that remain outstanding with respect to the impact of a no-deal Brexit on IP, in Europe and in the UK, and the progress that has been made towards giving certainty to rights owners.

Geographical indications

If the goal of the UK government has been largely to preserve the status of IP rights in the UK post Brexit, one area which does require a significant overhaul is geographical indications (GIs). At present the UK has no independent system for protecting GIs.

While EU trademarks can be transposed into equivalent UK registrations with relative ease, in the case of GIs the UK government is faced with the task of creating an entirely new set of rights.

This issue has not featured as prominently as others in coverage of Brexit’s effects on IP. As Kate O’Rourke, partner at Mewburn Ellis and former president of the Chartered Institute of Trademark Attorneys, explains, this is no surprise: there are far fewer GIs than trademarks or patents. Their importance—not just for the rights owners, but for the future of Britain’s IP—should not be underestimated, she says.

In O’Rourke’s view, GIs could play a pivotal role in any future trade negotiations undertaken by the UK.

“Whereas the EU places a very high level of importance on independent GI protections, in the US they are usually processed through the trademark system,” she says.

“It is not difficult to imagine that the US could, in trade negotiations, insist on the UK’s having a weaker GI system than we did when we were in the EU.

“Any prospect of the UK’s offering a weaker level of protection for GIs could, in turn, prove a real stumbling block in any negotiations with the EU,” she adds.

Ignoring a throwaway comment Johnson made about Melton Mowbray pork pies (later proved incorrect), the UK government has been relatively quiet since it published in February its latest GI guidance in the event of a no-deal exit. As it stands, EU GI owners would have to apply for the new equivalent registration in the UK when it is created. Conversely, it is not clear what the future of UK GIs in the EU will be post-Brexit.

“In order to minimise any risk for UK business, the UK government should commit to protecting all products currently registered under the EU GI scheme, not just UK products,” O’Rourke says.

“The current proposals leave an opening for a potential dispute which could potentially result in UK GI owners not being afforded protection in the UK, a scenario that is unlikely but also a catastrophe should it come to pass.”

Unified Patent Court

The area in which there is the least certainty about the course of future events is perhaps the Unified Patent Court (UPC). Formally, the major obstacle to the UPC’s implementation is not Brexit but a constitutional challenge brought in Germany in 2017, yet in reality, the issues are closely interlinked.

In August we learned that, in the eyes of the German government, the UPC issue is on hold pending Brexit. One German politician, Roman Müller-Böhm, remarked that the German government was “not sufficiently prepared” for the impact Brexit could have on the UPC’s future.

In Dynowski’s opinion, Brexit could have a significant impact on the court’s prospects of ever becoming a reality. There are two main questions to be answered: will the new UK government want to push ahead with membership of a fully functional UPC; and will the rest of Europe want it there at all?

"It will force greater costs on EU rights owners looking to protect their IP in the UK." - Piotr Dynowski, Bird & Bird

“It seems that the potential users of the system would all be interested in keeping the UK in the system. If the UK was not involved it would make it less interesting and less attractive,” Dynowski says.

Yet there are plenty who would be happy to push ahead without UK involvement, he adds. In his analysis, Italy and France in particular are “quite keen to have a UPC without UK participation”, with those countries “spotting an opportunity to expand their influence over the system”.

Will the UK push ahead with its commitment to join the system? The UK has already ratified the agreement but, as Dynowski explains, joining the system would mean that “to some extent, the UK would have to accept the jurisdiction of the Court of Justice of the European Union (CJEU) in patent cases”. The jurisdiction of European courts and law over the UK is clearly a contentious issue for those in favour of Brexit, particularly those who want a no-deal scenario.

Julia Florence, president of the UK Chartered Institute of Patent Attorneys (CIPA), is urging the UK government to do “whatever they can” to ensure the UK remains a part of the UPC. Speaking to WIPR, she says: “The jury is still out on the future of the UPC pending the German constitutional complaint. It would be a real shame if the UK was not part of the court, and it would be to the detriment of the system as a whole.”

Ultimately, she says, while a no-deal Brexit could make continued UK participation in the UPC more difficult, “the most important thing is the future relationship we have with the EU” post-Brexit. “The whole IP world is pressing to keep the close alignment we have,” she says.

“Until there’s movement on the constitutional complaint or Brexit, we really won’t know where we are, but we remain hopeful,” she adds.

For supporters of continued UK involvement there is, it seems, plenty of cause for optimism. After all, the agreement to join the UPC was signed by Johnson himself in 2018 when he was Foreign Secretary. Whether he will honour that commitment as Prime Minister, however, remains to be seen.

In Petillion’s view, Brexit poses a “real threat” to the future of the UPC. But, offering a more optimistic outlook to the project’s backers, he says that in a purely theoretical sense, Brexit and the UPC are unrelated and “can be separated”.

Medicines

One of the biggest outstanding concerns about a no-deal Brexit has to do with whether the UK’s National Health Service (NHS) will be able to supply essential medicines and medical devices to patients.

The continued flow of pharmaceuticals into the country is so fundamental to the industry’s health that it will remain at the forefront of the conversation as a potential no-deal scenario approaches.

On August 21, UK healthcare providers penned a joint letter to Johnson outlining their “significant concerns about shortages of medical supplies”. The letter, signed by the heads of 17 Royal Colleges and charities, said: “delays at the border could exacerbate current supply issues and create the very real possibility that life-saving medication is delayed from making it across the Channel”.

A leaked UK government report outlined the potential consequences to the supply of medicines should the two sides fail to agree a deal. The “Operation Yellowhammer” document, which was published in The Sunday Times on August 18, said that disruption to trade channels could last for up to six months following a no-deal Brexit.

Flow rates across the English Channel could be as low as 40% on day one of this scenario, the report predicted. This poses a particular threat in respect of medicines, three-quarters of which are supplied via this route.

Some senior industry figures share concerns that a no-deal exit could have significant ramifications for access to generic drugs in particular. Reacting to the latest government guidance in February, Warwick Smith, director general of the British Generic Manufacturers Association (BGMA) said that the UK “must avoid different standards and any checks at the border, otherwise there will be an inevitable impact on patient wellbeing”.

British generic makers seem clear in their view that the closer the alignment with the EU, the better it is for the industry, arguing that “the only way to ensure continued availability of medicines, and future launches, is to be part of the EU regulatory framework and single market”.

The NHS Confederation, which represents bodies providing healthcare services under the NHS, has also warned that the transition to a new medicines authorisation system could cause further delays in drugs reaching the UK market. At present, drugs are centrally approved through the EU’s regulatory authority, but these responsibilities will be transferred to the UK’s Medicines and Healthcare Regulatory Authority post-Brexit.

How ready is the EU?

Brexit discourse leans towards examining the level of readiness on the part of the UK government, and whether the country is sufficiently equipped to deal with the challenges that arise. With respect to IP, however, it is worth examining what preparations the European institutions have had to make to mitigate the potential ramifications of a no-deal Brexit.

In Dynowski’s opinion, institutions such as the EU Intellectual Property Office (EUIPO) have done as much as they could be “reasonably” expected to. Petillion agrees, arguing that in terms of “what they could do, there is not much more to do now”.

The EUIPO’s Brexit hub, available online, outlines the consequences for EU rights owners in multiple scenarios, including a no-deal exit. The hub includes the EUIPO’s latest guidance on a no-deal Brexit, published in April 2019. As the political situation has developed over the summer and no-deal is an increasingly fathomable option for many in Westminster, do European institutions need to revisit the scenario?

“Now that a no-deal Brexit is more probable, it would be good to update the guidance and focus more on the no-deal scenario but, taking into account the uncertainty, it’s difficult,” Dynowski says.

In this context, how are attorneys advising their clients in the EU? The advice has been fairly consistent throughout the entire process and in respect of different scenarios.

“The recommendation to clients was, and is, to do additional submissions in the UK. They will probably need to reconsider their portfolios,” Petillion says.

“Regardless of Brexit, the UK will remain one of the most important markets in Europe,” Dynowski says, although it will force greater costs on EU rights owners looking to protect their IP in the UK due to the requirement to apply for separate registrations where an EU right would previously have sufficed.

It seems that more guidance and discussion will do little to assuage the concerns of rights owners. As Dynowski observes: “There is a high degree of weariness among clients and industries in general with the whole Brexit scenario; it’s been dragging on for so much time.

“Every conference has a session about Brexit and everyone tries to speculate, but people are pretty tired of discussing it,” he says. Readers in the UK will be familiar with the phenomenon of ‘Brexit fatigue’, but it seems that the ordeal has been a draining experience for rights owners and practitioners in the EU as well.

As it has been throughout the Brexit process, the prevailing mood among rights owners and practitioners is uncertainty, and a fear of unknown consequences should there be a ‘hard’ Brexit. The most ardent opponents of Brexit feel that efforts to secure a deal are simply an exercise in damage control.

Perhaps the best advice is much the same as practitioners have been giving all along. In the absence of any certainty, Dynowski says, “the only good strategy is to try to be prepared for the worst-case scenario and be in the starting blocks when it happens”.