Brexit: 'The sooner this is sorted, the better'

Less than half a year out from the UK’s departure from the EU, the terms of any deal—if such an agreement can even be struck—have still to be determined.

For UK-based firms, the post-Brexit issues are obvious: will UK-qualified trademark lawyers be able to act before the European Union Intellectual Property Office? Will sole practitioners, eg, barristers, be able to handle EU-based work? How will the UK Intellectual Property Office convert EU trademarks into national rights?

Above all, when will these uncertainties be clarified?

For EU-based firms, answers to this final question are just as important as they are to their UK-based counterparts.

One thing that appears to be widely accepted by EU-based firms is that there will be no drastic change to business when the UK leaves the union on March 29, 2019. However, the longer-term affect is harder to predict.

Jurisprudence divergence

The Court of Justice of the European Union’s (CJEU) decisions about trademarks, copyright, geographical indications, and other matters related to IP are binding on all 28 EU member states, ensuring a level of harmonisation in the national courts’ application of IP law (among other laws).

The CJEU will continue to function as it always has done post-Brexit, but the question of what role Europe’s highest court will have for UK jurisprudence arises, explains Malte Nentwig, partner at Boehmert & Boehmert in Germany.

“We really do not speculate that we will gain any further business from Brexit.” Kai Schmidt-Hern, Lubberger Lehment

“The mere fact that the court system of the EU’s remaining 27 members will be fully separated from the UK courts indicates that at least some degree of de-harmonisation between EU and UK jurisprudence is likely to occur,” he says.

Sofia Willquist, partner at AWA in Sweden, suggests that the UK courts might maintain the jurisprudence of the CJEU in efforts to give IP rights owners predictability, but Brexit does present the potential for divergence.

Flip Petillion, partner at Belgium-based law firm Petillion, says he does not expect to see a large divergence in the case law of the CJEU and the UK’s national courts post-Brexit.

If the UK does not adhere to principles set out by the CJEU, there would be a lack of certainty in the continuity of the protection of IP rights in the UK, according to Petillion.

"It is very difficult to foresee how the UK courts will decide when it comes to cases relating to trademarks and designs.” Sofia Willquist, AWA

“I would expect that whatever has built up in the past will continue to apply in the future,” he says. “I do not think that the UK will reinvent the wheel, especially since they have been the ones to approach the CJEU to ask for clarification on many occasions.”

Kai Schmidt-Hern, partner at Lubberger Lehment in Germany, is not quite so optimistic.

“It’s pretty clear that there will be problems arising from the different interpretation of provisions by the CJEU, on the one hand, and the UK courts on the other,” he says, adding that we can be “quite confident” that UK law and EU law will diverge in certain fields, and IP will be one of them.

This divergence brings with it the additional problem of free movement of goods and services.

Traditionally, the UK’s IP system is more pro-competition than the EU’s, and UK courts have had difficulty accepting some of the CJEU’s decisions as national law courts would have decided them differently, Schmidt-Hern explains.

He cites the L’Oréal v Bellure case (C-487/07), which concerned a comparison table in which branded perfumes were compared with Bellure’s lower-priced “smell-a-likes”.

In 2009, the CJEU ruled that a likelihood of confusion, or likelihood of detriment to the repute of the trademark, is not required to show that unfair advantage of a mark is being taken.

As noted by Schmidt-Hern, in 2010, the English Court of Appeal “strongly criticised the judgment as being an unjustified expansion of trademark protection”. It warned that such rulings present a “real danger“ that certain areas of trade will not be open to proper competition.

Schmidt-Hern explains that, if certain determinations are made in the EU but not in the UK (or vice versa), this will impede the free movement of goods between the UK and EU member states—“and that was the point in harmonising trademark law in the first place”.

Given that no other member state has left the EU, the way that jurisprudence will diverge and be applied post-Brexit is one of the many things that cannot be predicted with certainty.

Willquist says: “Since the UK has been part of the EU for such a long time, it is very difficult to foresee how the UK courts will decide when it comes to cases relating to trademarks and designs.”

Schmidt-Hern similarly concedes that the UK does appear to be interested in upholding the common market at least in an economic sense, so UK lawmakers may keep a close eye on what is happening in the EU.

"UK firms won’t actively pursue the EU work or train young lawyers in EU law, which means the work will eventually move away." Verena von Bomhard, Bomhard IP

In any case, any such changes will not be immediate, according to Nentwig. “The good news for stakeholders is that while there might be some degree of separation in the long term, at least for the years immediately following Brexit, the UK courts are unlikely to throw the rulings of the CJEU completely overboard,” he says.

Mark Bell, partner at Marks & Clerk in Paris, points out that regardless of EU membership, the UK will remain a member of the European Patent Convention, meaning that there will be no immediate changes for European patent owners post-Brexit.

However, as Willquist points out, “what will happen after Brexit when it comes to the Unified Patent Court (UPC) is a different matter, and there are opinions that diverge completely”.

The UK ratified the UPC Agreement in April, but a pending constitutional case in Germany has blocked the court’s implementation for the moment. It is unclear whether the case will have concluded before Brexit occurs.

In July, a White Paper released by the UK government seemed to suggest that the UK intends to be a member of the UPC.

But in September, researchers at the Munich-based Max Planck Institute for Innovation and Competition claimed that the UK will not be able to remain in the UPC Agreement after leaving the EU, as to do so would be contrary to the EU’s core values.

Regardless of what happens with the UPC, Nentwig suggests that a certain level of patent harmonisation will continue to occur.

“There is a continued effort for a harmonised interpretation of the Convention in questions of patent validity of all member states of the Convention—independently of the emergence of a UPC,” he explains.

The client context

Although there has been much concern in the UK about rights of representation, EU-based firms do not expect an increase in work as a result.

“I don’t think EU-based firms should create the impression that they’re waiting to pick up the crumbs from the table, or that they’re happy about Brexit because it might bring business opportunities”, says Verena von Bomhard, partner at Bomhard IP in Spain.

She predicts that clients will not move away from their trusted UK firms simply because of Brexit—at least, not in the short to medium term.

In relation to the right-of-representation issue, von Bomhard says “UK practitioners will be quite able to find a way to deal with that”. For example, UK firms are working towards having a partnership or merger with a continent-based firm.

Schmidt-Hern concurs: “We really do not speculate that we will gain any further business from Brexit.”

Willquist says that over the years many UK firms have chosen to set up shop in other locations, such as Germany, Belgium, and the Netherlands, and this has simply continued as normal as Brexit looms.

If there is any increase in work for EU-based firms, she suggests that it will come from outside the EU.

“We have the size and competence to handle all EU-related IP matters, and Swedish and Danish firms have a reputation of being fairly good at English, making it easy to work with us,” Willquist says.

Bell says that firms with existent bases in both the UK and EU will be able to servicing the two post-Brexit markets, while also capitalising on existing cross-national structures to provide a “synergised” service across both of them.

Schmidt-Hern also points out that a number of IP-specific questions will come up as a result of Brexit, potentially leading to a “new and specific type of work”. This depends on how the UK and EU agree on the handling of IP rights, he says.

The longer-term impact, however, may well be a different story.

Nentwig says that clients are already distinguishing between firms that will remain in the EU post-Brexit, and those that will not. “Clients may consider engaging EU-based firms for any matters affecting EU law,” he says.

He adds that closer collaboration between UK and EU-based firms is likely to ensue, and the flow of work between them will be reciprocal—as for EU firms that currently have such an arrangement with non-EU firms, such as those based in the US.

According to von Bomhard, EU work for UK firms will decrease over time. “It makes more sense for EU work to be done from the continent,” she explains.

She adds that young attorneys in the UK will no longer focus on EU work, as for them the EU will be “just another territory”, and this will reflect the clientele that are attracted.

“Clients won’t wake up and move away, but UK firms won’t actively pursue the EU work or train young lawyers in EU law, which means the work will eventually move away,” she says. Instead, UK firms may move their focus to global or commonwealth matters, von Bomhard suggests.

Willquist adds that, in the event of a ‘hard’ Brexit, this move may come sooner.

“Brexit is likely to raise obstacles by limiting freedom of movement, making the UK less attractive and accessible to skilled professionals,” Bell argues.

However, he notes, firms with offices in both the UK and the EU will still be able to access pools of talent from both markets, and the inherent advantage of natively communicating in English will remain attractive to non-EU businesses.

A waiting game

With less than six months to go until Brexit day, no exit agreement has been reached and there appear to be more questions than answers.

As Petillion notes: “there is nothing worse than living in uncertainty and unpredictability,” particularly in the context of international business relations.

He is probably voicing the view of many when he says: “the sooner this is sorted out, the better”.

Law firms spoken to