Lawyers concerned by no-deal Brexit guidance on IP exhaustion
The UK government’s latest guidance on a no-deal Brexit fails to clarify the future of IP rights exhaustion surrounding the European Economic Area (EEA), according to lawyers.
Released yesterday, the papers are the third and final batch of documents intended to provide guidance on a no-deal Brexit.
The previous releases covered IP-related matters including broadcasting rights and tobacco labelling.
The final collection of documents focuses on patents and the exhaustion of rights, plus trademarks and copyright (see WIPR’s report here).
Exhaustion of rights
Currently, the UK is part of the EEA exhaustion scheme—under which IP rights are considered exhausted after they have been put on the market anywhere in the EEA with the rights owner’s consent.
The UK yesterday said that it will continue to recognise the EEA exhaustion regime to “provide continuity in the immediate term for businesses and consumers”.
This will ensure that the parallel import of goods can continue from the EEA to the UK, although the government noted that there “may” be restrictions on the parallel import of goods from the UK to the EEA.
As such, “businesses undertaking such activities may need to check with EU right holders to see if permission is needed”, the government advised.
Avi Freeman, partner at Beck Greener in London, said this does not give the clarity desired by businesses and IP owners.
“That is simply saying that ‘we don’t know and will leave it to businesses to sort out themselves’.”
He explained that businesses will be unhappy about the lack of clarity and guidance in this area.
The government’s guidance noted that this is the plan only for a “temporary period”, and it has yet to decide how the exhaustion regime will operate after this.
Stephen Bennett, partner at Hogan Lovells, also in London, said that businesses will be keen to avoid a system of international exhaustion at the end of this temporary period as this could allow goods sold in the developing world at low prices to be re-sold in the UK.
He explained that many companies operate a much lower pricing model in the developing world to allow access to their products, and they don't currently need to worry about those goods being traded to the UK and undermining their UK price because of the EU rules on exhaustion.
However, with international rules of exhaustion, "goods from the developing world could be diverted to the UK and undermine the model", Bennett said.
Unified Patent Court
Bennett explained that, despite the guidance released yesterday, “we don’t have clarity about the Unified Patent Court (UPC) and whether the UK could stay in it as a third country”.
The UK ratified the UPC Agreement in April this year, but two researchers at the Max Planck Institute for Innovation and Competition recently said that the UK will not be able to be in the UPC after Brexit, as this would be contrary to the EU’s core values.
The UPC is currently unable to move forward due to a pending matter at Germany’s Constitutional Court, which has prevented the country’s ratification of the UPC Agreement.
Yesterday, the government said that if Germany ratifies the agreement, the UK will explore the possibility of remaining within the UPC system—even in a no-deal scenario.
Paul England, senior professional support lawyer at Taylor Wessing, said that in light of the overall uncertainty around Brexit, the ongoing German constitutional case and the UPC itself, the promise to “explore” the options is probably all that the UK government can currently say.
The government said that if the UPC is implemented but the UK later withdraws from it, existing unitary patents will “give rise to equivalent patent protection” in the UK.
In this case, UK businesses would be able to use unitary patents to protect inventions in the countries covered by the UPC Agreement, but not in the UK.
Similarly, EU businesses would not be able to use unitary patents to protect inventions within the UK. They would instead need to apply for domestic rights and use the UK court system to settle disputes regarding them.
Freeman noted that in this respect, “UK businesses will be no worse off than businesses from anywhere else”.
Chris Williams, partner at Blake Morgan in London, said the main downside to UK businesses would be the “lack of convenience and consistency across Europe, rather than an inability to protect and enforce rights”.
SPCs
Finally, the government yesterday confirmed that the EU’s legislation relevant to patents and supplementary protection certificates (SPCs) will be retained in UK law.
This means that for the purpose of testing pharmaceutical products, businesses can continue to rely on the exceptions from patent infringement that apply when studies, tests, and trials are being carried out.
England said there are “no surprises” in this respect. He explained that the UK government had previously stated that the SPC system would be retained post-Brexit.
Concluding, Freeman said that the guidance does not actually instruct businesses on how to pursue cross-border trade post-Brexit, but rather suggests that something may happen and businesses may need to act.
“I doubt business owners reading it will be particularly reassured,” he said.
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