After yesterday’s leave vote, the UK government will need to start the process of disentangling the country from the EU. Formal steps to trigger withdrawal under Article 50 of the EU Treaty are currently expected to await Prime Minister David Cameron's replacement in the coming months, although informal negotiations may begin sooner. What will be the legal impact for innovative businesses?
A major casualty for Britain will be its membership of the planned Unitary Patent.
The UK’s membership of the European Patent Convention would not be directly affected by Brexit as membership goes beyond EU countries. Some governance matters are for EU members only, and so the UK will lose influence.
The same is not true of the Unitary Patent system as this requires EU membership. Ratification of the Unified Patent Court Agreement could still go ahead without the UK. Under the rules, another member state could take the UK’s place as one of the three member states having the highest number of European patents in the year before the UPC Agreement was signed.
This would leave the UK outside of the Unitary Patent and businesses would have to decide whether it was worthwhile to pursue separate UK national protection in each case. For businesses with principal interest in trading in the UK, the choice of the Intellectual Property Enterprise Court or the Patent Court will remain highly attractive. For those with an international perspective, there is a risk that the UK’s influence on the enforcement of patent owners’ rights will diminish, particularly in key areas such as pharmaceuticals.
In theory, the London-based seat of the central court for cases involving chemistry, pharmaceuticals and the life sciences could remain, although it seems likely that other participating countries would want this relocated to within a member state.
EPO president Benoît Battistelli has indicated that a British departure could delay the introduction of the Unitary Patent for the other participating nations.
Trade marks and designs
The central EU trade mark has been a mainstay for business since 1996, relied on to provide pan-EU trade mark cover with a single registration, with a considerable saving of administrative burden and cost for businesses operating in several jurisdictions. While UK businesses will still be able to seek protection for their brands under this system, the EUTM will no longer extend to the UK. The situation is similar for the Community Registered Design, which protects the appearance of products or product features.
Owners of EUTMs and CRDs may be offered an opportunity to acquire UK registered rights on payment of a fee, as was the case on Ireland’s separation from the UK in 1921. This could leave those with large portfolios facing substantial administrative and fees burdens in re-registering all of their rights, and then maintaining those separate registrations.
Alternative approaches include
- allowing existing EUTMs and CRDs to continue to apply to the UK until they are up for renewal; or
- automatically converting existing EUTMs and CRDs into UK registered trade marks and designs.
But dealing with separate registrations is relatively straightforward compared with some of the difficult issues around the exhaustion of rights and Europe-wide licences. We discussed these points in more detail here.
Businesses with trade in the EU will certainly have to consider registration both nationally and in the EU; those with limited trade across the EU may face challenges as to the validity of their EU trade mark, for non-use in the EU.
Across all of the IP rights there are likely to be additional costs and administrative activity, both as the systems are separated and going forwards. Enforcement may become more costly and complex as the UK separates itself from pan-EU systems and starts to diverge from European law.
The recently reformed EU data protection rules are due to take effect in May 2018. By that time, the UK is likely to have developed a direction of travel for separation, even if it is some way off completing the process. Does that mean the tougher new regime for personal data would not be effective in Britain?
It seems not. The Information Commissioner’s Office has already indicated that the UK’s history of protecting personal data, and the importance of clear laws and safeguards in the growing digital economy, will mean that protection will not fall away with a departure from the EU. And as the recent negotiations with the US over data transfers has shown, any kind of data-rich organisation is likely to face difficulties in trading with EU consumers and businesses if it operates under laws that are not regarded as offering sufficient privacy safeguards to individuals. The UK is likely to track the EU system, at least in the short term.
Consumer law is closely harmonised with regulations such as the consumer contracts regulations based on EU law. These regulations will not disappear overnight, but we can expect that they will be altered or removed over the next few years. This leaves businesses with some difficulties in the short term, as they must currently comply with complex obligations that often require changes to the ordering and payment processes. However, in the longer term the regulatory burden for UK transactions may become less onerous. Businesses with sales across the continent, however, will need to comply with EU law.
Of course, many consumer laws are home grown. The Consumer Rights Act 2015, for example, which recently introduced major reforms to consumer transactions, is a mixture of home made and EU law, and so may be largely unaffected.
Pharmaceuticals and medical devices regulation
The effect on life sciences business will be substantial. The centralised pharmaceuticals approval process is compulsory for more advanced medicines and the decentralised process is closely harmonised between member states. Given the need for drugs companies to sell their products around the world, and the trend around the world to harmonise standards and processes, it seems unlikely that substantial change to medicines laws will be a priority. However, some divergence is to be expected over time, and costs are likely to increase for businesses as they deal with a separate UK regulator and obtain separate product authorisations. Arrangements will be needed to ensure continuity of existing product authorisations and to deal with issues such as variations.
The central EU regulatory body, the EMA, is currently based in London. We can expect a new location to be found elsewhere on the continent.
Medical devices law does not provide a centralised approval process but sale of medical devices across the EU generally depends on validation by a relevant EU body. These rules are currently being tightened up – the UK will have to take a position on whether it tracks these developments or adopts a new direction.
The impact on participation in EU funded research under the Horizon 2020 programme will depend on what arrangements the UK negotiates. Although non-EU researchers can participate in Horizon 2020 projects, they are not necessarily eligible for funding. Certain associated countries such as Norway are permitted to participate on the same conditions as EU members, but this requires a separate agreement to be reached.
A range of important EU initiatives are in progress affecting the digital economy, medical devices, trade secrets law to name but a few. The UK will have to determine how far it takes up any of these changes, and if it does not, how to enable trade between the UK and the remainder of the EU.
There will be many conflicting priorities for the UK government going forwards. Not all of the areas of uncertainty will be addressed promptly, and there is likely to be confusion and lack of clarity for business in many areas. We must hope that a sensible approach to compliance and enforcement is taken as these issues are sorted out.