Updated June 24, 2016
A few hours ago, citizens of the United Kingdom voted in favor of leaving the European Union. This is a monumental step which historians will analyze in order to understand why and how it became possible. In the meantime, lawyers will have to figure out the consequences, including how to untangle this 60 year-old relationship.
European patents should not be affected by Brexit because the Munich Convention is not a European Union instrument. It currently has 38 Contracting States and some of them (for example Switzerland, Norway and Turkey) are not members of the European Union. On the other hand, the “Unitary Patent” is a creation of the European Union and Brexit will have heavy consequences on the system.
Similarly, Community trademarks (now European Union Trademarks) were created by Council Regulation (EC) No 40/94 of 20 December 1993, and the regulation in its current form does not say a word about what happens when a Member State leaves the Union.
The main feature of EU trademarks is that they are not a bundle of various national rights, but trademarks with their own regime (with a “unitary character”): the owner obtains a single right valid in the 28 Member States. As a consequence, Brexit means that EU trademarks will no longer be recognized in the United Kingdom.
In theory, EU trademark owners could simply lose their rights in the United Kingdom. However in practice, economists say that Brexit could drive international businesses from the UK, and the UK government will certainly try to find ways to avoid this outcome. In this context, the UK will have to find a legislative solution to facilitate the conversion of EU trademarks into UK national trademarks. This conversion could either be automatic or upon an application. What will have to be decided is the cost of this conversion, in particular the fees that will have to be paid to the UK Intellectual Property Office.
The conversion of EU trademarks into national UK trademarks is not the only issue that will have to be dealt with. There will also be consequences in the European Union. Currently, the requirement of a “serious use” is satisfied if the trademark is used in a substantial part of the European Union, including use within a single Member State. For example, even a use limited to “London and the Thames Valley” might be considered as serious. Judgment of the General Court of 30 January 2015 – Case T‑278/13. What will happen to trademarks which were used mainly in the UK? They could be challenged as no longer in “serious use” in what is left of the European Union. While the conversion of EU trademarks into UK trademarks is presumably a matter for the UK legislature, the consequences of use limited to the UK will be dealt with at the European Union level. There could be a transitional period during which UK businesses or international businesses focused on the UK will be given the possibility to consolidate their rights in the European Union.
Another issue that arises is in relation to the exhaustion of rights principle. A trademark owner cannot prohibit the use of his trademark in relation to goods which entered the European Economic Area (EEA) with his consent. He can use his EU trademark to stop products from entering the EU but once he has let genuine products into the EEA, he cannot prevent them from circulating from one country to another within the EU. This is why when products are cheaper in a country with lower revenue, they can be freely resold in the UK for example.
If the UK decides to join the EEA, owners of EU trademarks will not have the possibility to stop genuine goods which have been put on the UK market from being exported to the EU. If the UK does not join the EEA, trademark owners will have the possibility to stop these goods at the EU border.
There will also be consequences upon trademark licenses. When the geographical scope is the “European Union,” will this be interpreted as meaning all the member countries at the time the agreement was signed, or all the member countries at the time the contact is being interpreted?
What are the next steps?
According to article 50 of the Lisbon Treaty, the UK has to notify the Council of its decision to withdraw, the Council will issue guidelines and a withdrawal agreement will be negotiated on that basis, taking account of the framework for the UK’s future relationship with the Union (in particular, the UK will have to decide whether it wants to rejoin the European Free Trade Agreement and trade with the EU via the European Economic Area). Then, the consent of the European Parliament will be sought and the agreement will be concluded by the Council. Given the number of issues that have to be dealt with, there is likely to be a long negotiation and transition period.