A Brexit Primer for Trademark Owners

Keep Calm 2On June 23, the citizens of the UK voted Yes to the question “Should the UK leave the European Union?” Here are some answers to questions that we are hearing from trademark owners.

Question 1. Is now a good time to panic?

Uncertainty creates stress but we have at least one certainty: from a strictly legal point of view, there will be no immediate impact. There is therefore absolutely no reason to panic.

This vote came as a surprise to many actors and has given rise to tons of comments, some of which are inaccurate from a legal point of view. For example, many wrote that “the vote triggers the departure process.” In fact, the only provision of the European treaties which deals with the situation is Article 50 of the Lisbon Treaty and, according to this article, the event that triggers the process is that the Member State which decides to withdraw must “notify the European Council of its intention.” As of today, we do not even know if and when the UK government will make this notification.

As regards the time schedule, some wrote that the process would take at least 2 years and others wrote that it would take 2 years maximum. What Article 50 of the Lisbon treaty says is that a “withdrawal agreement” has to be negotiated, that the withdrawal agreement should set out the date it goes into effect (and on that date, the European Treaties will cease to apply) and that, if no agreement on the withdrawal date is reached in the withdrawal agreement, the date will be two years after the leave notification unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

In theory at least, departure could be effective in 6 months or 3 years. Given the number and importance of issues which have to be dealt with (one of the pro-Brexit arguments was that too many rules were “imposed by Brussels” in all areas), it is much more likely to be 3 years than 6 months.

Question 2. Will this affect the scope of the US registered trademark rights?

No. Trademark rights are essentially territorial. US registered trademarks are governed by US law and what happens in the European Union cannot affect the scope of US trademarks.

Question 3. Will this affect the scope of my UK registered trademark rights?

There used to be differences between national trademark laws in the EU. This was seen as a potential indirect obstacle to the circulation of goods in the EU and initiatives were taken to harmonize national laws in this field. The most recent one is the Directive (EU) 2015/2436 of 16 December 2015 which we discussed in our webinar of 14 April 2016.

UK Courts will no longer refer cases to the European Court of justice and they will no longer be bound to follow the rulings of that Court. However, the rules which were enacted by the UK pursuant to the harmonization Directives will remain effective in the UK as long as they are not amended. In practice, therefore, Brexit should not affect the scope of UK-registered trademark rights.

Question 4. What will happen to my EU trademarks?

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.

  • Genuine use

The rights of an EU trademark owner can be revoked if, within a continuous period of 5 years, the trademark has not been put to genuine use in the EU in connection with the goods or services listed in the registration. The requirement of a “genuine use” in the EU may be satisfied even though the trademark has been used within a single Member State. For example, even a use limited to “London and the Thames Valley” might be considered as genuine. Judgment of the General Court of 30 January 2015Case T‑278/13.  What ‎will happen to trademarks which were used mainly in the UK? They could be challenged as no longer in “genuine use” in what is left of the European Union. The withdrawal agreement could provide for a transitional period during which UK businesses or international businesses focused on the UK will be given the opportunity to consolidate their rights in the European Union.

  • Exhaustion of rights

‎A trademark owner cannot prohibit the use of its trademark in relation to goods which entered the European Economic Area (EEA) with its consent. The owner can use its EU trademark to stop products from entering the EU but, once it has let genuine products into the EEA, it 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. A lot will depend on whether the UK decides to join the EEA or not.

If the UK decides to join the EEA, owners of EU trademarks will not have the ability 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.

  • Definition of the EU in contracts

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?

Question 5. What should I do to position myself for unforeseen?

One question is whether it is a good idea to file UK national applications. One of the reasons for the success of EU trademarks was that it is much cheaper to file a EU trademark at the EUIPO office in Alicante than to file applications with the various national offices. The Regulation on EU trademarks provides for a mechanism that can be used to convert EU trademarks into national trademarks in specific circumstances that do not apply here. However, it is expected that the “withdrawal agreement” will provide for a similar conversion mechanism. What we do not know yet is the fees that will have to be paid. It is also expected that the UK trademarks that will result from the conversion will benefit from the same priority date as that of the EU trademark. In this context, a “wait and see” approach appears quite reasonable.

On the other hand, it is the right time to conduct an audit of your trademark portfolio and to check in which geographical areas the EU trademarks are actually used. EU trademarks which have been used solely or mainly in the UK will be at risk. In this regard, it should be kept in mind that the filing of a new EU trademark application is not necessarily an effective way to overcome the problem.

Foley Hoag has an office in Paris, as well as offices in Boston, New York and Washington D.C., and has been working for many years with trademark agents in the UK. We can help you conduct an audit of your trademark portfolio and design the appropriate strategy. You can contact Catherine Muyl or Natasha Reed.

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