Brexit and trade marks? The facts

We are now four weeks on from the UK’s vote to withdraw from the EU.

Despite the vote, it is important to appreciate that there will be no immediate change to the UK’s relationship with the EU or to the legal framework for the protection of EU Trade Marks (EUTMs) or UK Trade Marks. The changes that will take place are not likely to be implemented for at least two years.

UK Government’s Next Steps

Once the UK Government formally notifies the European Council of its intention to leave the EU, a period of two years (extendible by agreement) is permitted in which the UK will negotiate a new relationship with the EU. It is not anticipated that the UK Government will formally give notification to the European Council of intended withdrawal for at least six months.

This means that, for the time being, and for at least two years, EU Trade Marks (EUTMs) still cover the UK. In other words, EUTMs have exactly the same effect they had four weeks ago and can be invoked against national UK trade marks and infringements in the UK.

Future Arrangements

We cannot say with certainty what the arrangements will be for EUTMs, in the UK, once the UK leaves the EU. And this may not become clear for some time.

However, there appear to be four broad possibilities:

  1. EUTMs will continue to cover the UK and nothing will change (this might be the case if the UK were to leave the European Union but able were to negotiate an alternative arrangement with the EU, perhaps involving access to the European Economic Area);
  1. Upon the UK’s formal exit from the EU, and in the absence of a special agreement for the UK to access the European Economic Area, EUTMs will be automatically divided into two registrations, an EU and a UK registration;
  1. Or, there will be an opportunity to convert an EUTM into an EU and a UK registration;
  1. Or, EU TMs will simply cease to cover the UK.

Our assessment is that options two or three are the most likely.

Some uncertainty arises, however, given that we do not know how precisely the transition would be made between the current arrangements and the new arrangements following the UK’s withdrawal from the EU.

Possible risks, given uncertainty about EU/UK trade marks in the future

We have identified the following risks, which you may wish to take into consideration when taking decisions around the management of your portfolio:

  1. In the future, filing only an EUTM application has some potential to result in the loss of protection in the UK following withdrawal from the EU. As mentioned, however, we anticipate that there would be transitional provisions permitting EUTM proprietors to maintain protection in the UK post-Brexit. Therefore, this risk is low.
  1. There is a risk that, once the UK has withdrawn from the EU, existing EU registrations, which have only been used in the UK, could become vulnerable to cancellation on the grounds of non-use. It is possible that the EU IPO and the EU Courts would take into account use that took place whilst the UK was still part of the EU but that is not clear. In the absence of effective transitional provisions, this would be a risk to future registered protection in the rest of the EU i.e. outside the UK.
  1. There is a risk that injunctions already granted prohibiting infringing activities across the EU may not have effect in the UK once it leaves the EU.
  1. Finally, there is some possibility that trade mark and other license agreements extending to the EU, which were signed whilst the UK was a member of the EU, may be vulnerable to being interpreted as having no effect in the UK, once the UK withdraws from the EU.

It must be emphasised that these are risks and, by definition, some or all may not in fact materialise.

There are steps available to mitigate these risks

The risks we have identified can be mitigated to a varying extent by steps that you can take now:

  1. As mentioned, although our assumption is that the proprietors of existing EU registrations will be given the option to maintain protection in both the UK and EU, by one means or another, there is certainly an argument to be made that holders of existing EU marks should now consider filing UK national applications given the uncertainty surrounding the transitional provisions that may be agreed.
  1. New applicants may wish to file a UK national application in addition to an EU application. Although, as things stand, an EU application covers the UK, there is certainly now an argument for filing a UK national application at the same time. This may be particularly true for clients whose main business is focused in the UK.

Please be aware, however, that this is not blanket advice. When judging whether to use either of these strategies, additional registration costs have to be balanced against risk in any trade mark portfolio and this is a question which needs to be considered on a case-by-case basis.

National applications may also bring other benefits

In fact, prior to the UK’s vote to withdraw from the EU, there were additional factors which in some circumstances advocated filing national UK applications alongside EUTM applications:

  1. The use of a trade mark in one member state may not be sufficient to maintain an EUTMThe historic position was that the use of a mark in one member state was deemed sufficient to maintain an EU trade mark registration. There have been a number of recent EU cases (and UK cases) where it has been clarified that the question is much more fact specific.Use will only be found to be “genuine use” sufficient to maintain an EU registration, where it is sufficient to create or maintain a market for goods/services under the mark in the EU, with consideration of the market in question. There is now, in essence, a de minimis threshold where use made in good faith might not be sufficient to maintain a registration at the EU level.For instance, the EU court held that use of a mark for hand-made chocolates sold through only one shop in Germany was not sufficient to maintain a registration of an EU trade mark. That may be at one extreme but it does show that it is now hard to predict exactly what level of use is necessary to maintain an EU trade mark.The case law in this area is nevertheless still in a certain amount of flux (the UK courts, for instance, have in recent cases given slightly different interpretations of the case law of the EU Court). Given this background, and where the client’s plans are for use in the UK alone, it would be a prudent strategy to file a UK application in addition to an EU application.
  2. The EUIPO “torpedo”Where a claimant brings trade mark infringement proceedings in the UK based on an EU trade mark, a defendant may counterclaim (in response to the claim) by filing an action to invalidate or revoke the prior EUTM relied upon. In those circumstances, the UK Court has jurisdiction to address those counter-attacks with the infringement action.The UK Courts do not have that jurisdiction, however, where a potential defendant files its application to invalidate or revoke the EUTM at the EUIPO BEFORE the infringement action is issued. In those circumstances, the UK Courts will typically be obliged to suspend the infringement proceedings pending the outcome of the revocation/invalidity proceedings at the EUIPO. Further, given that cancellation actions at the EUIPO can take up to 6 years for a final decision to be reached, early filing at the EUIPO of a counter-attack by a potential defendant is an established tactic. This issue is referred to colloquially as the EUIPO “Torpedo.”It should be noted, though, that the claimant’s rights are not in any way extinguished (and interim remedies are still available to it) but the tactic is perceived as being a serious weakness in an aggressive enforcement strategy, potentially resulting in early and lengthy suspension of a claimant’s claim.One way that a claimant can avoid a defendant using this tactic is by obtaining national marks, which are not vulnerable to the “torpedo”, in addition to EU trade marks. (There are other ways of avoiding the tactic, though, for instance issuing a claim before notifying the defendant of the complaint, but there are other downsides with that approach.)In our experience, most clients do not find the existence of the “torpedo” issue to be one which necessitates filing of national application(s) in addition to EU applications, but it is at least one factor in favour of an additional national filing.Nevertheless, it will be appreciated that Brexit is an additional factor where, for particular trade mark proprietors, in particular circumstances, the filing of national UK applications in conjunction with EU TM applications, may be an appropriate strategy.

Next steps

In summary, our expectation is that the UK and EU will agree transitional provisions over the next two years in preparation for the UK’s withdrawal from the EU. We anticipate that those provisions will ensure protection for EUTM proprietors in both the UK and EU. Nevertheless, given that we do not know yet the precise details of those transitional provisions, there is some element of risk created by that uncertainty. For some proprietors, therefore, the filing of UK trade mark applications in addition to existing or new EUTMs may be a prudent strategy, particularly given that the costs of filing in the UK are relatively low.

We will continue to monitor the situation and will advise further on the details of any transitional arrangements as soon as they are available. In the meantime, we are happy to provide further tailored advice on request.[:]

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Posted on: 22nd July 2016