Sad to CJEU Go? What Brexit Could Mean for Intellectual Property (part 2 of 2)

Guest post by William Wortley*

In this article we conclude our look at the potential implications of Brexit on the European intellectual property law framework. (Part 1 can be seen here).

Copyright

Although copyright is less harmonised than other areas of IP, it does not escape the potential ramifications of a “hard” Brexit. The Commission has signalled its intention to push forward with the Digital Single Market (DSM) Strategy, reshaping copyright to make it fit for the digital age. Certain legislation, such as the proposed Content Portability Regulation, are expected to come into force prior to the UK’s exit from the EU, although this will not stop it potentially losing effect post-Brexit if a settlement is not achieved. The regulation allows EU consumers to access digital content provided in their Member State of residence if temporarily in another Member State. If the content localisation provisions no longer applies after Brexit, content providers in the UK will be severely hampered by having to negotiate licences in the remaining Member States. The issue is of commercial importance to UK businesses,

The marriage of civil and common law traditions has always been a slightly awkward one when it comes to copyright. The “author’s own intellectual creation” standard of originality, derived from the Infopaq decision, was effectively a compromise between the lower UK standard and the higher standard in countries such as Germany. While the originality threshold will still stand, the EU may be freer to move slowly towards a higher standard without considering Britain. Equally, UK judges could edge back towards it’s previous “labour, skill and judgment” standard, which rewarded effort expended with copyright protection and did not require the level of creativity expected in countries such as Germany or France. Such a division may also see the UK legislators seek to amend areas such as private copying, having had a compensation-free regime successfully challenged under judicial review in 2015.

The legal regime with regard to internet intermediaries may also be affected. Articles 12-15 of the E-Commerce Directive provide intermediaries with “hosting, “caching” and “mere conduit” defences to copyright infringement. There is some momentum internationally to review the role that intermediaries play in policing the internet, including their role in copyright infringement. On the other hand, a post-Brexit UK may look to deregulation to increase competitiveness in that market. A full UK exit would present an opportunity to review such provisions. Given the international focus on the role of intermediaries, it seems likely that changes would be multilateral. However, if no trade deal can be agreed between the parties, the UK may seek to protect its economic position with more drastic and attractive legislative changes.

Exhaustion

As it stands, the EU-wide exhaustion principle stops owners of IP rights preventing importation of goods already placed on the market elsewhere in the EEA with their consent. If the UK does not join the EEA, or a mutual recognition of the exhaustion principle is not negotiated, then IP owners will be able to rely on their rights to prevent parallel imports of such goods. This is likely to lead to an alteration of the business model of IP rightholders operating in both markets and to an increase in enforcement costs.

Enforcement

A common problem that IP stakeholders may face is effect that Brexit will have on Pan-European enforcement of rights. Pan-European injunctions issues in EU courts may cease to have effect in the UK and vice versa. This may have significant cost and time implications for holders of community rights, most notably for EU trademark and design rightholders seeking to enforce their IP rights. Retention of common enforcement mechanisms makes sense for both parties and it would therefore seem likely to be retained in some form. In the event that no deal is agreed, a prospect hinted at in this last week’s address, the UK could still seek to join the Lugano Convention which extends the cross-border recognition and enforcement of judgements to European Free Trade Association (EFTA) countries.

Future Legal Development

The UK is not only “freeing” itself of the jurisdiction of Europe, but losing its ability to influence the direction of European law. The UK has been a liberal voice in the development of European law and industrial policy, notably in the development of the DSM strategy, a voice that may no longer be heard. Although the exact influence is difficult to measure, the differences in legal and industrial heritage may lead to subtle divergences in future development. This is manifest in an area like copyright, where the legal traditions are so clearly divergent. Furthermore, in the event that the UPC does come into force without the UK, the development of its jurisprudence is also likely to be affected. The presence of UK patent judges, widely well-regarded for their competence and expertise, could lead to greater confidence in court judgment and therefore in the system as a whole.

 Conclusions

IP rights are, of course, just one part of what will be a very complicated divorce. Furthermore, businesses trading with the EU will need to comply with the requirements of the European Single Market. However, a full UK exit certainly creates the greatest number of headaches for stakeholders and legislators alike. Despite the UK’s ratification of the UPC agreement, the future of the system remains in the balance; trademark and design right portfolios look likely to face significant cost implications; rules on copyright protection could easily move in different directions. Prime Minister May’s recent proclamation, although seen in some camps as aggressively “hard” Brexit, still makes economic expediency a central theme. Despite this, all stakeholders should be preparing for a rocky road ahead.

 

*William Wortley is an IP professional based in Munich and London. He holds an LL.M. in Intellectual Property and Competition Law from the Munich Intellectual Property Law Center. William.d.wortley@gmail.com

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