Brexit impact on Trade Marks, IP and Immigration | An insight from Walpole Partner Charles Russell Speechlys

Walpole’s latest Brexit insight event – Navigating Brexit – held in early September, featured a number of fascinating speakers, including experts from law firm Charles Russell Speechlys LLP, Walpole’s Corporate Partner. During the event, Senior Counsel at CRS, Kate O’Rourke, discussed the impact of the UK leaving the European Union on issues including trade marks, IP, competition law and immigration.

We are pleased to share the below hugely informative follow up to this event from Charles Russell Speechlys; for further information, please scroll to the bottom of the page for a list of contacts, or visit the CRS website here.

Trade Marks and Intellectual Property
Post-Brexit dispute resolution continues to be a totemic issue in the Brexit debate. The UK government’s position has long been that it is not willing to accept the jurisdiction of the European Court of Justice (“ECJ”) once the UK has left the EU. However, in a recent position paper on this subject its language has been moderated, with the government now saying that ‘in leaving the European Union, we will bring about an end to the direct jurisdiction of the Court of Justice of the European Union’ (emphasis added). What an indirect jurisdiction of the ECJ might entail remains unclear, but this tonal shift does signal that the UK government may be open to compromise.

One possibility is membership of the European Free Trade Association (“EFTA”) and the European Economic Area (“EEA”), either as part of a transitional arrangement or potentially for the long-term. This would entail the UK recognising the jurisdiction of the EFTA Court, the EFTA/EEA equivalent of the ECJ. The EFTA Court closely follows the rulings of the ECJ but its rulings are advisory only and as such may represent a compromise. Whatever happens, the recent debate on the European Union (Withdrawal) Bill indicates that there is at least general acceptance of the need for a new dispute resolution body post-Brexit, even if we will no longer be under the ‘direct jurisdiction’ of the ECJ.

The possibility of continued UK membership of the EEA also raises another critical issue, namely how the principle of Intellectual Property Rights (IPR) exhaustion will be affected by Brexit. Generally speaking, owners of IPRs can control the distribution of their branded items. However, once a brand puts its goods on the market in the EEA (i.e. the 28 EU member states, plus Norway, Liechtenstein and Iceland), their right to restrict the onward sale of those goods within the EEA is ‘exhausted’. If the UK leaves the EEA post-Brexit, the position will change.

One option would be for the UK to adopt a policy of national exhaustion, whereby IPR owners only exhaust their rights on a territory-by-territory basis. This would mean that once a product has been placed on the domestic market in a particular country with the consent of the IPR owner, the owner has exhausted its rights to restrict the circulation of those goods within that territory. However, the owner retains the right to control the distribution of those goods in all other territories around the world. In contrast, under the doctrine of international exhaustion, IPR owners exhaust their right to restrict the circulation of their branded goods as soon those goods have been put on the market in any territory where international exhaustion applies. Generally speaking, national exhaustion favours the IPR owner, while international exhaustion favours the consumer. The UK government’s position on this remains unclear but will be closely related to whether the UK remains a member of the EEA and/or the customs union.

The ongoing protection of registered trade marks, designs and geographical indications is also still unclear, but there is growing consensus for the adoption of the so-called “Montenegro” model proposed by the Chartered Institute of Trade Mark Attorneys. Under this system, all of the existing registrations would be automatically “cloned” onto the UK Registers without the need for any further formalities, or fees. However, it must be acknowledged that a ‘cliff edge’ Brexit remains a distinct possibility and continued industry pressure to avoid this outcome should remain a priority.

In the context of such uncertainty, IP owners will need to continue to closely monitor developments in all these areas and may wish to adjust their IP portfolio as the landscape shifts. Our IP team can offer the full range of services to advise in this respect.

Competition Law
The law of selective distribution is of immense importance to brand owners. This governs how far they can go in controlling how their goods are sold by the distributors. This can be a source of tension between them and distributors. Whilst owners are anxious to ensure that goods are sold in suitable settings which are consistent with the prestige of a luxury brand, distributors want to sell goods as widely as possible.

In recent times, a flashpoint has been whether or not a brand owner can prevent distributors from selling goods online or indeed whether they can prevent sales on third-party platforms such as Amazon or eBay.

It is now clear that legally a brand owner cannot completely prevent a distributor from selling its goods online. It has been less clear whether or not prohibitions on online platform sales are legal. Indeed, while some national courts have concluded that such provisions fall foul of competition law others have reached the opposite conclusion.

As a result of this uncertainty, the European Court of Justice has been asked to make a definitive ruling on the question in the case of Coty v Germany. As part of that case, the ECJ has also been asked to rule on whether the need to preserve a luxury image justifies having a selective distribution arrangement at all.

Whilst the final judgement in this case is awaited, the Advocate General of the Court of Justice has delivered his opinion on how the judges should rule. His opinion favours the interests of brand owners. He has recognised that whereas outright online sales bans may be unlawful, the brand owner has a legitimate interest in regulating how online sales are made and that it may damage its brand to allow goods to be sold on third-party platforms. While the Advocate General is effectively calling for a case-by-case analysis on the question, he recognises that online platforms will be an inappropriate point of sale for many luxury brands.

More importantly, the Advocate General recognises that the requirements of maintaining a luxury image do indeed justify putting in place a selective distribution system. This will be a positive encouragement to brand owners, who are very concerned about the Court reaching the opposite conclusion on this critical question.

Whilst the AG’s opinion will be welcomed, the case is not closed yet. The judges will take note of the opinion, but they are not bound to follow it. Whilst in most cases they do so, it is open to them to arrive at a different result.

Whatever the outcome of the ECJ judgement, brand owners will be well advised to consider whether their distribution arrangements remain fit for purpose in light of recent legal developments.

Owners should also take account of the complexities and opportunities that are presented by Brexit. It is not certain that once the Great Repeal Bill has been passed by Parliament, the same rules relating to selective distribution will continue to apply to UK distribution arrangements. On a more positive note, brand owners may even be able to lobby for rules that are more conducive to the requirements of safeguarding their interests.

In line with a general theme arising from the event, it is clear that savvy proprietors will taking advice on the changing environment and putting their distribution systems in order without delay.

Immigration
There is understandably a great deal of concern felt by employers of EU nationals in the UK. Despite recent reassurances and promises to protect their status, we continue to advise of the importance for EU nationals to apply for a registration certificates, permanent residence cards and British Citizenship where eligible, to help ensure they will have the right to live and work in the UK without restriction after 2019.

Walpole and its members are in a unique position to influence the Government’s position now on post-Brexit EU migration by contributing to the recently announced Migration Advisory Committee’s Call for evidence on the economic and social impact of the UK’s exit from the EU. The deadline to do so is 27th October 2017. We can assist you with this.

If you wish to attend a meeting with the Migration Advisory Committee outside of London, the MAC’s representatives will be available on the following dates and at the following locations:
5th October, Manchester
6th October, Cambridge
11th October, Herefords and Worcestershire
12th October, Doncaster
18th October, Nottingham
23rd October, Ipswich

The full itineraries for these visits are still being worked out. The MAC are working on arranging visits to Northern Ireland, Wales, Lancashire, the south west and south east of England. If you would like to engage with the MAC on these dates, please contact either MAC@homeoffice.gsi.gov.uk or on 020 7035 1764.

The Government’s recent offer to EU nationals to secure their rights after Brexit requires an application on Brexit for ‘settled status’. This is at best vague and at worst, an attempt to delay applications until a time when the application fee can be increased from the current £65 and the eligibility criteria tightened. Brexit Coordinator Guy Verhofstadt told MEPs during a debate of the constitutional affairs committee that the British government’s offer to provide EU citizens in the UK with ‘settled status’ was not acceptable as it would cause a tremendous administrative burden for many people having to apply individually to stay. Those that have already applied for registration certificates and permanent residence cards in the UK tend to agree that the current system in already an administrative burden.

If such an application is required, those with permanent residence should be in a stronger position as their case has already been substantively assessed by the immigration authorities. It would be very difficult to refuse settlement to someone who already has permanent residence and proof of their permanent residence in the UK. Therefore, it is still advisable for EU nationals to apply for this status if eligible.

Brexit immigration services
Charles Russell Speechly’s immigration team can offer the following services:

• A ‘High Touch individual service’ for key employees;
• An ‘Immigration Drop-In’ service at your office to review applications prepared by employees and provide advice where needed;
• Advice and assistance with submissions to the Migration Advisory Committee;
• Bespoke email instructions explaining the process of applying for residence cards and permanent residence cards;
• An email service to answer ad hoc immigration queries;
• A telephone hotline for those applying without our assistance to troubleshoot concerns;
• A seminar to staff on how to apply for permanent residence which can also be delivered as a webinar or podcast;
• Advice factsheets.

Contact
If you have any queries, please contact:

Kate O’Rourke
Senior Counsel
T: +44 (0)20 7203 5011
kate.o’rourke@crsblaw.com

Paul Henty
Partner
T: +44 (0)20 7427 6506
paul.henty@crsblaw.com

Paul McCarthy
Senior Associate
T: +44 (0)20 7427 6609
paul.mccarthy@crsblaw.com