On 23 June 2016 the citizens of Great Britain voted to leave the EU. As the European Union trademarks are only valid throughout EU Member States, in the worst-case outcome trademark owners are at risk of losing their trademark rights in Great Britain.

However, a more likely outcome would be that existing trademark law can be reapplied for or be automatically converted, thereby ensuring their continued priority. In order to avoid a loss of rights, the ongoing developments must however be monitored attentively.

Consequences for existing EU trademarks?

EU trademarks are valid throughout the EU. If Great Britain decides to leave the EU, the existing EU trademark regulation would become void within Great Britain and EU trademarks would presumably no longer enjoy a special protection. It is fundamentally conceivable that a race towards the registration of new trademarks would take place.

Not overnight

The referendum and the vote to leave the EU does not represent a formal notification and the official process must be activated by the government. Therefore the referendum will most probably not bring about immediate legal consequences for trademark owners.

UK’s way out of the EU will now comprise following steps (see in particular the “exit clause” for the Member States - Article 50 TEU):

Initially the British government must formally notify the European Council of its intent to leave the EU. Then Great Britain and the EU will proceed into negotiations for a withdrawal agreement. This agreement will seek to lay down the transitional agreement as well as establish the prospective relations between Great Britain and the European Union.

If no agreement is concluded within two years and if the European Council does not agree to an extension, Great Britain will automatically cease to be a Member State at the end of the two years, the expiry of the term. This scenario is rather unlikely, as both parties have an interest in agreeing on a regulated withdrawal established by a withdrawal agreement.

Possible regulation scenarios

How the legal situation will be regulated within the withdrawal agreement is completely unclear at the moment - especially since a withdrawal from the EU is a novelty. On the one hand Great Britain has an interest in protecting British trademark owners of EU trademarks, but on the other hand the EU has an interest in an extension of protection of EU trademarks with regard to Great Britain.

Worst case

One alternative – the worst case scenario – would be if the withdrawal of Great Britain from the EU would result in the EU trademarks losing the protection of their trademarks in Great Britain, without being able to ensure the existing priority of their brands. This would lead to a race of trademark registrations of trademarks which are no longer protected (this race would have started actually already due to the first-come, first-served principle). As this alternative would basically mean an expropriation for trademark owners in regards to their British trademark protection, it is a rather unlikely outcome.
Best case
A second alternative would be an agreement providing unlimited validity of the existing EU trademark regulation in combination with a consideration of all future changes. This outcome is rather unlikely, as Great Britain would be bound to all changes made in future including all judgments of the European Court of Justice, without having the possibility to take part in the decision-making process.
Most likely solution
The most likely outcome would be for current EU trademark regulations to cease. The result would be that the trademark regulations and the legal protection of these trademarks would no longer be applicable throughout Great Britain. The “British part“ of EU trademark registrations would then be converted into national British trademarks, either through administrative processes, or more likely, be converted within the realms of a timely request maintaining the priority of the EU trademarks. Within this scenario the rights as well as the priority of trademarks throughout Great Britain would be preserved while at the same time remaining autonomous in regard to future changes.
Where is the journey headed?
Following the vote in favor of Brexit, many trademark owners are facing major uncertainties- yet in our opinion; an actual loss of trademark protection is a rather unlikely outcome. Initially the legal situation can be expected to remain unchanged during the upcoming negotiations.
Brexit should already now be considered in regard to existing and future contracts (especially for coexistence, demarcation and license agreements). For existing agreements it should be considered, whether or not validity is desirable throughout Great Britain. If necessary agreements should be renegotiated in order to provide clarification. For future contracts a clarification is recommended from the outset. In regard to a possible breach of contract, it would be advisable to consider if Great Britain is wanted as the place of jurisdiction or arbitration and whether British law should be applicable – among others for arbitration agreements. Finally EU trademark owners should consider the possible consequences of Brexit on questions related to the exhaustion of trademark rights as well as the requirements for genuine use of trademarks in order to preserve rights - these aspects are also important from a strategical point of view.
The direction of the journey ahead remains to be seen over the next few months as well as during the negotiations on EU level. Therefore it is important to review closed contracts as well as prospective (model) contracts and, if necessary, to revise them. Further it is important to vigilantly pay attention to any changes which may occur in order to ensure trademark protection and avoid a possible loss of rights.

Dr. Thomas C. Körber, Attorney of law, Partner, Arnecke Sibeth, Frankfurt am Main
tkoerber@arneckesibeth.com
www.arneckesibeth.com

Dr. Tudor Vlah, LL.M., Attorney of law, Associate, Arnecke Sibeth, Frankfurt am Main
tvlah@arneckesibeth.com
www.arneckesibeth.com

 

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