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Impacts of Brexit- Observations from China

By Handong Ran

On 29 March  2017, UK Prime  Minister  Theresa May formally triggered the  process for the  UK to leave the European Union (EU). This began a two-year process of negotiations which  will lead to Britain leaving the  EU.

On a general economic level, Europe has  been the most  important trading partner for China  in the past decade. Despite the large  volume  of trading between Europe and  China,  many  Chinese enterprises, especially SMEs, have  had  difficulties doing business in Europe or with European business partners, partly because of language and  cultural  differences and  the rather complex legal  systems in Europe. Having  generally pro-free trade policies and  English  as the official language, the UK was naturally  chosen by many  Chinese enterprises as a bridge to reach the European market  and  to partly avoid  the language and cultural  barriers. This has  worked  well, and  confidence among Chinese enterprises in this type  of business model  has  built up over the years.

However,  for some, this confidence was  shaken by results of the European Union (EU) membership referendum last year and  subsequent triggering of Article 50 of the TFEU. There  is fear that the China-UK-Europe type  of business models will not continue to work when  the UK leaves the EU and  if free movement cannot be  maintained as result  of the withdrawal negotiation (by way of the UK joining the EEA or otherwise). Chinese IP owners and  users are  keen  to find out how their positions in Europe are  going  to be  affected by Brexit.

Patent protection

Many Chinese high-tech companies have  started to realize  the importance of patent protection to the growth  of their businesses in the European market. This has  been reflected by the increasing number of patent filings by Chinese applicants at the European Patent Office in the last 10 years (average year-on- year  increase by more  than  22%). In the last few years, the exciting  developments of the Unitary Patent (UP) system attracted a lot attention from Chinese IP owners and  users. There  was  high expectation for the UP system to become operational in 2014.  Although the target launch date was  pushed back several times,  the attitude remained generally optimistic  until serious doubt was  cast on the future of the system by the referendum vote. Personal discussions indicate that, for those following the issues, confidence picked up again when  confirmation was  given  by Baroness Lucy Neville-Rolfe (the UK’s IP minister at that time) on 28 November 2016  that the UK was  set  to ratify the Unified Patent Court (UPC) Agreement.

It is now generally understood among Chinese IP owners and  users, after great efforts have  been made by officials from the UKIPO, professional bodies like CIPA, and  individual  attorneys from various  UK firms to spread the “business as usual”  message that the European Patent Convention (EPC 1973)  is not a piece of EU legislation and  will be  unaffected when  the UK leaves the EU. IP owners can  continue to obtain  UK patent protection by validating their European patents in the UK after the UK leaves the EU.

Until Theresa May’s snap election call, it looked promising that the UP system would be  operational from December 2017.  The project may suffer further delay,  but hopes are  still high for a 2017  or early 2018  start  date. Chinese IP owners and  users need advice and/or up-to-date information on developments regarding the UK's position  in the system so as to design or adapt their patenting strategies for the change, and  in particular for European patents to be granted within the period between the launch date and  28 March  2019  (the end  of the 2-year  withdrawal negotiation).

Assuming the UK will take  part  in the Unitary Patent system from the launch date but will not remain in the system after leaving  the EU,1  it will not be  a straightforward decision for some IP owners as to what validation  plan  should be  taken  for their European patents granted within this period of time. If an applicant wants  to cover  the UK by a European patent granted within this period of time, the Applicant could  either  validate the European patent in the UK or elect  unitary effect  to cover  the UK. As matters stand, Applicants cannot validate in the UK in addition to electing for unitary effect.2 If the Applicant goes for the former option  (UK validation),  his/her  right in the UK will not be  affected when  the 2-year  period runs out (when  the UK leaves the EU and  the UP system). With this option,  of course, the patent will not enjoy the unitary effect.  If the latter (unitary) option  is taken, when  the UK leaves the EU, the unitary effect  may no longer  apply  to the UK, but, it that is the case, it is fully expected that transitional arrangements  will be put in place to continue the Applicant’s right in the UK (by automatic conversion of the UK coverage of the unitary patents to UK national  rights). It is expected that nothing  further will be  required when  that time comes, but that IP owners will have to be  aware of the need to separately renew  the UK rights.

For patent applications recently filed or yet to be  filed at the EPO, this is less  likely to be  a problem because they will probably not proceed to grant  until after 28 March  2019.

For inventions where  UK protection is important and pan-EU  protection is not crucial,  Brexit is yet another reason for Applicants to consider national  routes rather  than  the EPO route.


UK based European patent attorneys will still be  able  to prosecute patent applications at the EPO after the UK leaves the EU. This message seems to be  understood around the world.

As matters stand, UK-based European patent attorneys will be  able  to represent clients  in post-grant proceedings relating  to unitary patents, e.g., central revocation and  infringement proceedings. Moreover,  once registered on the List of representatives before the UPC, a UK based EPA will remain  on that List so long as the attorney continues to be  registered at the EPO.

Of course, every  coin has  two sides. For businesses where  UK patent protection is crucial,  many  Chinese applicants already choose to go along  the UK national  route  alone  or in addition to the EPO route.  Such  Chinese clients  continue to prefer  to engage UK patent attorneys at the time of filing

Trade Marks and Designs

Much has  been said  regarding the importance of reviewing  all licences/settlements/delimitation/co-existence agreements relating  to portfolios of existing  EU trade mark and  design registrations and  taking  necessary actions now to mitigate undesirable effects caused by change in geographical coverage of those registrations when  the UK leaves the EU. These are  issues that are  sensitive to European and  US holders of IP rights  in Europe, but are  not high in the consciousness of many  Chinese IP owners.

1   Whether  or not the UK remains in the Unified Patent Court jurisdiction.  Continuing in the unitary patent system would require a separate agreement between the UK and  the EU.

2   Patents (European Patent with Unitary Effect and  Unified Patent Court) Order  2016  Section 2, amending Patents Act Section 77(1):  “Subsection (1) does not apply  and  is to be  treated as never  having  applied in respect of a European patent (UK) whose unitary effect  is registered by the European Patent Office in the Register for unitary patent protection”.

3  Patents (European Patent with Unitary Effect and  Unified Patent Court) Order  2016  Section 2, amending Patents Act Section 77(1):  “Subsection (1) does not apply  and  is to be  treated as never  having  applied in respect of a European patent (UK) whose unitary effect  is registered by the European Patent Office in the Register for unitary patent protection”.

Tuesday, May 16, 2017