The low down
Brexit brought uncertainty and extra cost for the clients of intellectual property lawyers. A sharp rise in instructions predictably followed. Double filing of patents and the need to litigate in two jurisdictions have delivered quite a payday. However, a surge in activity is not wholly attributable to the UK’s departure from the EU. The United Nations considers the UK to be the world’s fourth-most innovative country, while the inventiveness required to respond to the pandemic has generated its own boom in registrations and the protection they require.
The seismic and conjoined repercussions of Brexit and the pandemic have been uneven across industries and countries. But for the UK’s booming intellectual property sector, for every cloud there has certainly been a silver lining.
According to the World Intellectual Property Organization’s Global Innovation Index 2021, governments and businesses in many parts of the world invested more in innovation during the pandemic. The UK was the fourth most innovative economy (among 132 economies ranked) after Switzerland, Sweden and the US.
Despite the decline in global output, international patent filings reached ‘an all-time high’ last year, with a 3.5% increase driven by medical technology, pharmaceuticals and biotechnology, according to the UN agency. Top global corporate R&D spenders such as Apple, Microsoft and many of the large pharmaceutical companies increased overall R&D investment by around 10%. Venture capital deals, meanwhile, grew by 5.8%, ‘exceeding the average growth rate for the past 10 years’. This continued into 2021.
‘Everyone was very fearful about Brexit and Covid-19 damaging business. In fact, the opposite has happened,’ says John Linneker, co-leader of Fieldfisher’s IP group, one of the City’s largest with nine partners and 40 lawyers. The firm had its ‘best [financial] year ever’ ending 30 April, and that includes ‘a significant percentage increase in turnover and profitability for the IP group’, Linneker tells the Gazette.
‘The UK remains an important market for brands and therefore an important jurisdiction for enforcement against infringers and counterfeiters’
Joel Smith, Hogan Lovells
London-based Gary Moss, head of litigation at patent firm EIP, says: ‘When we first went into lockdown we were pretty cautious about the year to come and expected to see a downturn in work but that didn’t materialise. I don’t think we are in any way exceptional in that.’
IP is a litigious area of law. Moss, who acted for Conversant and Unwired Planet in last year’s successful Supreme Court challenge against Chinese telecoms group Huawei, argues that English courts and judges played no small part in this, by being ‘swift’ and ‘flexible’ in adapting to new ways of working remotely.
So how have IP practices in England and Wales been affected? The Brexit Trade and Cooperation Agreement (TCA) came into effect on 1 January 2021, marking the end of the transition period. Under the terms of the Withdrawal Agreement (WA) existing EU-wide IP rights such as registered EU trade marks and design rights were automatically cloned into equivalent UK IP rights. This resulted in the creation of over two million ‘comparable trade marks’ and ‘re-registered designs’ by the government’s Intellectual Property Office (IPO).
However, this process did not apply to pending applications and new filings, meaning dual-filing in the UK and the EU for IP rights-holders seeking protection in both territories.
The upshot has been a significant increase in business, particularly in trade marks, as well as work on the ‘exhaustion of IP rights’ which underpins the system of parallel trade (the import and export of IP-protected goods), according to Linneker.
IP rights are considered ‘exhausted’ where the goods are put on the market by, or with the consent of, the rights-holder. Since 1 January this year, IP rights – whether trade marks, patents, designs or copyrights – in goods first placed on the market in the European Economic Area (EEA) are considered ‘exhausted’ in the UK, but this is not reciprocal. In practice, this means that parallel importers need to review whether they will need the EEA-based IP rights-holder’s permission to export goods to the EEA to avoid legal action against infringement. In the summer, the IPO conducted an open consultation on how the principle of exhaustion should work for the UK, and it is analysing feedback.
Another big change since January is the need for an ‘address for service’ in the UK, Gibraltar or Channel Islands when filing new trade mark, design and patent applications at the IPO or launching proceedings under IP legislation.
Sahira Khwaja, IPMT partner at Hogan Lovells, says that this was not the case before. Although the new requirement predominantly affected new applications, contentious actions and ‘comparable’ UK rights created from international trade mark registrations protected in the EU under the Madrid Protocol, ‘it nevertheless prompted people to update relevant records’, even though under the terms of the WA they did not need to do so until 1 January 2024.
The UK address for service can also be that of an ‘attorney or representative’. As Khwaja points out, the change ‘has also meant an increase in other related work, as proprietors have decided to use local counsel rather than, as some had previously done, their EU counsel for this work’.
There have been ‘positive’ knock-on effects on the contentious side, too. For instance, an EU trade mark court’s pan-EU injunction no longer covers the UK, nor can it be obtained in this jurisdiction – and vice versa, meaning that rights-holders have to bring dual proceedings to prevent infringement in the UK and in any EU country.
Grand designs: European patent convention
UK-based practitioners may have dodged the Brexit bullet – for now. The UK is a founder member of the European Patent Convention (EPC), an international treaty dating back to 1973 that has 38 contracting states. The European Patent Office (EPO) grants European patents that successful applicants can validate in EPC states they designate, in the form of a ‘bundle’ of national patent rights.
Huw Evans, head of patent litigation at Gowling WLG, says: ‘Most innovators use the EPC to secure patent protection across Europe, very often using UK IP professional services as a gateway into Europe.’ The US is the top country of origin for filings at the EPO: 25% of applications are filed by US applicants, and around 55% of UK patent attorney filings at the EPO originate from inventors based in the US, he points out.
But this ecosystem could be under threat as the UK strikes new free trade agreements with global partners. In June, the UK government began negotiations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which counts 11 countries around the Pacific Rim, including Australia, Canada and Japan, as members.
Says Evans: ‘Very often trade deals will touch upon IP rights. So what we hear from clients is that it’s important that existing agreements such as the EPC are not undermined [and that the UK does not find itself] at odds with the EPC [as] an unintended consequence of entering into a trade agreement.’ A case in point is the ‘grace period’ – a limited time in which inventors can still file for a patent after disclosing the invention. In countries such as the US, Canada and Australia, the grace period is 12 months, as with the CPTPP. But it is only six months and only in limited circumstances in the EPC.
In its written evidence to the House of Lords International Agreements Committee’s inquiry into the CPTPP in June this year, the IP Federation said: ‘UK IP professionals are used by foreign companies across the globe, most notably the US, to file and prosecute a high proportion of all patent applications at the EPO, generating fees of over £970m a year, and exports of £740m.
‘If the UK were not a member of the EPC, much of this work would go to IP professionals in other European countries. It is critical that the UK negotiates carve-outs for provisions of the CPTPP relating to patent grace period and patent term adjustment.’
In its report, published on 17 November, the committee concluded that ‘the rules of the CPTTP agreement directly conflict with the [EPC], which raises the prospect of significant economic damage to the UK’s patent industry.’
‘The UK remains an important market for brands and therefore an important jurisdiction for enforcement against infringers and counterfeiters,’ says Joel Smith, Hogan Lovells’ IPMT partner. ‘The fact that the courts of member states can no longer grant a pan-EU injunction which covers the UK means that brands need to enforce in the UK independently. This has led to a serious uptick in trade mark litigation this year, after a year of restrictions through the pandemic.’
It is also anticipated that UK and EU IP jurisprudence will begin to diverge, bringing extra work for practitioners on these shores.
The legislation and the case law of the EU are a source of much of the UK’s intellectual property laws – for example, copyrights, database rights and EU trade marks. Existing EU law as it stood at 31 December 2020 is treated as ‘retained’ law which still applies in the UK, and the law of the Court of Justice of the European Union (CJEU) continues to bind courts, unless an appellate court decides to depart from it, explains Smith.
‘Interestingly, in the first real test in the IP sphere this year in Warner Music v TuneIn [March 2021], the Court of Appeal declined an invitation to depart from the long line of case law from the CJEU on the meaning of “communication to the public” in the context of establishing copyright infringement,’ says Smith. ‘In fact, the Court of Appeal applied the existing CJEU case law and even took into account as highly persuasive a new CJEU decision (VG Bild-Kunst) decided after Brexit. This has shown that the UK courts are likely, for now, to be closely aligned to the EU approach in IP, absent the UK parliament taking deliberate steps to legislate for change.’
One case to watch for a possible shift in this approach is the longrunning trade mark infringement dispute between Sky and SkyKick on the issue of ‘broad trade mark specifications’. Considered one of the most important IP cases in recent years, it went through the Court of Appeal this year and may go to the UK’s highest court, according to Linneker, who acts for SkyKick. ‘There may a decision of the Supreme Court which can ignore previous jurisprudence of the CJEU,’ he says.
Other types of intellectual property rights that may see divergence are Supplementary Protection Certificates (SPCs). Pinsent Masons partner Charlotte Weekes explains that these extend a patent right and apply to medicines and plant protection products, including the newly implemented SPC Manufacturing Waiver for medicines. Unlike patents, SPCs were previously governed by EU regulations, now ‘retained’ in UK law.
‘The law that has developed around the interpretation of SPC legislation has been piecemeal and complex, leading to multiple referrals to the CJEU over the past 10 years,’ she says. ‘Post-Brexit, however, it is no longer possible for UK courts to make references for guidance on interpretation, and other than pending referrals made prior to the end of that period, UK courts will not be required to follow CJEU judgments.’
‘Brexit has had very little direct impact on obtaining and litigating patents in the UK’
Chris Sharp, Pinsent Masons
Since Brexit, UK courts have yet to issue a decision on a dispute relating to SPCs. However, the UK’s withdrawal from the EU may result in positive changes for clients here in the UK, she contends. ‘It is possible that the law applying to SPCs may become clearer in the UK than elsewhere, with its ability to independently develop and change the legislation where appropriate, and to reach a resolution quicker, thereby providing our clients with earlier legal certainty in this jurisdiction,’ according to Weekes.
Not all areas of IP practice have been equally affected by EU withdrawal. ‘Brexit has had very little direct impact on obtaining and litigating patents in the UK, and therefore on our litigation practice,’ says Pinsent Masons partner Chris Sharp. That is because the country is still a member state of the European Patent Convention, a non-EU treaty, and domestic legislation such as the Patents Act 1977 continues to apply.
Yet there is uncertainty over how long this will last. Sharp describes the UK’s formal decision to withdraw from the Unitary Patent (UP) and the Unified Patent Court (UPC) in July 2020 as ‘the most significant development post-Brexit’. The government said that ‘participating in a court that applies EU law and is bound by the CJEU is inconsistent with [our] aims of becoming an independent self-governing nation’.
The UPC is one single court, set up by 25 participating EU member states, to address UP and European patent infringement and validity in one place, with the aim of removing the need for parallel litigation in different jurisdictions and promoting legal certainty, he explains.
In practice, the UK’s withdrawal from the new judicial system meant that the central division of the UPC with responsibility for life sciences cases, which was due to sit in London, will have to be moved, possibly to Milan. Moreover, UK-qualified lawyers and judges may not appear in the UPC, according to Sharp, who adds: ‘Despite the UK’s withdrawal, the UPC is forging ahead and we anticipate that it will become a reality sometime in 2022. This may represent the most significant shift in patent litigation that we have seen, and will see, in our practice.’
The system is not without its risks. A decision in one court within the UPC will apply EU-wide, and each may have different approaches, mirroring the US federal court system. ‘From the point of view of defendants, say, you are a big company and somebody has got a patent and they want to harass you, the prospect of being injuncted for the whole of the EU is potentially damaging. And as somebody once put it, are you going to find one jurisdiction becoming the Eastern District of Texas?’ The federal district court was until recently considered a friendly forum for ‘plaintiffs’, including so-called ‘patent trolls’.
Whether these risks are a factor or not, many clients with European patents will ‘opt out’ of the unitary patent system, and litigation in the UK’s ‘critical market’ will continue, forecasts Sarah Taylor, senior practice development lawyer in Pinsent Masons’ IP group. Despite this, for the firm’s pan-European litigation team (spread out across six countries) UPC presents ‘many opportunities, particularly for our smaller clients who may benefit from litigating in one court, rather than several’.
Tim Powell, partner at London’s boutique IP firm Powell Gilbert and a specialist in multi-jurisdictional patents litigation, says: ‘It is too early to say whether this new court will impact on our practice but we are watching developments closely. It will be important to remain involved as undoubtedly this will be an additional component of any pan-European strategy.’
Caitlin Heard, partner at CMS, warns: ‘The UK’s withdrawal from the UPC agreement could greatly affect patent litigation in the UK in the future, particularly in the FRAND [fair reasonable and non-discriminatory] and SEP [standard essential patents licensing and patent] dispute space. It will offer patentees the ability to obtain a pan-EU injunction and pan-EU damages in one hit. Can the UK courts compete? To do so we need to ensure we can offer a quick, reliable and cost-effective method of dispute resolution.’
Ruling against China’s Huawei in the Unwired Planet appeal, the Supreme Court determined that English courts had jurisdiction to settle FRAND terms of a patent licence which covered foreign patents even in the absence of the parties’ consent. Andrew Bowler, partner and joint head of litigation at Bristows in London, was involved in the case, acting for ZTE in a joined action (Conversant v Huawei and ZTE) that was heard alongside the Unwired Planet v Huawei appeal. ‘Since that case, the volume of SEP/FRAND litigation in England has increased hugely, with it now being a significant proportion of the Patents Court list,’ he says.
SEPs are patents to technology incorporated in a technical standard, and which therefore have to be used in order to comply with the standard – for example, in a 4G-compatible phone.
Bowler notes that many FRAND licensing disputes between multinational entities are now litigated in England as a result of the jurisdictional competence and willingness of English courts to set FRAND licensing terms for a global patent portfolio, and as a result of the courts’ willingness to get into the detail of what is FRAND in a particular set of circumstances. ‘While an implementer cannot be forced to enter into the court-determined FRAND licence, if it is found to infringe one of the SEP holder’s UK SEPs, the implementer can be injuncted in this jurisdiction if it does not commit to take the licence.’ The revenues at stake under a global licence can be ‘substantial’, given the size of some of the parties using standardised technology such as manufacturers of 4G mobile phones.
Often counter-strikes are brought in a second country such as France, China, the US or Germany. ‘This means that we have developed a lot of experience since Unwired Planet in jurisdictional and anti-suit disputes,’ says Bowler. Since the Unwired Planet decision, most of the associates and partners in the firm’s technology patent and competition teams have engaged in FRAND litigation or advisory work. ‘This seems likely to continue with licensing disputes involving 5G and IoT [the Internet of things] in the future,’ he says.
‘There is quite a lot of this work knocking around at the moment,’ says Moss, referring to FRAND/SEP disputes, including anti-suit injunctions in the Chinese courts. Major litigation includes Optis v Apple and IP Bridge v Huawei (two cases Moss is working on) as well as Nokia v Oppo, InterDigital v Lenovo and Philips v Asus.
‘The Supreme Court’s decision in Unwired Planet has helped pave the way towards the UK being the jurisdiction of choice for SEP disputes,’ says Heard. ‘It was transformative in so far as it allowed for determination of a multi-jurisdictional dispute in a single jurisdiction. But to reach that ultimate resolution is reasonably slow and expensive.’
Bird & Bird partner Richard Vary says: ‘The next challenge for the English courts will be to make that process proportionate not just for the high-value cases, but also for the medium-sized and smaller cases. Sales of cars, for example, are orders of magnitude lower than sales of smartphones, so we need to find a process that will [assist the] resolution of FRAND disputes in automotive cases. Other IoT industries will stretch the court’s ability to deal proportionately with smaller cases still further.’ (The UK IPO has issued a ‘call for views’ on SEPs. Submissions will be accepted until 1 March 2022.)
What about Covid-19? It has been a period of technological and scientific innovation with positive knock-on effects on IP practices. Powell echoes the experience of many other IP practices when he says that ‘against all expectations we had the busiest year in the history of Powell Gilbert’.
As Hogan Lovells’ Smith notes, the pandemic ‘has brought new areas of opportunity’. These range from advising on collaborations for vaccine research and development to the rapid launch of online platforms and new e-products and services, especially around entertainment/gaming.
‘We have seen a huge amount of well publicised technological advancements as a positive response to the pandemic,’ confirms Huw Evans, head of patent litigation at Gowling. These in turn need IP protection. Hence the firm’s IP lawyers have been kept busy with advice, for example, to manufacturers of ventilators for the NHS; to BioNTech on IP matters relating to the Pfizer/BioNTech Covid-19 vaccine; and to AstraZeneca on its collaboration agreement to develop and distribute the University of Oxford’s recombinant adenovirus vaccine (known as AZD1222).
Bristows’ commercial IP group advised Oxford University on the agreement with AstraZeneca.
‘The UK’s withdrawal from the UPC agreement could greatly affect patent litigation in the UK. Can the UK courts compete? To do so we need to ensure we can offer a quick, reliable and cost-effective method of dispute resolution’
Caitlin Heard, CMS
It has also been a busy time on the contentious side of IP. Smith says ‘there has been a surge in cases involving misappropriation of trade secrets’; due to home-working, there has been ‘less physical scrutiny’ of what data employees access. ‘This has been exacerbated by the very fluid jobs market, with many employees moving to new roles, potentially with competitors, or deciding to set up their own businesses,’ he says.
As we know, Covid-19 has also resulted in ‘rapid advances in the way disputes are handled by the courts from filing most documents electronically to the hearing of trials or applications virtually’, Smith adds, meaning ‘efficiencies and cost savings’ and greater participation from overseas clients.
‘The Patents Court was remarkably adaptable at moving to remote or hybrid hearings and so litigation was not disrupted,’ says Powell.
Sharp also praises the Intellectual Property Enterprise Court and the Court of Appeal for showing ‘great flexibility in adapting to the restrictions enforced by the pandemic, and several trials have been run, successfully, entirely remotely. This is in contrast to some European jurisdictions where courts were forced to close at various stages of the pandemic’.
Finally, changes to the patent judiciary over the past 18 months, with the appointment of IP specialists Meade J and Mellor J, and the elevation of Birss LJ to the Court of Appeal, provide ‘strength for patent cases at every level of the judiciary’, observes Weekes – with Kitchin LJ serving on the Supreme Court since 2018.
Marialuisa Taddia is a freelance journalist