The implications of Brexit for franchisors with trademark registrations

Franchisors who are also the owners of registered EU trade marks (EUTMs, formerly known as CTMs) should be considering the likely implications of Brexit on their registered rights. It is important to note that there are no changes to EUTMs yet (and in all likelihood there will not be during the period of time it takes for the UK to negotiate its exit from the EU). However, current Court of Justice case law suggests that once the UK has left the EU it can no longer continue to participate in the EUTM system – so what will happen?

EUTMs will continue in force in respect of the other Member States but will not cover the UK. The current expectation is that the UK will put in place regulations allowing owners of existing EUTMs to obtain UK registered trade marks with equivalent priority dates. However, there are currently over a million registered EUTMs, so this will be a significant process. The mechanism for achieving this is currently under discussion, with various options being considered. The main issues are as follows:

• Whether there should be an opt-in requirement for trade mark owners or, alternatively, whether a corresponding UK registration should automatically ‘split off’ from EUTMs and be brought onto the UKIPO register;
• Whether fees should be payable; and
• Whether the UKIPO should re-examine the prospective UK registration or simply ‘rubber stamp’ it. One of the difficulties here is that there may be marks which were originally refused in the UK but were subsequently accepted as EUTMs. Owners of such marks will want to avoid a re-examination of the merits of the registration.

With this uncertainty around what the process will be careful thought needs to be given to how the UK can minimise the complexity and the potential burden on trade mark owners.

In the long term, the downsides for trade mark owners are that there are likely to be increased costs as well as an inability to obtain remedies, including injunctions, covering more than one European country in the UK courts. Post-Brexit, a prior UK registration may not prevent competitors registering conflicting EUTMs. Further, if a trade mark owner previously decided to let a UK registration lapse and to rely on its corresponding EUTM rights it may find that it can no longer claim seniority from its original UK registration.

A potential advantage of Brexit for trade mark owners looming on the horizon is that final trade mark judgments will be made by the UK courts, without the involvement of the CJEU. This is likely to result in speedier decisions. However, in the shorter term there may be uncertainty as to the law that the UK courts will apply because it is expected that they will no longer need to apply EU law and precedents post Brexit. EU law is likely to be persuasive but not conclusive.

As with many Brexit related issues it would be sensible for franchisors to be aware of the potential issues that may arise within their IP portfolios and keep a close watching brief on the proposed solutions put forward by the UK government.

Article first published on the British Franchise Association website, April 2017