Sunday, 10 July 2016

IP and Brexit: the Fashion Industry

Jane Lambert


Our IP system, which is ranked by TaylorWessing as one of the best in the world (see The Global Intellectual Property Index) consists of some rights that subsist under national law and others that subsist under EU law. When we eventually leave the EU, those rights that subsist under EU law such as the EU trade mark and the Community design will fall away. I discussed those consequences generally in What Sort of IP Framework do we need after Brexit and what are we likely to get? 3 July 2016. In this article I consider how those changes will affect the British fashion industry which relies on EU trade marks and Community designs more than most. I have chosen this industry because I have conducted seminars on IP and fashion in London and Leeds (see IP and Fashion Law 12 Sept 2015 London IP and Tech, IP and Fashion Seminar - 7 Oct 2015 20 Sept 2015 and Second Course on IP and the Fashion Industry 27 May 2016),

Importance of the British Fashion Industry
Fashion is enormously important to the British economy. According to Fashion International the fashion industry employs 550,000 persons and has a domestic market value of £66 billion which is 6% of the market. About 75% of those jobs are in retailing  the top 5 British fashion businesses being retailers.Nevertheless, 34,000 are employed in clothing manufacturing with a further 5,000 in making footwear. There are a few men's and women's wear, accessories and jewellery manufacturers at the top end of the market that are household names, some of which are British such as Burberry and Church’s, but most items for everyday use are imported mainly from Asia and sold under retailers’ labels. British exports of textiles and clothing amounted to £6.9 billion in 2014 while imports amounted to £24.3 billion 

IP and the Fashion IndustryBranding and design are particularly important to the industry though there are inventions in the textile, garment and footwear manufacturing sectors from time to time such as new fibres and additive manufacturing equipment.

Branding
Investment in branding is protected by trade mark registration and the law of passing off. Trade marks may be registered for the UK alone under the Trade Marks Act 1994 or for the whole EU including the UK under the EU Trade Mark Regulation (Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark), Passing off is a common law or judge made doctrine that evolved long before the UK joined the EU. It may be summarized as nobody may lead consumers to believe that his or her goods, services or business as those of another trader.

Design

Design is rather more complicated than branding because design has two meanings in law as it does in everyday speech. One definition provided by art 1 (a) of the Designs Directive (Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs OJ L 289, 28/10/1998 P. 28 - 35 is 
“the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture and/or materials of the product itself and/or its ornamentation.” 
Another is “the shape or configuration (whether internal or external) of the whole or part of an article” (see s.213 (2) of the Copyright, Designs and Patents Act 1988 ("the CDPA"),

Designs that fall in the first definition that are new and have individual character may be registered for the UK alone under the Registered Designs Act 1949 as "registered designs" or for the whole EU including the UK as "registered Community designs" under the Community Design Regulation (Council Regulation  (EC) No 6/2002 of 12 December 2001 on Community designs(OJ EC No L 3 of 5.1.2002, p. 1)). Designs that could be registered as registered or registered Community designs are protected automatically against copying throughout the EU by the Community Design Regulation as "unregistered Community designs."   

Designs falling in the second definition are protected against copying in the UK by unregistered design right under Part III of the CDPA. 

Design right does not protect surface decoration but fabric designs and other surface decoration may also be protected from copying by copyright. Sometimes a fashion item such as an accessory, piece of jewellery or perhaps even a garment may be protected by copyright as a work of artistic craftsmanship. 

Manufacturing
There are a number of ways of protecting investment in research and development. New inventions may, of course, be patented under the Patents Act 1977 or the European Patent Convention or they may be kept under wraps as trade secrets in the hope that nobody discovers them by parallel research or reverse engineering. 

There is as yet no such thing as an EU patent but there is an agreement for a single patent for the territories of most of the EU member states including the UK to be known as "the unitary patent" and for a single court to determine disputes over such patents to be known as "the Unified Patent Court". That agreement, known as the UPC Agreement, is open only to member states of the EU.

The trade secrecy of the laws of the EU member states are shortly to be harmonized a directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure ("the Trade Secrets Directive"),

Effect of Brexit
Art 50 (3) of the Treaty on European Union provides:
“The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”
It follows that all regulations will fall away and that HM government shall no longer be required to implement directives. Statutes and statutory instruments that have been passed to give effect to directives will continue to apply unless and until they are amended or repealed because they were made by or under the authority of Parliament. There is, of course, nothing to stop Parliament from preserving within the UK a right that had been created by a regulation such as a right in an unregistered Community design that was created by the Community Design Directive.

Consequences for Branding
The main change will be that EU trade marks will cease to apply to the UK. Unless HM Government agrees to legislate to grant corresponding British marks to EU trade mark proprietors, those who wish to do business in this country should apply for trade marks in the UK unless they already hold UK registrations that cover their goods or services,.

Proprietors of British marks seeking EU registrations will cease to be entitled to seniority from their British registrations. Similarly, such proprietors will no longer be entitled to rely on their British registrations or earlier rights in the UK to oppose applications by others for EU trade marks. Nor can they rely on sales or other use in the UK to resist revocation applications.

Proprietors of EU trade marks will be unable to seek redress for infringement of their marks from courts in the UK after Brexit as those courts will no longer be EU trade mark courts. Sales in the UK after Brexit shall not count for the purpose of the exhaustion of rights doctrine.

Trade mark licensing, distribution and franchising agreements will have to be reviewed and where necessary amendments should be negotiated.

Consequences for Design
The biggest change upon Brexit will be the disappearance of unregistered Community designs. That is a useful tool for fashion designers and manufacturers as the right arises automatically, extends throughout the EU and can be enforced in the small claims track. HM government may well be pressed by the fashion, toy, novelties, consumer electronics and other industries to create a similar IP right in the UK.

Registered Community designs will cease to apply to the UK after Brexit. Again, the government will be pressed to preserve existing registered Community design protection in the UK in some way either by converting them into registered designs backdating the date of filing to the date of application in Alicante or by some other transitional measure.

After Brexit those seeking registered design protection in the UK in respect of new designs will have to apply to the IPO under the provisions of the Registered Designs Act 1949.

Courts in the UK will cease to entertain actions for the infringement of registered Community designs as they will no longer be Community design courts.

As with trade marks, all licensing, distributions and franchising agreements will have to be reviewed and amended where necessary.

Consequences for ManufacturingIt is possible but by no means certain that the UK will still be in the EU when the UPC agreement comes into effect and the Trade Secrets Directive has to be implemented but, even if it is, the effect of those instruments on manufacturing is likely to be minimal.

Costs ConsequencesThe need for registration of trade marks and designs in both the UK and EU plus the costs of reviewing, renegotiating and redrafting agreements and the possibility of conducting litigation in respect of the same or related matters in more than one jurisdiction are bound to increase the industry’s legal costs significantly. That will be offset to a limited extent by savings of time and money in not having to refer points of EU law to Luxembourg for preliminary rulings under art 267 of the Treaty on the Functioning of the European Union.

Seminar on Brexit
I shall discuss this topic as well as other IP issues arising out of Brexit at a seminar in Liverpool to be organized by Guy Williams Layton on 14 Sept 2016. This seminar is likely to be very popular and places will go very quickly. If you want to attend call me during office hours on 020 7404 5252 or send me a message through my contact form