Category Archives: Intellectual Property

Lee v. Tam and the Registrability of Disparaging Marks

Can a band register their name, “The Slants,” as a mark? Is that name disparaging to Asian-Americans and so barred from registration under the Lanham Act, 15 USC 1052(a)? Can the football team that plays in Washington maintain its registrations for its “Redskins” marks?

During the oral argument at the U.S. Supreme Court on January 18, 2017, the “Redskins” marks were not directly in issue, but there is no doubt that what the Court decides in Lee v. Tam will decide the validity of the “Redskins” registrations, as well as the registrability of “The Slants”.

The oral argument addressed all the key points that have been debated since the Trademark Office first addressed the merits of the “Redskins” and “Slants” cases.

On the one point of most concern to the trademark bar – the overuse of marks potentially considered to be disparaging, the Justices seemed clear that the denial of registration would not preclude enforcement of rights in registered (and potentially unregistered) disparaging marks.

The central question before the Court is whether denying registration implicates the First Amendment if the denial does not burden, restrict or prohibit the use of the subject marks, although the denial precludes reliance on the benefits of registration, which are substantive as well as procedural, and include incontestability barring certain defenses, recordation with Customs to stop infringing imports, statutory damages against counterfeits.

What is notable are the number and variety of the amicus briefs filed. In support of Tam, amicus briefs were filed by: law professors and lecturers such as Floyd Abrams (Yale and Columbia), Eric Freedman (Hofstra), Nadine Strossen (New York Law), and William Van Alstyne (William and Mary); Pacific Legal Foundation; American Center for Law and Justice; Chamber of Commerce. There were amicus briefs filed on behalf of neither party by the American Bar Association and Public Knowledge, and on behalf of a number of members of Congress. And amicus briefs filed on behalf of the petitioner included: the Hispanic National Bar Association, National Asian Pacific American Bar Association, National LGBT Bar Association, National Native American Bar Association and a number of law professors.

The oral argument provided no clear answer as to what the ruling will be. Numerous analogies to copyright law were drawn by Justices Kennedy, Alito and Ginsburg. Numerous questions were posed about the purpose and function of trademarks by Justices Roberts, Stewart and Breyer. The most torturous component of the argument revolved around the distinction that might be drawn between the commercial and the expressive components of a trademark, with John Connell on behalf of Tam submitting that the trademark serves both functions, with the non-commercial component of his client’s mark communicating Asian pride.  Tam himself has been quoted as saying: “We’re fighting for more than a band name; we’re fighting for the right of self-determination for all minorities.”

It is interesting that in such a submission, neither “The Slants” nor the “Redskins” cases offer competent survey evidence to address whether or not the population alleged to be disparaged by the mark in question finds the mark in fact to be disparaging. Justice Stewart noted that the director of the USPTO was relying on internet commentary to support the finding of disparagement. The question is whether such important determinations should be based on such flimsy evidence. And this same concern applies equally to the prohibition on registration of scandalous and immoral marks, a separate provision of 15 USC 1052(a), which was remarked on more than once by Justice Ginsburg. The USPTO has taken the position that if there is a dictionary that identifies the term as “vulgar” (a word that does not appear in the statute), that term is precluded from registration. If the bar to registration of disparaging marks falls, there can be little doubt that the bar to registration of “immoral” marks also falls.

And then the question must also be raised that if disparagement is not a bar to registration, can it be a basis for precluding the use of a mark, such as when a mark is alleged to cause a likelihood of dilution by tarnishment?  How the Lee v. Tam matter is decided, and the breadth of the language employed, will clearly have an impact on more than the question of registration of “The Slants” and ‘Redskins” marks. It should also resolve the uncertainty over the impact of a finding of incapability of registration on the ability to enforce trademark rights under the provision protecting unregistered marks and names from infringement, 15 USC 1125(a).

R-E-L-A-X: We Can Still Patent Software, But Don’t Expect A Clear Test Anytime Soon

More than two thirds of all patents challenged under 35 U.S.C. §101 have been invalidated since Alice Corp v. CLS Bank was decided in 2014.[1] Is this recent trend signaling the beginning of the end of the software patent? Should software even be patentable? Will a clear test help? While both the majority and dissenting opinion in Intellectual Ventures I LLC v. Symantec Corp. agree that software is patentable, in a bizarre twist, the concurring opinion has declared that software patents are finished. Clearly some judges on the Federal Circuit have run out of patience with the multitude of software patents that were drafted prior to the Mayo/Alice cases being decided. Nonetheless, don’t expect a clear test for patent eligibility under §101 anytime soon. This article reviews the majority and dissenting opinions in Intellectual Ventures, contrasts the concurring opinion, and explains why we believe a clear test for patenting software is not needed and in fact, would set back the patent system for years.

Intellectual Ventures I LLC v. Symantec Corp.

Intellectual Ventures sued Symantec for infringement of three patents. Ultimately, all three were found to be directed toward different abstract ideas:

1) Receiving mail and discarding it based on the characteristics of the mail

2) Screening messages

3) Virus scanning

The Federal Circuit went through both steps in the Alice framework and ruled that all three patents were invalid under §101 (affirming the District Court on two and overruling the Court on the remaining patent).

The Federal Circuit made two things clear. First, the inventive concept required to transform an abstract idea into a patent eligible concept must be in the claims. This concept was spelled out by the majority directly addressing the dissenting opinion. The dissent had argued that one claim in one patent was patentable because that claim improved the functioning of the computer and addressed problems specific to the internet. However, the majority stated that, while it was true the patent disclosed an improvement in the functioning of a computer, the improvements at issue were absent from the claims. Therefore, the Federal Circuit held the claim invalid.

Second, the majority makes clear that software is still patent eligible. The majority restated precedent noting that to be patent eligible, software must improve the functioning of the computer or solve problems specific to the technological environment. The majority even gave an example of how the virus screening claim at issue might have been patent eligible.[2] The fact that the majority stated what they are looking for when determining software patent eligibility and provided a concrete example of how such a claim might have been patentable, makes clear that software is still patent eligible.

Judge Mayer’s Concurring Opinion

Initially, Intellectual Ventures I LLC v. Symantec Corp. seemed like another run-of-the-mill software patent case. Company A sues Company B for infringement of software patents.  Company B argues that the asserted patents are invalid under §101. The Federal Circuit agrees and the software patents are ruled invalid. Case over, right? Not so fast. Judge Mayer, in a concurring opinion, has decided he’s had enough of software patents in general. His frustration likely built up after more than two years of purging the system of software patents that never should have been issued. Since Alice in 2014, software patents have been invalidated at the Federal Circuit level under §101 at an alarming rate of roughly 95 percent.[3]

Judge Mayer’s central point, on its face, is difficult to dispute. If an idea (software) is not patentable and only embodiments of the idea are patentable, and the generic computer the software is running on is not patentable, then all ideas running on the generic computer should not be patentable. However, guidance from the Courts, like the majority opinion, has said software must improve the functioning of the computer or solve problems specific to the technological environment in order to be patent eligible. It’s undisputable that patents directed at conventional ideas cannot be patented by simply tying those claims to a generic computer. What we believe Judge Mayer is missing is that not all software patents are generic ideas on generic computers. In reality, a lot of software patents are behind the improvements of the electronic devices we use today. Software has a place in patent law; unfortunately, it has taken patent law several years to catch up and find that place.

Judge Mayer’s reasoning has two main points:

1) Software patents “run afoul” of the First Amendment

2) Software patents on a generic computer are not eligible for patent protection

Judge Mayer’s first point regards preemption, a main concern in the post-Alice world. However, instead of worrying about how a patent claim might preempt a field of invention, Judge Mayer expresses concern about preempting the First Amendment by “exacting heavy taxes on widely-used conduits for online expression.”[4] This concern, while somewhat valid, is actually resolved by the Alice framework, which specifically addresses the potential for preemption. If, for example, an idea preempts “widely-used conduits for online expression,” it would be ineligible for patent protection under §101. Thus, Judge Mayer’s slippery slope argument involving preemption is not a valid reason to make software ineligible for patent protection.

Judge Mayer’s second point, the more sweeping concept of preventing patents from being issued on software, is broken into four sub-points:

1) The scope of software patents outweighs their technical disclosure

2) Software patents provide incentives at the wrong time

3) There are too many software patents

4) Software patents lack the definiteness required by patent law

The first sub-point also regards preemption. As noted above, preemption is accounted for under the current Alice framework. However, one sticking point for Judge Mayer is that most software patents do not include the software code behind the invention. The reason for the lack of code in the patent, however, is that the code itself is not patentable. What is patentable is what the code does. Software code itself can be protected using copyright law and has no place in patent law.

The second sub-point, that software patents provide incentives at the wrong time, exists for virtually any invention, not just software. While Judge Mayer correctly points out that a lot of software patents are filed at the “idea stage,” before the invention is finished, the same is true for most inventions. This problem has only gotten worse because of the new First to File rule under the America Invents Act. It’s true that “those who scamper to the PTO early…reap hefty financial dividends.”[5] But, this reward is not a result of software patents; it is a result of the new filing provision of the America Invents Act. Right or wrong, first-to-file is here to stay and all inventors are incentivized to file patent applications as early as possible.

The third sub-point, that there are too many software patents, should have no bearing on whether software is patent-eligible. Clearly, most of the things we use today are operational because of software. In fact, it is very likely that you are reading this article using an electronic device that is operational because of software. It’s no surprise that the most popular area of innovation has a lot of patents. Software’s patent eligibility doesn’t hinge on the popularity of the technology it relates to.

The fourth sub-point, that software patents lack the definiteness required by patent law, is also related to preemption. Judge Mayer states that software is “akin to…literature or a piece of music, undeniably important, but too unbound” to be patent eligible.[6] But Judge Mayer misses the point – software patents don’t patent software, they patent what software does. If software simply does something that can be accomplished without it, the Alice framework will render that ineligible for patenting, thereby preventing the preemption Judge Mayer is concerned about.

A thorough review of Judge Mayer’s analysis, combined with the fact that it was a concurring opinion, shows that the software patent is not dead. The current Alice framework directly addresses most of Judge Mayer’s concerns. Looking at the underlying reasons for Judge Mayer’s arguments suggests he is simply frustrated with the large number of bad software patents he sees on a regular basis.

There Is No Cookie-Cutter Solution

We should not spend much time waiting for a clearer standard on patenting software from the Supreme Court. Many recent cases seeking such guidance have been denied certiorari.[7] This is likely because the patent system has already learned first-hand the consequences of bright line rules. In its 2008 search to find a predictable test, the Federal Circuit declared the Machine or Transformation test as the standard for patent eligibility under §101.[8] While the Machine or Transformation test seemed to be in line with Supreme Court precedent, it had tremendous unintended consequences. The Machine or Transformation test led to numerous patents awarded merely because a conventional abstract idea was performed on conventional computer hardware. Today, many similar patents are regularly invalidated because implementing an abstract idea on a generic computer is not patent eligible. While many suggest that the sheer number of patents being invalidated is a sign of bad things to come, or worse, that software and its effects are not patent eligible, the fact that these patents are being invalidated is actually a good sign. The heightened number of invalidated patents is an indication that a lot of ineligible patents were issued under a system that hand-cuffed both patent examiners and the courts. The patent system is purging itself of patents that slipped through the system under the Machine or Transformation test.

The Supreme Court has long “warn[ed] …. against” interpreting Section 101 “in ways that make patent eligibility depend simply on the draftsman’s art.”[9] Trying to give a definition to the term “abstract idea” or a clear test on patent eligibility under §101 would do just that. Given the Alice framework, it’s clear that software patents will continue to be granted based on how well a patent prosecutor can define the invention so that it is not simply an “abstract idea.” A clear test with bright line rules and definitions would handcuff patent examiners and the courts for years, and once again set back the patent system.

For the purposes of §101, the want of predictability is outweighed by the need of flexibility. Patent law exists to promote the progress of science and useful arts. Scientific progress is unpredictable. An overly rigid legal system will only “impede innovation more than it would tend to promote it.”[10] Moreover, “Section 101’s vital role…is to insure that patent protection promotes, rather than impedes, scientific progress and technological innovation.”[11] The current application of the patent eligibility standard is working; no clear test is needed.

Summary

In trying to address new technology, the Federal Circuit used an inflexible rule to interpret Section 101. Since then, the Supreme Court has made determinations under Section 101 more flexible, which has led to large-scale purging of many patents that should never have been issued. The Supreme Court would not have gone through Bilski, Mayo and Alice, if software were ineligible for patent protection. Instead, the Supreme Court appears to be trying to mold a flexible set of rules that can keep pace with innovation. Another inflexible rule would simply set the patent system back again. The software patent is alive and well. It is merely being held to the same standard as all other areas of technology.

 

[1] Two Years After Alice: A Survey of The Impact of a ‘Minor Case’ (Part 1), Bilski Blog, June 16, 2016, available at: http://www.bilskiblog.com/blog/2016/06/two-years-after-alice-a-survey-of-the-impact-of-a-minor-case.html.
[2] Intellectual Ventures I LLC, v. Symantec Corp, 2015-1769, at 24-25 (Fed. Cir. 2016).
[3] Two Years After Alice: A Survey Of The Impact Of A ‘Minor Case’ (Part 1), Bilski Blog, June 16, 2016, available at: http://www.bilskiblog.com/blog/2016/06/two-years-after-alice-a-survey-of-the-impact-of-a-minor-case.html.
[4] Intellectual Ventures I LLC, v. Symantec Corp, 2015-1770 at 3 (Fed. Cir. 2016) (Mayer, C. J., concurring).
[5] Id. at 10.
[6] Id. at 12.
[7] Ultramercial, LLC et al. v. Wild Tangent, Inc. 772 F. 3d 709 (Fed. Cir. 2014) (cert. denied).
[8] In re Bilski, No. 2007-1130 (Fed. Cir. Oct. 30, 2008).
[9] Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).
[10] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).
[11] I/P Engine, Inc. v. AOL Inc., 2013-1307, at*9 (Mayer, C. J., concurring) (“A robust application of section 101 ensures that the nation’s patent laws remain tethered to their constitutional moorings.”)

Counseling Early Stage Companies: Advance Preparation for the Exit

Representing early stage, high-growth companies often involves supporting a team of entrepreneurs to take a business from an idea, through commercial launch and market penetration, to a successful exit, often through an acquisition by a strategic or financial purchaser.  The speed and intensity of the client’s activity can be tremendous.  Under the pressure of achieving critical product development or revenue milestones – often driven by the client company’s investors – management will sometimes forego certain basic contracting, human resources and capitalisation  management measures.   Unfortunately, these short cuts will surface during the exit transaction, where the acquirer’s due diligence on the target company will spot these shortcomings in order to identify potential risks as well as opportunities to revalue the target company’s assets and business and reduce the purchase price.  The attorney representing the early stage company can streamline the exit transaction and minimise adverse due diligence discoveries by helping the client institute the following four relatively simple disciplines at the company’s outset (or at least at the outset of the counsel’s engagement), well in advance of any merger and acquisition considerations.

  1. Protect and Preserve Company Intellectual Property. For many early stage companies, intellectual property assets can represent the core of the company’s value at exit.  Those assets, of course, are generated by employees and contractors working on behalf of the company.  In the course of the company’s history, employees and independent contractors come and go.  However, sophisticated acquirers will often probe the target company’s files for potential intellectual property “leaks” or gaps – situations where employee or contractor inventions or developments may not clearly belong to the target company.The simple but often neglected solution to this due diligence red flag is drafting and religiously using a standard employment agreement or independent contractor/consultancy agreement with all new employees and service providers. These standard agreements should contain the following basic covenants:I. Confidentiality: Provisions prohibiting an employee or independent contractor from disclosing or otherwise using the company’s confidential information both during the relationship and for multiple years beyond the term of the agreement.ii. Invention Assignment: Provisions indicating that all “inventions, original works of authorship, trade secrets, concepts, ideas, discoveries, developments, improvements, combinations, methods, designs, trademarks, trade names, software, data, mask works, and know-how, whether or not patentable or registrable under copyright, trademark or similar laws” developed during the term of employment or contractor service belong to the company.  This covenant should similarly include an acknowledgement that all copyrightable material is a “work made for hire.”  Note that company counsel should confirm the impact of the applicable state laws on these covenants. For example, the “work made for hire” clause should be excluded from independent contractor/consultancy agreements governed by California law, as California law dictates that individuals subject to this type of covenant in a services agreement may be deemed employees under the California Labour Code .  Avoid the temptation to limit company ownership of employee or contractor developments to only those generated “on company time” or “using company resources.”  This limitation will only act to invite ownership ambiguity – an unnecessary impediment in the acquisition due diligence process.iii. Pre-existing Intellectual Property Disclosure and Licenses: Provisions obligating employees or contractors utilising pre-existing intellectual property in their work for the company to (i) clearly identify the pre-existing IP and (ii) grant the company a perpetual, transferrable license to use, in the course of its business, any relevant pre-existing IP included in works created by the employee or contractor for the company.
  2. Facilitate Shareholder Decisions. The decision to exit the business will naturally require the approval of both the Board of Directors and the shareholders of the company.  Minority shareholders who are no longer associated with the business, or who have a different perspective on the company’s direction and objectives, can seek appraisal rights, demand certain concessions, or take other steps to block or disrupt the transaction.  While reverse merger structures can be used to minimise the disruption caused by dissenting minority shareholders, these structures increase both transaction costs and the potential liability to the target company.The pre-emptive solution here is a basic shareholder agreement, prepared and negotiated when the early stage company’s shareholder base is relative small and cohesive. The shareholder agreement should include the following elements:i. Dragalong Rights. Terms requiring minority shareholders to support and vote with the majority on fundamental company decisions, including a vote to sell the company and/or waive of appraisal rights.ii. Buy/Sell Arrangements. Structures that ensure that the equity interests of disaffiliating shareholders are (or can be) repurchased by the company or the remaining shareholders;iii. Joinder Provisions. Requirements that all new shareholders (including those acquiring their equity interests through the conversion of debt) become signatories to the shareholder agreement.
  3. Simplify Contract Assignment. A major factor in the acquired business’ valuation is the status of its contractual relationships with customers, vendors, strategic partners and other third parties, and how easily an acquirer can continue to take advantage of those contracts following the acquisition. Contracts that include non-assignability clauses – provisions requiring counterparty’s consent prior to assignment – can greatly obstruct this transition, particularly if the transaction is structured as an asset sale (vs. a stock sale or merger). At best, these clauses can delay a closing while the target company pursues the counterparty’s consent, who may see an opportunity to extract a contractual concession from a vulnerable target.  At worst, the target company’s inability to obtain a counterparty’s consent may result in the termination or rejection of the contract by the acquirer, which can reduce the target company’s valuation.Since non-assignability clauses are often a standard part of the “boilerplate” sections of many agreements, and since solving the anti-assignment clause problem once the contract has been signed is difficult, if not impossible, company counsel should help the client implement the following prophylactic measures at the outset of the negotiations:i. Removal: Generally, the absence of a non-assignability clause in a contract allows both parties to assign the contract freely.ii. Change of Control Carve-Out: An exception that eliminates the need for the counterparty’s consent when the contract is assigned to a successor organization in the event of a merger, spin-off, or other reorganization, or any sale to any entity which buys all or substantially all of the assigning party’s assets, equity interests or business can eliminate the issue in an exit transaction.iii. Reasonableness Standard. As a fallback, incorporate a requirement that the counterparty’s consent to a contract assignment may not be “unreasonably withheld.” While this does not eliminate the need to secure the counterparty’s consent, it will impose a baseline legal standard which may facilitate the assignment negotiation.
  4. Maintain Good Corporate Capitalisation Hygiene. While cases of mystery shareholders appearing at the closing of an acquisition transaction are rare, confusion over the accuracy of the capital structure of the target company, as well as the identification of non-compliance with securities laws, can materially disrupt an exit transaction.  Common causes of capitalisation problems most often relate to (i) failing to either register or file a registration exemption with the Securities and Exchange Commission and/or state authorities in connection with the sale of private securities issued by the target company to early investors, which are usually friends and family, (ii) issues involving the company’s equity incentive plan, including unsigned documents, unclear vesting schedules, and uncertain stock repurchase provisions and exercise; and (iii) overlapping and conflicting convertible securities, including securities with conflicting conversion terms or circular conversion formulas. Many buyers will avoid assuming any risks associated with an ambiguous capital structure or improperly issued shares, preferring instead to let the target company identify and resolve discrepancies before closing.As with the other sets of issues described in this article, the preventive solutions are straightforward and, in most cases, inexpensive:i. Comply With Applicable Federal and State Securities Laws in Securities Offerings: Most states and the SEC have numerous exemptions allowing early stage companies to issue securities without the need for a formal registration.  The exemption process, however, often requires the issuing company to file a registration exemption with the appropriate securities regulator. Failing to file a registration exemption may not require the company to register its shares, but it may prevent the company from utilising a “safehabour ” in future transactions, including an exit transaction with another private company.  Filing the necessary registration exemption forms will not only help ensure securities law compliance; it will also provide assurance to a potential acquirer that these registration exemptions will remain in effect in future transactions.ii. Invest in a Commercial Cap Table Management Software. There are a number of quality, low cost software solutions on the market that can help track and automate company cap tables and “date-stamp” capital structure changes, in order to allow for a simple analysis of capitalisation changes and confirmation of issuances.iii. Automate the Effect of Certain Equity Incentive Plan Triggers. For example, if a company’s restricted stock plan provides for the buyback of unvested shares if the employee terminates, the company’s repurchase of those unvested shares should occur automatically.  Relying on the affirmative action of the company (and potentially the memory, or filing system, of the company’s executives) can result in inconsistent equity incentive plan operation and unintended equity ownership.

    iv. Create Pro Forma Models to Reflect the Terms of Convertible Securities. Going through the exercise of translating the terms of convertible securities – particularly where different securities are issued at different times to multiple parties – will help pressure test the conversion terms and validate that they function as intended.

The foregoing measures, designed to minimise exit disruption, are neither difficult nor time-consuming.  In fact, the most difficult task is often convincing the client company to expend the time, effort and resources to implement these disciplines, even years in advance of a potential exit.  As noted above, it is ultimately time and energy well spent.

Is Your Company a Trademark Bully?

Depending on one’s perspective, a “trademark bully” is either simply a vigorous enforcer of its valid trademark rights who is unduly criticized for such enforcement or an overreaching behemoth trying to unfairly expand its trademark rights well beyond the reasonable boundaries of its protection. For this second category, think “Goliath” challenging the unprotected “Davids” in the market.

The “behemoth” is the most common image and was called to mind squarely when the U.S. Patent & Trademark Office solicited comments in 2010 about harassing trademark litigation tactics, and defined a trademark bully as “a trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.” 1 No additional legislation resulted from that study, but the phrase “trademark bully” stays with us.

This article addresses ways in which trademark owners can vigorously protect their rights, determine which infringements are worth pursuing, learn how to avoid being the subject of social media shaming and consider how the playing field may change if the accused infringer obtains pro bono counsel or has insurance coverage to defend the claim. The goal of any enforcement plan is to protect the owner’s full rights at the lowest possible cost, while avoiding any negative publicity that may result from an overreaching program, which could damage the owner’s reputation or goodwill associated with its name and mark.

Vigorous Enforcement of Trademark Rights

In general, if an owner fails to enforce its exclusive rights to use a particular name or mark in connection with specific goods or services, the value of the owner’s mark and its ability to enforce it against others may diminish over time.

In cases of owner inattention, junior users or potential infringers may begin to use the mark or something very similar in jurisdictions where the owner’s goods or services are not yet sold or offered, and are not yet known by the local purchasing public, and thereby develop a loyal following that recognizes the potential infringer’s use of the mark over the owner’s.  This infringement can be very damaging to the owner’s reputation, sales and business development, as well as the bottom line. If customers seek the relevant goods and services from the potential infringer instead of from the owner, then the owner’s mark loses its value as an indication that the goods are – or should have been – sourced by the owner when the owner enters that market.

If an owner takes action early, it is likely to be more successful in stopping use by the potential infringer. The longer the owner waits, however, the more difficult it will become to reassert the owner’s senior position in the market. Similarly, the longer the two marks coexist in the same marketplace for similar goods and services – and particularly where there is no evidence of actual confusion by consumers – the weaker and more narrow the owner’s rights in the mark may be. If more infringers using the same or similar marks for the same or related goods or services enter commerce without challenge, then the field becomes “crowded” and everyone’s rights in their similar marks become very narrow, to the point where only exact matches or very close approximations would be considered infringing.

In addition, if the owner knew about the potential infringers and declined to take any action for one reason or another, the owner may have difficulty obtaining relief – such as an injunction against continued infringement. The owner also may later be found to have waived its rights to pursue the potential infringer for such infringement, or to have acquiesced to their use, or to have unreasonably delayed enforcing its rights (i.e., laches), thus making it inequitable to require the potential infringer to stop using the mark where it has become established.

As a result, trademark owners should consider implementing a watch system – which can have varying degrees of complexity – that searches the marketplace, the internet and relevant industry materials for potentially infringing use. The more effective programs will search regularly for potentially competing marks in a variety of relevant places and use search parameters designed to identify close matches, rather than limiting a search to a very narrow, exact match.

Once potentially infringing watch results are identified, the trademark owner should analyze them carefully to determine whether contact with the potential infringer is warranted and/or necessary to preserve the owner’s rights.

Determining Which Infringements are Worth Pursuing

Owners should establish early in the trademark rights’ pendency a set of protocols that will help the owner determine when to challenge apparently unauthorized uses by third parties. Some factors to consider when establishing such a program are:

  1. What are the owner’s core names and marks? At a bare minimum, these names and marks should be protected the most vigorously against potential infringement. Owners might forgo zealous enforcement efforts for marks that are anticipated to have a short life – such as for products or product lines or advertising campaigns that will have a limited run or short duration in commerce.
  1. How closely related must the goods or services of an unauthorized user be to the owner’s goods or services? The answer to this question may depend on the number and nature of third party uses of similar marks already in place.
  1. How did the owner learn about the unauthorized use? From a complaint by a customer about poor customer service or quality referring to the unauthorized user’s goods or services, thus demonstrating “actual confusion” and potential damage to the owner’s reputation and goodwill?
  1. What is the owner’s end-game in the enforcement program? To litigate all potential infringements to their final conclusion? To get the unauthorized user to recognize the owner’s senior rights and obtain a license producing a revenue stream where the goods may be related but are not competitive?

With respect to each of these factors, it is critical that owners evaluate the potential likelihood of confusing customers and potential customers about the source of the goods or services distributed under the mark, the potential misunderstanding about the owner’s endorsement of, sponsorship of or affiliation with the potential infringer, and the potential for damage to the goodwill and other value of the owner’s mark if the potential infringer’s quality is not as good as the owner’s.

Avoiding Social Media “Shaming” and other Public Relations Missteps

Whenever an owner drafts a cease and desist letter to a potential infringer, care should be taken not to unnecessarily inflame the recipient or invite re-publishing that letter on the internet for purposes of ridicule and shaming. This phenomenon is common today using social media outlets.  Inflammatory language and threats of imminent lawsuits with draconian remedies are likely to increase the risk of such re-distribution, causing public relations discomfort that may take some time to correct.

Instead, owners may be better served by identifying genuine concerns they have with the potential infringer’s use and asking for corrective action in the form of discrete, reasonable requests that are feasible for the potential infringer to complete. These requests can be forceful and rigorous, but they should be constructed with a view toward maximizing the possibility of compliance and resolution. Cease and desist letters are not a required prerequisite to filing a federal lawsuit, but they can be valuable tools to negotiate an acceptable settlement before incurring significant legal costs. If the potential infringer declines to respond, follow up letters can be more strident, but it is rarely prudent to start off that way unless the owner is immune to bad publicity.

If the Owner’s actions become the subject of social media hype, consider carefully before jumping in and disputing each individual claim. Attention span on the internet is relatively short. After the initial frenzy about a hot topic, the audience typically moves on to the next. If the subject of the frenzy answers by continuing to argue that its actions were reasonable and defensible, the debate will only serve to keep the issue “front and center” in the minds of the purchasing public, which may damage the owner’s goodwill and reputation more than the initial infringement – commonly known as the “Streisand Effect.”2

Change in Dynamics if the Potential Infringer Uses Pro Bono Counsel or Has Insurance Coverage

A frequently held (but not always correct) assumption is that an owner who is a “trademark bully” must have deep pockets and able to continue litigation without consideration of increasing costs. Similarly, victims of so-called bullies are generally assumed to be smaller entities, without significant resources. Thus, the theory proceeds, these trademark-bully-owners seek to extort settlements from these smaller entities in a way that expands the owner’s trademark rights unfairly.

If a potential infringer accused of trademark infringement by an owner is represented by pro bono counsel or has insurance coverage, however, the possibility of an extortive settlement may decline. When the potential infringer is not paying its legal fees for defense out of its own pockets, it may be less inclined to accept an unreasonable settlement demand just to reduce its steadily climbing legal costs.

As an owner, consider carefully the actual economic position of the potential infringer, to the extent that such information is available in the early stages of the dispute. Be aware of the public’s assumptions about the potential infringer and its role in the community, and manage public relations needs from the inception of the dispute. Do not wait for an emergency to arise before addressing public relations issues. The more the potential infringer can be cast as a “victim of a bully” the more likely the owner’s goodwill and business reputation could be harmed by bad press, including social media.

Conclusions

Enforcement programs are essential to any owner’s ability to manage the business’s names and marks, maintaining its exclusive right to use these names and marks in connection with specific goods and services as long as feasible. While overly aggressive and unreasonable programs may legitimately be called “bullying,” owners must take seriously their obligations to monitor and enforce the use of their marks in commerce to avoid losing or de-valuing their rights.

 

1 See Request for Comments:  Trademark Litigation Tactics, n.1 in https://www.uspto.gov/trademarks/litigation_study.jsp)

2 See What is the Streisand Effect?, The Economist Explains (blog), April 15, 2013, http://www.economist.com/blogs/economist-explains/2013/04/economist-explains-what-streisand-effect, which explains, “Named after the American singer and actress Barbra Streisand, the Streisand Effect describes how efforts to suppress a juicy piece of online information can backfire and end up making things worse for the would-be censor.”

 

How GCs can unlock IP asset value (and make friends with the CFO)

It’s a truism that a patent is only as valuable as the patent owner’s willingness and ability to enforce it. And therein lies the challenge faced by companies or institutions with substantial IP assets when they attempt to justify allocating resources to pursue claims.

By the time a patent exists to enforce, the company has likely already made a substantial investment to develop the asset. Protecting it through litigation will require still more money to be invested. The challenge is not only the very high price tag of that additional investment—it is also its high degree of risk, given the even more uncertain outcomes of IP litigation compared to other forms of commercial litigation. As a result, many companies, universities and other entities find themselves with untapped IP assets because of their inability to bear the additional cost and risk of protective litigation.

It gets worse. Companies that are able to overcome the hurdle of added cost and risk, and move forward with IP litigation, face a further challenge in the negative impact of litigation spending on corporate balance sheets. And although private practice lawyers tend not to think about balance sheets, GCs—and CFOs—think about them a lot, and they know that litigation impacts corporate balance sheets in ways that reduce profits and pull down earnings. Indeed, this was specifically cited by 23% of GCs surveyed as part of Burford’s 2016 Litigation Finance Survey as a reason their companies stopped pursuing a viable claim—because legal expenses were hitting the company’s bottom line. For the same reasons, many more choose not to pursue the claims at all.

To understand how negatively IP litigation impacts corporate balance sheets, one must understand how litigation is treated as an accounting matter.  A pending litigation claim to enforce IP rights is a corporate asset, similar in form to any other contingent receivable. However, spending to pursue that claim, and increase its asset value, is peculiarly not added to its asset value, or “capitalized”, and instead is immediately expensed, flowing through the P&L and reducing operating profits. Indeed, a pending litigation claim—despite having legal status as an asset, or a “chose in action”—is affirmatively not an asset for accounting purposes. It is found nowhere on financial statements. Finally, when a significant litigation claim succeeds, the associated income from the claim is often not treated as operating income on the P&L. Instead, it’s put “below the line” as a non-operating or one-off item.

In practical terms, the GC responsible for generating a lot of IP litigation expense and risk is likely going to be persona non grata in the CFO’s office because no matter the ultimate value of that IP litigation to the company, the immediate hit to earnings can be significant. Obviously, companies want to maximize their profits and minimize their expenses. Being hit with expenses as a litigation matter goes forward and then not later recognizing the income from the win is a bad outcome. The situation is even worse for publicly traded companies with significant IP litigation. When investors and stock market analysts look at the balance sheet and don’t see an asset, they don’t credit it; and when they see the kind of expenses associated with high value IP litigation, they may take an overly negative view of the company’s risk factors and value.

Yet despite all of this, the situation is far from dire. Companies have new options.  Litigation finance is growing rapidly in the IP space as part of a broader growth trend that saw a quadrupling of litigation finance use by leading U.S. law firms between 2013 and 2016, according to Burford’s latest research. Among the reasons for its growth in the IP space is its ability to neutralize the negative impact of IP litigation on corporate balance sheets and to shift the cost and risk of IP litigation to a third party. In simplest terms, outside finance enables GCs with significant IP assets to move the cost and risk of pursuing litigation off their corporate balance sheets—because the litigation financier assumes the cost and risk of the IP litigation. The financier provides capital to cover fees or expenses, or both, typically in exchange for a portion of the proceeds if the litigation is successful. Due to the risky nature of IP litigation, the more innovative finance providers will most often develop bespoke financing approaches including portfolio deals where risk is diversified across a pool of matters.

Moving litigation cost off the balance sheet immediately removes any concern about the negative accounting impact of litigation on earnings and profits. When a litigation financier pays the costs of proceeding, those costs do not flow through the company’s P&L, thus conserving the company’s profitability from its operations. Working with an outside financier also enables the company to husband its cash to use for other purposes—and to avoid having it flow out of the company’s coffers and thus reducing its asset value. As a result, when the company wins its claim, the very first time its financial statements are impacted by being a litigant is when it has a positive cash and income event. That obviously yields a far happier accounting outcome for clients.

In sum, outside capital gives GCs a dramatically de-risked platform to unlock the asset value of IP litigation claims—and it also provides longevity and the ability to commit to the long-term nature of IP litigation, whatever the business situation of the company.

Geographical Indications in Sri Lankan Law

Chapter XXXIII of the Intellectual Property Law No. 36 of 2003 makes provision for the protection of geographical indications.

Geographical Indications (GI) are off shoots of indications of source and appellations of origin which were first accorded recognition in the Paris Convention. Indications of source is a broad concept and designates a country or place situated in that country from where the particular product in question originates.  Accordingly expression such as made in Sri Lanka would fall into this category.

Appellations of origin is a geographical names of a country or place in that country. The product just necessarily have its characteristics and quality linked with the geography of the place by way of for instance agro climatic conditions and human factors.

Geographical indications are indications identifying a particular good as originating in a country or locality in that country.  The quality of characteristics or reputation of such goods must be essentially attributable to the geographic origin.  Definitions would include not only geographical names but also any non-traditional names which have acquired significance.  Ceylon Tea would fall into this category.

There are has been no uniform approach by various countries in respect of protection of geographical indications. Some countries have enacted specific “sui generics” to protect GI’s.  Other protect GI’s under existing laws and still others afford protection by a combination of both.  For protection of GI’s Unfair Competition, Consumer Protection Laws protecting tradenames and marks and passing off and laws relating to false and misleading trade practices would also be relevant.

As far as international treaties and agreements are concerned the protection of GI’s are concerned they began with the Paris Convention for the protection of industrial property in 1883 where protection was afforded to appellations of origin.  In the recent past the TRIPS Agreement the WTO afforded protection of GI’s by promoting a standard definition of GI’s and prescribing certain minimum standards by which they should be legally protected by all WTO member States.  Some of the more important international agreements relating to GI’s are –

  1. Convention for the protection of Industrial property 1883
  2. Madrid Agreement for the repression of false or deceptive indications of source on goods 1891
  3. General Agreement on tariffs and trade (GATT) 1947
  4. Lisbon Agreement for the protection of appellations of origin and their international registration 1958
  5. Agreement on trade related aspects of intellectual property right 1995.

Section 161 provides as follows –

“(1)     Any  interested  party shall be entitled to prevent –

  • the use of any means in the designation or presentation of goods that indicates or suggests that the goods including an agricultural product, food, wine or spirit in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of goods; or
  • any use of a geographical indication which constitute an act of unfair competition within the meaning of section 160;
  • the use of a geographical indication identifying goods including an agricultural product, food, wine or spirit not originating in the place indicated by the geographical indication in question or identifying goods not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expression such as kind, type, style or imitation or the like.

(2)      The protection accorded to geographical indications under sections 103, 160 and 161 shall be applicable against a geographical indication which, although literally true as to the territory, region or locality in which the goods originate, falsely represents to the public that the goods originate in another territory.

(3)      In the case of homonymous geographical indications for goods including an agricultural product, food, wine or spirit, protection shall be accorded to each indication, subject to the provisions of subsection (2) of this section. The Minister in case of permitted concurrent use of such indications, shall determine by prescribed practical conditions under which the homonymous indications in question will be differentiated from each other, taking into consideration the need to ensure equitable treatment of the producers concerned and the protection of consumers from false or deceptive indications.

(4)      The Court shall have power and jurisdiction to grant an injunction and any other relief deemed appropriate to prevent any such use as is referred to in this section.  The provisions of Chapter XXXV of the Act shall mutatis mutandis, apply to such proceedings.

(5)      For the purposes of this section “geographical indications” shall have the same meaning as in section 101.

At present in Sri Lanka whilst there is a provision for the protection of GI’s including injunctive relief, the form of registration of GI’s is generally in the form of certification marks.  For instance as far as Ceylon Tea is concerned Sri Lanka Tea Board grants a certification mark subject to the provisions contained in the Intellectual Property Act in respect of certification marks.  However there are other produce of Sri Lanka which may not be eligible at present for the grant of certification marks because there is no authority to grant such rights under the provision of Chapter XXIX.

Several exporters have pointed out to the Government that when seeking protection of Sri Lanka produce in foreign countries they find it easier and more convenient if Sri Lankan authorities could certify that the mark is in fact registered in Sri Lanka as a GI.  The Spice Council of Sri Lanka representing the exporters of spices and Export Development Board have constantly drawn the attention of the authorities that early measurers must be taken in this regard.  Accordingly the authorities have agreed on principle to make interim provisions relating to Ceylon Cinnamon and certain other products taking into account the provisions of Section 204 of the Act which enables the Minister from time to time to make regulations for the purpose of carrying out or giving effect to the principles of the Act and sub-section 2 provides that without prejudice to the generality of the powers conferred by subsection 1 the Minister may make regulations in respect of the matters referred therein –

Subsection 2 refers to 8 such matters . In terms of section 2 (2) the Director General shall be vested with the powers of the implementation of the provisions of this Act control and superintendence of the registration and administration of industry designs, patents, marks and any other matters as provided by the Act and the supervision and control of all persons appointed for or engaged in the implementation of the provisions of this Act. As provisions relating to GI’s are contained in Part IX of the Act the regulations could be made in respect of GI’s as well.  Accordingly the Government is expected to make regulations for the better protection of Ceylon Tea and Ceylon Cinnamon. Consideration is also being given as to whether a new Act should be enacted in respect of registration of GI’s.  Meanwhile regulations as an interim measure referred to are expected to be enacted early and this would at least to some extent further protect the exporters of Ceylon Tea and Ceylon Cinnamon and other spices.

The Fate of Pharma Patents in U.S. Inter Partes Review Proceedings

As part of the 2011 America Invents Act,[1] the United States Congress created a new process for challenging the validity of issued U.S. patents in the Patent Office (before the Patent Trial and Appeal Board –“PTAB”).  Known as an Inter Partes Review (“IPR”), this process allows third parties to pursue a “mini-trial” against the validity of the patent at issue based solely upon prior art.

This article reviews the IPR process as compared with a federal district court trial on validity, surveys how pharma patents have been faring in the IPR realm, and highlights our team’s recent win before the PTAB regarding a pharmaceutical formulation patent that was challenged as allegedly obvious.

I. Background

The branded pharmaceutical industry relies on patents to provide a period of exclusivity for innovative medicines and thus justify their large and often risky expenditures on research and development.  As a result, the branded pharmaceutical industry has championed the importance of patents.  In contrast, the fast-moving technology and electronics industries have often expressed concerns about costly patent litigation.  These concerns have been magnified by the advent of “Non-Practicing Entity” litigants (otherwise known as “NPEs” or more colloquially “patent trolls”).  These trolls, who make no products, use patents they own to seek damages from alleged infringers as a business model.

In response to these concerns, Congress enacted the IPR process as a supposedly quick and inexpensive way for the public to challenge the validity of patents in the United States Patent Office.

A. Summary of The IPR Process

In broad overview, the IPR process provides, inter alia, for:

  1. an initial request for review from a “Petitioner” (who can be anyone) stating the reasons for alleged patent invalidity;[2]
  2. an optional preliminary response from the Patent Owner stating why a review should not be initiated;[3]
  3. a decision from the PTAB regarding whether to institute a review of the patent, which requires a determination that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims;[4]

And, if the review is initiated:

  1. a short period of limited “discovery” where experts may be deposed;[5]
  2. a more substantive response by the patent owner – which can include argument about the prior art, expert declarations and evidence of commercial success;[6]
  3. a short (half day or so) hearing (“trial”);[7] and
  4. an ultimate determination within a statutory period of one year.[8]

Although rare, the Patent Owner may amend its claims[9] in an attempt to avoid invalidity.

B. Differences From Federal Court Invalidity Proceedings

IPRs differ from federal district court cases on validity in several key aspects, including:

(a) who may attack the validity of the patent (anyone may petition for an IPR versus only those with “standing” in district court);

(b) the standard of proof required to invalidate the patent (a mere “preponderance of the evidence” in an IPR versus the higher standard of “clear and convincing evidence” in district court);[10] and

(c) the way the patent claims will be construed (“broadest reasonable construction” in an IPR versus a narrower construction in the district court).[11]

These differences arguably make the IPR a forum where patent invalidity is more likely to be found than in district court.

C. The New “IPR Patent Trolls”

Ironically, the IPR procedure that was created in part to tame patent trolls has engendered a whole new type of patent troll – those without standing in federal court that seek to use the IPR process to gain financial reward.  These new “IPR patent trolls” are not business competitors to the patent owner.  Instead, they are third parties (including hedge funds and related entities) that are empowered by the statute to initiate and pursue an IPR.  It has been speculated that they may be using that power to seek financial gain by either shorting the stock of the patent owner or obtaining some other financial settlement.

II. The Statistics

Since the AIA’s enactment, the Patent Office has received over 5,000 Petitions to review patents.[12]

As of August 2016, 3,529 petitions have been completed, with 1,807 of those instituted.  Of those instituted, Petitioners have invalidated around 70% of all challenged claims.[13]

With respect to biotechnology and pharmaceutical patents, there have been 331 petitions, 207 of which have been instituted.[14]  Among biotechnology and pharmaceutical patents, the invalidation rate has been approximately 45%.[15]

III. A Pharma IPR Win at the PTAB

Despite the statistics and the lower standard of proof for invalidity, patent owners can and do win IPRs.

Case in point: IPR No. 2015-00988, Coalition for Affordable Drugs II, LLC v. Cosmo Technologies Ltd.

In this IPR, an entity formed by hedge fund manager Kyle Bass and his associates – that otherwise would not have had standing in federal court – brought a petition to initiate an IPR and invalidate U.S. Patent No. 6,773,720 (“the ’720 patent”) in the Patent Office.

A. The Invention of the ’720 Patent

The ’720 patent is directed to an orally-administered, controlled release formulation of the drug mesalamine.  Mesalamine treats ulcerative colitis – an inflammatory condition of the large intestine.  Mesalamine provides its therapeutic benefit at the site of inflammation on the interior surface of the large intestine.  It does not provide therapeutic benefit when absorbed systemically into the bloodstream.

Thus, one challenge to making an effective mesalamine oral treatment is that it must release drug in and throughout the colon – bypassing the stomach and small intestine – and it must maintain relatively even or “controlled” drug release along the length of the large intestine.  An added dilemma for the formulator is that oral dosage forms of mesalamine must contain large amounts of the drug to be of benefit (over 1 gram) – leaving little space for excipients.  Yet, it is the excipients that are necessary to control the release of the mesalamine.

Working within these constraints, the inventors of the ’720 patent created a two-matrix formulation that uses minimal amounts of excipients to control the release of large amounts of mesalamine – slowly and in the right place in the colon.

B. The Petitioner’s Challenge

The Petitioner’s challenge to the validity of the ’720 patent turned on two prior art references – the Leslie reference from over 23 years before the invention of the ’720 patent that did not mention mesalamine and the Groenendaal reference from 10 years before the invention.  Although neither of these references referred to each other or spoke about a two-matrix formulation, Petitioner argued that there would have been a general motivation to combine the two references (simply because they both involved controlled release) and once combined the elements of the ’720 patent would be readily revealed.

C. The PTAB’s Analysis: No Invalidity

Although the PTAB did grant the initial request for review, after full consideration of the developed record, the PTAB concluded that the Petitioners had not proven invalidity by a preponderance of the evidence.

In coming to that conclusion, the PTAB considered numerous distinctions from the prior art, including whether the particular chemical class of “waxes”  called for in the challenged claims were disclosed in the prior art.  The Board rejected the Petitioner’s broad statements that the prior art disclosed “waxy” materials and distinguished those from the actual “waxes” recited in the claim.  The PTAB also found an absence of a motivation to combine the references; and also noted the complexity of formulation science – as conceded by Petitioner’s expert during deposition.  Further, the PTAB credited the commercial success of the patented invention as an objective indicia of non-obviousness.

D. Take Home Lessons

There are many take home lessons from the experience.

First and foremost, IPRs involving pharmaceutical patents can be won by patent owners.  In many ways that should not be a surprise.  The pharmaceutical and chemical sciences have repeatedly been recognized to be complex and unpredictable[16] – hallmarks of non-obviousness.

Second, identifying clear differences between the prior art and the claimed invention – and buttressing those differences with solid evidentiary proof in terms of literature and expert testimony – can help the PTAB understand why a claimed invention truly is different.

Third, although some IPR decisions seem to discount commercial success and other objective indicia of non-obviousness, this form of evidence should not be ignored by patent owners.  When presented to the PTAB, it can prove helpful.

Fourth, as the IPR process unfolds, patent owners should not recoil from reiterating arguments that were apparently rejected at the initiation stage.  The PTAB seems willing to reconsider its initial views when new information is presented.

Fifth, one of the complexities of an IPR proceeding is that the witnesses are not actually observed at trial by the PTAB judges.  While excerpts of deposition testimony are cited in briefs, there is no live testimony.  For this reason, deposition testimony should strive to elicit clear admissions and important points from the other side’s experts.

From the perspective of the petitioner, a claim of invalidity should be based upon prior art that is as close to the patented claim as possible.  Where one needs to stretch the prior art’s disclosure to simulate the claim, proof of invalidity is likely lacking.

IV. Parting Thoughts

As with many “solutions” to problems in the law, the IPR solution to supposedly “weak” patents and “patent trolls” has created concerns of its own.  A procedure that permits important issued patents to come under attack, under a lower standard of proving invalidity, has the very real potential to weaken the patent system and discourage investment in important new research.  Whether Congress should maintain the lower “preponderance of the evidence” standard for IPRs is a topic that should be discussed and debated.  However, as things currently stand, the Patent Office has the important task of balancing the concerns raised by so-called “weak” patents with the goals of the patent system itself – promoting research and innovation.

[1] Pub. L. No. 112-29, 125 Stat. 284 (2011) (also referred to as the “AIA”).
[2] 35 U.S.C. §§ 311 and 312.
[3] 35 U.S.C. § 313; 37 C.F.R. § 42.107.
[4] 35 U.S.C. § 314; 37 C.F.R. § 42.108.
[5] 35 U.S.C. § 316(a)(5); 37 C.F.R. § 42.51.
[6] 35 U.S.C. § 316(a)(8); 37 C.F.R. § 42.120.
[7] 35 U.S.C. § 316(a)(10).
[8] 35 U.S.C. § 316(a)(11).
[9] 35 U.S.C. §§  316(a)(9), 316(d); 37 C.F.R. 42.121.
[10] See 35 U.S.C. 316(e) (“In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence”) and Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016) (“the burden of proof in inter partes review is different than in the district courts: In inter partes review, the challenger (or the Patent Office) must establish unpatentability ‘by a preponderance of the evidence’; in district court, a challenger must prove invalidity by ‘clear and convincing evidence.’”).
[11] See Cuozzo Speed Techs., 136 S. Ct. at 2142 (claims interpreted in broadest reasonable manner for an IPR).
[12] Patent Trial and Appeal Board Statistics, last updated August 31, 2016, available at https://www.uspto.gov/sites/default/files/documents/2016-08-31%20PTAB.pdf.
[13] Id.  This excludes instituted IPRs that were terminated prior to a final decision from PTAB.
[14] Id.
[15] M. Grewal, J. Hill, and K. Zalewski, “Trends in Inter Partes Review of Life Sciences Patents,” 92 BNA’s Patent, Trademark & Copyright Journal 3 (June 17, 2016).
[16] See, e.g., Eisai Co. Ltd. v. Dr. Reddy’s Labs., 533 F.3d 1353, 1359 (Fed. Cir. 2008) (“To the extent an art is unpredictable, as the chemical arts often are, KSR‘s focus on [ ] ‘identified, predictable solutions’ may present a difficult hurdle because potential solutions are less likely to be genuinely predictable”);  Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1351 (Fed. Cir. 2008) (extended release formulation not obvious: “difficulties in predicting the behavior of any composition in any specific biological system.”);  Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1104 (5th Cir. 1972) (paraphrasing Churchill, the court noted that chemical compounds present a “riddle wrapped in a mystery inside an enigma”).

 

Brexit and its affect on Intellectual Property

The Brexit outcome to the UK’s referendum on EU membership has no immediate effect on intellectual property in the UK – EU laws remain (pun not intended) in effect until such time as Article 50 notification is made by the UK and the consequent 2 year negotiation period ends (unless extended by agreement of the other 27 member states).

During the negotiation process, the UK will remain part of the EU. To ensure an orderly transfer to a post-Brexit regime, transitional provisions will likely be put in place to ensure no loss of IP rights once Brexit takes effect. It is clear however that preparation, portfolio reviews and establishing appropriate strategies in the coming months and during the run-up to Brexit will be key to a successful IP transition. The preliminary analysis below, written by Abida Chaudri, Solicitor at Arc IP, and Dr Julian M Potter, Partner & Stuart Forrest, Senior Associate, at WP Thompson Intellectual Property, sets out some of the issues at this early stage.

Trade Marks – No Immediate Changes

UK trade mark registrations, whether obtained via the national route or by means of the Madrid Protocol International Registration system, will not be affected by Brexit.

Post-Brexit and if the UK does not become a member of the EEA, European Union trade marks (EUTMs) will not cover the UK and national UK applications (or International Registrations designating the UK) will be necessary.

EUTMs in force as at the date of Brexit will inevitably be affected, again assuming the UK does not become a member of the EEA. Currently, EUTMs cover the 28 EU member states as a single unitary right. On Brexit, EUTMs will no longer cover the UK but will continue to subsist in the remaining 27 member states and be governed by EU law. Transitional provisions will very likely be enacted by the UK government allowing EUTMs to take effect as national rights in the UK. The mechanism by which this would occur has not yet been identified but could be one of the following:

  1. a) Conversion of EUTMs into national registrations

It is already possible to convert EUTMs into national applications in any of the EU member states but this arises by virtue of EU legislation. Converted applications retain the original filing and priority dates and seniority claims of the EUTMs from which they derive. Fees are payable both to the EU intellectual Property Office (EUIPO) and, for UK conversions, to the UK IP Office (UKIPO). EU legislation states that converted marks are not to be subject to any additional or different requirements of national law – which means that, in the UK certainly, converted EUTMs are treated in the same way as national applications and (re-)examined, published and open to opposition. On the plus side, registration in the UK then results in a new 5 year grace period to commence genuine use.

Conversion of EUTMs into national UK marks to address Brexit will require new UK legislation and need to consider, for example : whether a conversion fee will be payable to the UKIPO; if re-examination and opposition periods will occur; if the current requirement for all UK applications (including converted EUTMs) to declare that the mark is in use or there is a genuine intention to use in the UK should be maintained – especially for converted EUTMs over 5 years old that have not been used in the UK; whether use of converted EUTMs pre-conversion in any of the remaining EU countries will count as use in the UK especially where they are over 5 years old and so would otherwise be vulnerable to non-use revocation in the UK.

  1. b) Re-registration of EUTMs in the UK

This is distinct from conversion but will, again, require UK legislation. EUTMs could potentially be re-registered as UK registrations in the same straightforward way that UK registrations can be re-registered in Jersey. Or there could be a system similar to that adopted on the breakup of Yugoslavia – so for example, Serbian trade marks were automatically extended to Montenegro in May 2008 without re-registation or payment of additional fees up until their renewal dates but new trade mark laws in 2010 required re-registration within 12 months. A similar scenario for EUTMs in the UK post-Brexit is possible, perhaps with some method of easily denoting the re-registered marks.

The position of UK registrations which were used to claim seniority for EUTMs but were then allowed to lapse may be challenging.  Seniority claims based on UK registrations will lapse on Brexit but it is debatable whether the UK would enact legislation allowing those national registrations to be restored so as to prevent loss of rights once EUTMs no longer extend to the UK.

Brexit will also lead to the loss of the UK’s EU Trade Mark Courts and the UK will not then be able to grant (or be subject to) EU-wide injunctions. Whether EU-wide injunctions granted by UK-based EU Trade Mark Courts would remain enforceable post-Brexit is not clear.

Since the UK would no longer be bound by decisions of the EU’s General Court, UK trade mark law (albeit EU-based unless amended) could well diverge over time, especially given its common law roots.

Designs – No Immediate Changes

Registered Community Designs (RCDs) are unitary rights covering all 28 EU member states and, like EUTMs, will no longer cover the UK post-Brexit. As for EUTMs in force on Brexit, a conversion or re-registration system for the UK is anticipated. The UK has its own design registration system (and UKIPO fees have recently reduced) but there may perhaps be increased interest in the Hague International Design System which operates similarly to the Madrid International Trade Mark regime, providing national registrations in multiple countries through a centralised application process.

Unregistered Community Design Rights may not be protected in the UK post-Brexit since the UK has its own system for unregistered designs.

Patents – No Change to Current Arrangements

The mechanisms for obtaining patent protection in both the UK and Europe will not be affected by Brexit. It will still be possible to apply for patents via the national route and at the European Patent Organisation (EPO).

The EPO is not an EU institution, and the European Patent Convention (EPC) is a separate international agreement that sets up the European Patent Organisation and the EPO.

The member states of the EPO already include several countries that are not member states of the EU, such as Switzerland, Iceland, Norway and Turkey. It is for this reason that Brexit will not have any impact on the UK’s membership of the EPO, and the ability of applicants to obtain European patents via the EPO that are effective in the UK.

UK Patents and pending European patent applications

UK Patents will not be affected by Brexit, whether they have been obtained via the national route or from validation of a European patent granted by the EPO.

European patent applications that are pending at the EPO will continue to designate the UK. Once granted, the European patent can then be validated in the UK regardless of Brexit.

What about the Unitary Patent and the Unified Patent Court?

The patent landscape in Europe is due to change in the future with the introduction of European patents with unitary effect (“Unitary Patents”), which will present a further route by which applicants can obtain patent protection in Europe when (and indeed if) it is brought into effect. The predicted implementation date of the Unitary Patent was sometime in 2017, but that is likely to be delayed since the UK is currently one of the three states that needs to ratify the treaty.

Unitary effect of a European patent, which leads to a Unitary Patent, can be requested following grant of the European patent. A Unitary Patent will have effect in the participating member states of the EU, i.e. not necessarily all the member states of the EU (for example, Croatia, Poland and Spain are not participating at the time of writing). If the UK leaves the EU, then it may not be able to participate in the Unitary Patent, and the associated Unified Patent Court. Several proposals have, however, been discussed that would enable the UK to do so following Brexit.

If the UK does not participate in the Unitary Patent following Brexit, then a Unitary Patent will not extend to the UK. Protection in the UK will have to be obtained through the routes that currently exist, i.e. the national route or from validation of a European patent granted by the EPO.

The Unified Patent Court (UPC) is a proposed common patent court open for participation of all member states of the European Union. The UK has been allocated one of the divisions of the UPC central court and it is expected that this will be lost to an EU member state in light of Brexit. If the UK is not able to participate in the Unified Patent Court, then the Court will not have jurisdiction over European patents validated in the UK. However, only 13 member states of the EU need to ratify the Unified Patent Court agreement in order for it to come into force, so the Court might not have jurisdiction over more than half of the member states of the EU anyway – possibly not such a significant jurisdiction regardless of the UK’s participation or not.

It might be the case that businesses in the UK, or businesses who are contemplating setting up in the UK, think that it would be desirable for the UK not to be within the jurisdiction of the Unified Patent Court. For example, UK based business might derive benefit from the knowledge that they will not be at risk of being the subject of an injunction that has effect in all of the member states participating in the Unified Patent Court agreement, i.e. potentially a pan-EU injunction.

To reiterate, the Unified Patent Court will not have any jurisdiction over national patents. This remains the case, even for states that are participating in the Unitary Patent and the associated Unified Patent Court.

Patent term extensions – Supplementary Protection Certificates (SPCs)

A rather niche practice in Europe has developed around SPCs, which are available for various regulated, biologically active agents, namely human or veterinary medicaments and plant protection products.

SPCs are currently granted under an EU regulation, which will no longer apply after Brexit. Similarly, extensions of the term of SPCs (following paediatric studies) are also granted under an EU regulation. There will, therefore, need to be new legislation in the UK in order to create rights that are equivalent to SPCs.

Copyright

There is no system for registration of copyright either on an EU-wide basis or nationally in the UK. Accordingly, UK laws will continue to apply, as will the UK’s membership of the Berne Convention, the Universal Copyright Convention and the WIPO Copyright treaty.

Geographical Indications and Designations of Origin

These are protected by an EU-wide regime – examples are Yorkshire Wensleydale cheese (geographical indication) and Stilton blue cheese (designation of origin). A national system of protection is anticipated post-Brexit, with the mechanism for achieving this to be established. There may also be a bilateral agreement with the EU for reciprocal protection.

Trade Secrets

The UK may not implement the EU Trade Secrets Directive of 5 July 2016 – EU member states have 2 years from this date to incorporate its terms into national law but if Brexit occurs before the 5 July 2018 deadline, then this will not be necessary. The UK may enact its own trade secrets legislation, perhaps based on the Directive, but since the UK has indicated that its law is already compliant with the Directive no change is likely.

Database Rights

These came into being in the UK on 1 January 1988 by virtue of EU legislation – The Copyright and Databases Regulations 1997. Post-Brexit, databases created in the UK would not be protected unless the UK were to become a member of the EEA.

.eu Domains

These can only be registered by businesses established in or individuals who are residents of EEA countries – so if the UK does not become an EEA member, UK-based businesses and UK residents will need to look at registering, and using, alternative domains.

Agreements

Where “Europe” is the territory covered by agreements such as licences of IP rights or co-existence agreements, this may be stated in a number of ways – for example: Europe, or the EU, or the EU as constituted at the date of the agreement or as constituted from time to time. Terms within agreements may also reference “Europe” in various ways. Whether or not the UK is included in each of these definitions of Europe will be a matter for assessment on a case by case basis, with appropriate variations even if the intention was clearly to cover the UK.

Exhaustion of Rights

Currently, IP rights attaching to goods in circulation in the EEA (EU, Norway, Leichtenstein and Iceland) by or with the consent of the IP rights holder are “exhausted” and further free movement within the EEA cannot be prevented (subject to limited exceptions such as changes to the condition of the goods). If the UK does not become a member of the EEA post-Brexit, it could be that exhaustion of rights will apply to the UK only so that goods entering from the remaining EU countries would infringe UK rights.

What should businesses do to prepare for Brexit?

Whilst not directly related to Brexit but important for EUTMs and converted / re-registered UK trade marks pre and post-Brexit : For EUTMS filed before 22 June 2012, review and if appropriate file Declarations at the EUIPO before the 24th September 2016 deadline stating that the intention on filing was to seek protection for goods / services beyond those falling within the literal meaning of any class headings covered by the EUTM. The scope for filing such declarations is greater, and more complicated, than appears at first sight and whilst there are qualifications, declarations that are accepted by the EUIPO will essentially extend the goods / services beyond those originally registered.

Review your current IP portfolio, decide which EUTMs and RCDs you will wish to convert to or re-register as national UK rights and budget for conversion / re-registration and subsequent renewal costs.

Review your filing strategy for EUTMs going forward and consider filing UK trade mark and design applications alongside EUTMs and RCDs if the UK is a key market.

Do not surrender any UK trade mark registrations which form the basis of seniority claims for EUTMs and ensure that the former are maintained since they will have earlier filing dates than EUTMs which are converted / re-registered as UK trade marks on Brexit.

Where current EUTMs have not been used in the UK (but are used in other EU countries) and where it is commercially appropriate to do so, take steps to establish genuine use (for the purpose of creating a market) in the UK pre-Brexit; also bear this in mind for EUTM and UK trade mark applications going forward.

Review agreements relating to IP and establish if they apply to the EU as at the date the agreements came into force or to the EU as constituted from time to time; either way, it may be necessary to vary the agreements so they apply specifically to the UK, even if the intention was clearly to cover the UK. Post-Brexit, the UK should be referenced separately to the EU.

Be aware of your, and legal representatives’, rights of representation for EUTMs and RCDs. Currently, representatives (for EUTMs) must be based in the EEA, be legal practitioners qualified to act as representatives in one of the EEA countries and have a place of business within the EEA. If the UK is an EEA member post-Brexit, then all well and good but if not, it is highly likely that representatives will maintain their rights of representation at the EUIPO by other possible means.

Monitor developments on Brexit so that all necessary actions can be taken, and appropriate resources devoted, in a timely manner.

Remember that there are no immediate changes and there will be a 2 year period to transition IP before Brexit actually takes effect.  Forward planning however is key.

Authors: Abida Chaudri, Solicitor, Registered Trade Mark & Design Attorney (UK & EU) and Director, ARC IP; Dr Julian M Potter, Partner & Stuart Forrest, Senior Associate, WP Thompson Intellectual Property

Abida Chaudri is an experienced solicitor and registered UK and European trade mark & design attorney with a background in both private practice and industry. She has broad experience and handles all aspects of trade marks, designs and soft IP, contested, non-contentious, and advisory with particular emphasis on strategy. She is a widely published author of numerous articles on IP issues and chair of the International Trademark Associations Indigenous Rights Policy & Analysis Sub-Committee.

Dr Julian M Potter is a Chambers recognised tier one UK & European Patent Attorney and Intellectual Property litigator. His practice encompasses all physics based disciplines and he has wide experience of drafting and prosecuting patents for the UKIPO, the EPO and patent offices throughout the world. Julian also represents clients in contentious matters such as oppositions and appeals and in advisory work including infringement, validity opinions and freedom to operate opinions, due diligence investigations, IP strategy, and product clearances. He holds a Higher Courts Litigation Certificate entitling him to conduct IP litigation in the High Court and has been involved in both Patents Court and Intellectual Property Enterprise Court litigation covering a wide range of technologies.

Stuart Forrest is a UK and European Patent Attorney and a member of WP Thompsons Chemistry and Life Sciences team. His practice covers all aspects of chemistry and he has a particular interest in lifecycle management and obtaining supplementary protection certificates. He is a CIPA delegate to the UKIPOs Patent Practice Working Group.

This article was first published in Lawyer Monthly Magazine in July 2016 and is reproduced here with the kind permission of Parity Media Limited

Intellectual Property and the Brexit Decision

On 24 June 2016, the United Kingdom voted to leave the European Union. The United Kingdom and the European Union are now dealing with the aftermath of this momentous decision, raising many questions as to what this means for our clients and the protection of their valuable IP rights both in the United Kingdom and the European Union. The process of leaving the EU is complex and to a great extent unknown—no country had ever left the EU before, although Greenland left the scope of the European Union about 20 years ago. The UK may not be alone however as the same political forces which have welled up and overwhelmed the political establishment in the United Kingdom are present in other European countries so Britain may not be the last European country to break-away from the EU in the near future. Furthermore, there are elections set down in virtually all the big countries of Western Europe over the next 18 months. The political atmosphere can only be described as both febrile and explosive.

The Near Term

The UK will not be leaving the EU until the British PM invokes Article 50 of the Lisbon Treaty. Once this has been done, it triggers a 2 year time limit for the EU and UK to negotiate the UK’s exit terms. However, some commentators have said that the re-organisation is the most complex economic reorganisation since 1945, so it could take 5 or even 10 years for the entire process to work itself out.

Patents and European Patents

Patents which are administrated through the European Patent Office are not affected by the vote of 24 June 2016, and such patents will continue in force, in the United Kingdom or any other territory which is part of the European Patent Convention. Nationals of European Convention (including nationals of the United Kingdom) can continue to act for clients before the EPO without restriction. Membership of the European Union is not relevant regarding such representation. With respect to the Community Patent, that is simply treated as a designated office in a European patent office and is no different from any other country in this respect. Finally in relation to the Unified Patent Court there simply is not enough known at the moment to proffer any manner of meaty information.

 Trademarks and Designs

As you may know, a trademark may be protected in the UK by a national UK or EU registration both of which can be obtained directly or via an International Registration under the Madrid Protocol. Ultimately, I anticipate EU registrations for both trademarks and designs will no longer cover the UK. At this stage, no one knows whether existing EU registrations will extend automatically to the UK or whether some kind of validation process will be instigated. It may be wise for brand owners to consider seriously the value of securing rights in the UK now, particularly if they plan to licence those rights in the UK and some or all of the European Union Member States going forward. It will probably be at least two years and probably much longer before the process to be followed becomes clear. In so far as Designs are concerned the Regulation 2015/2424 established the EUIPO in March 2016 and deals with the EUIPO generally and does not distinguish between trademarks and designs.

Copyright

Copyright Law has been harmonised at the European level in numerous respects – for example, the term of protection, the acts amounting to infringement, performers’ rights and qualifying criteria for protection. EU legislation also regulates important issues such as the liability of internet service providers. The extent to which these will be affected by Brexit negotiations remain to be seen.

Customs Seizure

EU Legislation empowers IP owners to partner with customs authorities  in the EU Member States to seize, detain and ultimately destroy imported goods which infringe their rights. This is a particularly important tool for trademark owners in the fight against counterfeits. If the UK remains part of the EEA, the EU legislation on customs seizure would most likely continue to bind the UK. However, under a WTO model, the UK would be free to reject EU legislation and determine its own border controls. This in conjunction with the possibility of amendment of rules relating to the Exhaustion of Rights could mean that businesses could find it easier to prevent counterfeits from entering the UK, although, at the same time it also increases the costs in maintaining two separate border protection regimes.

If you have any questions or have any comments, please contact John Olsen (john.olsen@lockelord.com).

Leaving the EU – what this means for you and your business

Now that the dust is settling on the UK’s decision to leave the EU, our clients are asking what this means for them.  We are the first member state ever to  leave the European Union and as such, the result has ignited much uncertainty and debate about what lies ahead.

Change always brings opportunities, as well as challenges, and we are focused on helping our clients understand how these changes can benefit their business during the period of transition ahead.

A recent survey we commissioned suggests that only 20% of businesses had set in place a continuity plan for the leave vote. In the public sector, there is concern about what will happen to staffing arrangements as well as EU-funded collaboration projects.  We understand that there is much uncertainty at present, but we will continue to support and provide innovative solutions to help our clients invest and grow.

Of course, it’s not only businesses that are affected.  Exit from the EU will likely have a knock-on effect on a range of private and family law matters which are currently governed by a system which in many areas combines both EU and domestic legislation into an integrated European framework.

Whilst it is not clear what the exit will look like or how we will take forward the laws that the UK has adopted over the last 40 years, we do know that there will be opportunities coming out of these changes and we will be supporting our clients in understanding how these can be used to their advantage.

In this article, I explore some of our key sectors and what the implications may be for them of leaving the EU.

Real Estate

Real Estate markets, whether commercial or residential, always prefer certainty. The last few months have led to a slowdown in transactions while people awaited the outcome of the Referendum. In some recent cases, transactions have been entered into with options to determine depending on the result of the vote, and those agreements may now be determined. Now that we know that the Leave vote has won, we expect to see the Real Estate markets to pick up rapidly. Banks are still in the market to lend to the right product, and there is a significant amount of private equity cash available for property transactions. However, there may be some weakness in areas involving prime offices if companies start relocating their HQs.

Private Law

Since 17 August 2015, we have been coming to terms with new EU legislation for succession (known as Brussels IV). Paradoxically, this system is intended to unify the succession laws which apply to an estate, and now, we have voted to leave just at the point when the member states choose to change things for good!

That said, the UK opted out of the full implementation of the legislation, along with Ireland and Denmark, so the impact strangely has been simplified as there was some uncertainty as to how the legislation applied to the UK. The intention is that EU citizens are able to make an election of the law of the jurisdiction of their nationality to govern the whole of their estate (including foreign property located in another EU state). Post-Brexit the UK is clearly a ‘third state’ under the Regulation, like the USA

This means less flexibility in the choice of succession rules and potentially more tax, although double taxation treaties should continue to apply. Our EU neighbours mainly favour a succession system which includes forced heirship, and we could find ourselves in a position where there is less choice on the ultimate distribution of foreign immovable assets.

Employment

Employment law is unlikely to see too many dramatic changes as the UK leaves the EU. Despite the claims that businesses are stifled by EU labour laws, the fact is that many Employment law rights either originated in the UK or have become deeply embedded in UK law as the UK’s attitudes to social issues have evolved. A move to scale back all but the most minor Employment law rights would, in all likelihood, be politically unpopular.

In addition, potential changes could be severely limited by the subsequent trade deal negotiated – other non-EU countries such as Norway and Switzerland have not in practice been able to free themselves of many EU labour laws. In several areas, such as data protection, we are likely to produce laws that mirror EU legislation to ensure we can conduct business effectively.

Such changes as there are could be seen in the areas of collective consultation rights, clarification on Working Time rights such as paid holiday and a repeal of the 48-hour limit, tweaks to the Transfer of Undertakings (Protection of Employment) Regulations 2006, and potentially more significant changes to/removal of the Agency Workers Regulations 2010.

As well as the immediate impact on markets and the business outlook for employers, the referendum result will also throw up longer-term issues, such as the migration of staff in and out of the UK and a potential re-run of the Scottish referendum. Unfortunately, the lack of a clear indication as to what any exit deal would look like makes it very difficult for businesses to plan for it in any practical way at the present time.

Banking and Finance

The financial markets and the banking sector hate uncertainty. The government needs to move quickly to reassure the business community by setting out a clear plan to replace existing trade and other arrangements with the EU and the world as a whole.

Particularly in the short term, the role of the Bank of England will be key. At a time when the monetary tools available to them are already limited, they need to find a way to protect the pound and keep interest rates at a level that enables companies to continue to borrow and invest in what will hopefully be a prosperous economic future for the UK.

Healthcare

The Referendum campaign highlighted a fundamental lack of objective data regarding the impact of EU membership on our healthcare system, and therefore the effects of an exit. However, staffing is likely to be impacted as the NHS, and social care are reliant on overseas migrants to help alleviate intense staffing pressure.

The London location of the EU Medicines Agency has been cited as a positive factor in the NHS’s successful positioning of its R&D capabilities, attracting overseas investment and funding. If the EMA must now relocate, the long-term impact on trials revenue and participation will depend on the strength and depth of relationships already established.

European systems have influenced several of the new models of care programmes in the NHS.  Many independent healthcare operators have pan- European activities. Uncertainty in the short term about implications of an exit could impact collaboration and appetite for financial risk in organisations supporting the NHS.

Education

It is impossible to ignore the fact that the higher education sector, which is presently reliant on the EU as a reliable source of funding, in the form of students, research grants, and capital finance, faces a challenging future, given the uncertain nature of the relationship between the UK and the EU. In the next five years, we may well see a more innovative approach to funding and collaboration required, with institutions looking further afield for support, or collaborations with the private sector.

Intellectual Property

For the moment it is business as usual and trade mark and design owners should not panic – European Union Trade Marks and Registered Community Designs remain valid in the UK, and there is no immediate loss of IP protection.

Once the UK formally gives notice to exit, the EU negotiations will begin on the status of EU marks in the UK and whether any transitional provisions will be required to grandfather across EU trade mark and registered design rights into the UK.

Planning

There maybe harmful consequences for major infrastructure projects as much of the funding comes from Europe including Crossrail and HS2.  How such projects will be funded in the future will apparently be included in the Brexit negotiations.

It is impossible, though, to predict what the wider impact will be on our economy or the property market at this stage but if migration is reduced, then the pressure on housing should be reduced and the housing needs assessed more accurately.

Information Governance

Most of the laws in information governance are derived from European legislation. The Data Protection Act, the Privacy and Electronic Communications Regulations, the Re-use of Public Sector Information Regulations, the Environmental Information Regulations – all of these are examples of UK laws derived from EU directives.  For primary legislation, such as the DPA, leaving the EU will have no immediate effect.  For secondary legislation, such as the EIRs, the situation is more complicated.  These were made under powers derived from the European Communities Act 1972, which is the statute that governs our membership of the EU.

Family Law

Leaving the EU will have a knock-on effect on a range of family matters governed by the current system, which pulls together strands of EU and domestic legislation into a single Family law regime. Changes are likely to be felt most keenly by international families.

In terms of jurisdiction in divorce matters, the current rule of “first in time” as to where proceedings will be dealt with will disappear. Parties will therefore potentially be afforded greater flexibility as to where they choose to divorce. However, matters could become increasingly costly if the proposed jurisdiction is contested and, in these circumstances, parties may well find themselves litigating over jurisdiction issues before the main proceedings are dealt with at all.

Enforcement of existing domestic Orders concerning maintenance, child contact, and domestic violence will also be affected. EU legislation currently works with domestic legislation to provide a relatively simple framework for enforcement of such Orders in other EU member states. Brexit means that the system will not operate as such any longer, thereby potentially undermining the current system of mutual co-operation between Courts.

The law governing international child abduction would also see some changes, albeit that these would be less significant. This is because the main international legislation governing this area is found in the 1996 Hague Child Protection Convention and the 1980 Luxembourg Convention, which will remain in force. However, changes incorporated into these Conventions by later EU Regulations will fall away, leaving gaps to be filled at a later stage. The child abduction regime may be weakened in the interim until a comparable system is put back into place through re-negotiation of bilateral agreements with different states to replicate the lost provisions.

For more information on what leaving the EU will mean for your business visit www.blakemorgan.co.uk/brexit or email brexit@blakemorgan.co.uk