Brexit – an ugly divorce or an opportunity for improvement?

The dust is starting to settle after the UK’s decision to leave the EU. What remains is great uncertainty – what happens now? The reality is sinking in and companies are asking questions regarding how this will affect their intellectual property rights and businesses in general. What is becoming clear is the absence of a straight answer – and it looks like we will have to wait. 

Through the referendum the British people have spoken, and with 52% wishing to leave compared to 48% in the remain camp, it was decided that the UK should leave the European Union. The next step is to invoke Article 50 of the Lisbon Treaty, which gives the two parties a two-year time frame during which they have to come to an agreement on the terms of the split. Prime Minister Theresa May has declared that this will take place by the end of March 2017. Accordingly, the UK will be expected to leave by the summer of 2019, depending on the precise timetable agreed by the parties during the negotiations. However, it must be kept in mind that Greenland was only able to leave the EEC in 1985, after three years of negotiations, despite the fact that the only real issue at hand concerned fishing rights. The current separation is bound to be more complex, considering the UK’s central role in many of the Union’s activities. Thus, an actual exit from the Union might take even longer in this case.

There are different possible outcomes regarding the future relationship between the UK and the EU. These can be summarised as follows: the World Trade Organization option, where the relationship between Britain and the EU is governed by the WTO obligations; the Norwegian option, where the UK is a member of the European Economic Area; the Swiss option, where the UK is a member of the European Free Trade Association; the South Korean option, where the relationship is based on a comprehensive free trade agreement; and the Turkish option, where the UK is a member of the EU customs union but has little power in terms of shaping policy.

Regardless of which of these outcomes is ultimately chosen, IPRs and the life sciences industry are bound to be affected, but to a different extent.

Patents
First, it is important to acknowledge the differences between the patents available. European patents will not be affected by Brexit since the European Patent Convention (EPC) was established by an agreement outside the EU. Thus, the EPC and the European Patent Office (EPO) are not EU institutions. The same applies to the Patent Cooperation Treaty, which is administered by the UN organ World Intellectual Property Organization (WIPO).

However, it was planned that the proposed Unitary Patent and the Unitary Patent Court System would enter into force during the spring of 2017. This will be delayed due to the fact that the agreement currently requires ratification by 13 signatory states, including the UK as one of the mandatory states. Another issue is how attractive this patent will be when the UK market is not covered. It is possible that inventors will continue to choose the existing system if they have to file a separate patent application for the UK.

Clinical trials
The EU Clinical Trials Regulation (No 536/2014) is expected to enter into force by October 2018, and thus overhaul the current regime. The new Regulation will modernise the framework for clinical trials, ensure a greater level of harmonisation within the EU and provide for a single application for trials across the EU. This change aims to reduce the administrative work for applicants in addition to simplifying the process. If the UK finds itself outside this new regulatory system, companies wishing to conduct clinical trials in the UK as well as the EU could face extra administrative burdens. However, the parties could arrange mutual recognition agreements to minimise such inefficiencies caused by Brexit.

Supplementary Protection Certificates
Since Supplementary Protection Certificates (SPCs) were introduced as national UK rights through an EU regulation, it is most likely that pending and existing SPCs will remain unaffected. However, the UK has now been provided with the opportunity to legislate on SPC rights that are more favourable to innovation companies carrying out research and developing new products. As an example, it has been discussed that medical devices should be the subject of SPCs, and that the reduced term for pharmaceutical SPCs might be reviewed. The decisions to be made by the UK may be influenced by the European Commission’s intended study on the effects of an SPC based on a Unitary Patent. 

Regulatory Data Protection
Since Regulatory Data Protection (RDP) for pharmaceuticals is provided by the UK Medicines Act, which is based on numerous EU Directives and regulations, it is likely that the protection will remain the same. Nonetheless, questions are bound to arise with regard to the EU’s General Data Protection Regulation (GDPR), which is planned to enter into force in May 2018. Like the Clinical Trials Regulation, the GDPR is designated to harmonise data protection within the EU. The UK’s relationship to the GDPR will depend on whether or not it comes into force before the negotiation period is completed. However, considering the current standard applied in the UK, it should not be difficult to obtain an acceptable data protection standard to enable a future trade and commercial relationship with the EU. 

Market authorisation
Brexit will most likely hit the pharmaceutical sector hard in regard to market authorisation since the industry has become dependent on the Europe-wide system run by the European Medicines Agency (EMA). The EMA can grant a single market authorisation to pharmaceutical companies, providing access to the entire EU market. Due to Brexit, the EMA is expected to relocate from London, and since the proximity to the EMA is one of the reasons as to why pharmaceutical companies choose to locate their main European operations in the UK, we may see a change in the location of numerous headquarters. If the UK is to be outside the EEA after Brexit, separate national authorisation would be required for the UK. This could result in an increased administrative burden for the applicants. However, it is possible that EU market authorisations could be taken into account, as in Switzerland, and the systems would thus stay aligned.

What Brexit will entail is yet to be determined. Many companies are now discussing the possibility of relocating their headquarters from London to Frankfurt, British law firms are setting up offices in Ireland, and Scotland might initiate another vote for independence. The United Kingdom’s wish to control its borders may come with a high price tag. Nonetheless, the general consensus at the moment is to “keep calm and carry on.”