What will devolution of Scotland from the UK mean for IP rights?

The price of freedom

On 1 May 1707, the Kingdom of Scotland and the Kingdom of England, combined to form a single political union, which eventually formed the United Kingdom (UK) comprising four separate but intertwined countries, namely England, Scotland, Wales and Northern Ireland. Now the residents of Scotland are being asked whether the country they live in should be truly independent from the rest of the United Kingdom. A “yes” vote could result in a headache for businesses wanting IP rights in the new Scotland.

Union flag upside down

The administration of IP rights in the UK

If Scotland votes to leave the UK, IP owners with rights in Scotland will be fundamentally affected, whether they are nationals of Scotland, or “foreign” companies contributing to the Scottish economy. Scotland’s First Minister Alex Salmond tells us that intellectual property will continue to be protected, although the details of how it will be protected has not yet been developed, and will not be unless the “yes” vote prevails.

In the UK there are two routes available to protect trade marks, designs and patents: national rights which apply across the UK and are administered by the UK Intellectual Property Office; and supra-national rights which apply across a range of European countries and are administered by the Office for Harmonisation in the Internal Market (OHIM) and the European Patent Office (EPO).

Post-independence, Scotland may create its own intellectual property office to administer a Scottish register of trade marks, designs and patents. It seems improbable that Scotland would share the UK’s register because the current status quo means that, for instance, a mark which is used only in England will remain validly registered and can therefore prevent the use or registration of a similar mark in Scotland; an invidious position for a newly sovereign country. Likewise with designs and patents, it seems unlikely that an independent Scotland would allow rights established in the remainder of the UK to inhibit the economic activity of entities in Scotland.

Perhaps Scotland will establish a system of re-registration whereby owners of existing national rights on the UK register may protect them on the Scottish register within a specified timeframe. Scotland may also become a signatory state to the Paris Convention and Madrid Protocol, so at least claiming priority rights from a Scottish patent or design application should be straightforward, as would designating Scotland as a separate jurisdiction under the Madrid system.

The European systems

Where it gets trickier is the supra-national rights administered by OHIM and the EPO. As the UK is a member state of the European Union, an independent Scotland will effectively be seceding not just from the UK but also from the EU. Several senior officials in the EU have bluntly indicated that admission back into the EU is far from guaranteed.

The upshot for IP right holders is that Community trade marks (CTMs), Community designs and European patents will no longer be enforceable in Scotland. Although Scotland may choose to recognise these rights as being valid through the adoption of national legislation, the same will not work in reverse. To maintain the validity of their CTMs, Scottish businesses will need to also trade outside Scotland so that they are in a position to prove the mark has genuinely been used. Similarly, registered or pending Community designs and European patents may be recognised in Scotland, at least in the short term. After secession, applicants are likely to have to seek protection in Scotland as well as the European systems (and the likely impending unitary patent system).

Scotland flag

Scotland’s First Minister Alex Salmond says “Independence will allow Scotland to offer a simpler, cheaper and more business-friendly model than the current UK one which is seen as bureaucratic and expensive, especially for small firms”. But being outside the European systems means that Scottish businesses trading in the EU must register in Scotland as well, which can surely only increase costs and bureaucracy. If Scotland becomes a member of the Patent Co-operation Treaty, which any contracting state to the Paris Convention can become, then not being part of the European systems may be slightly less of an inconvenience.

For businesses in Scotland wanting protection in Europe, the European systems are still an option, though as they will no longer be residents of the European Union, they will need representation from a professional representative, the most convenient ones being located, ironically, in the UK. One also imagines that Scottish IP professionals, suddenly unable to practice European law, but equally suddenly the world experts in Scottish patent law, will find little economic incentive to reduce the cost of obtaining protection in Scotland.

Note also that, with regards to enforcement of Community trade marks and designs, a national court has the power to grant an EU-wide injunction for infringement but only if the country is a member of the EU, an option which will not be open to Scottish businesses.

The Scottish Government also hints at introducing protection of technical innovations with something akin to a German utility model. That’s fine for obtaining IP rights in Scotland, but less convenient for Scottish businesses wanting to seek IP protection overseas in the many countries of the world that do not have utility models, in which Scottish businesses will still need to reach the long-established “patent” standard. One might argue that downgrading the barrier to entry to IP rights in Scotland is actually anti-Scottish, as it enables non-Scottish entities to more easily obtain enforceable rights in Scotland against Scottish businesses.

Not so .SC peasy

What about names? The United Kingdom will still exist but probably as the United Kingdom of England, Wales and Northern Ireland. Use of “GB”, though inaccurate as a large chunk of the island of Great Britain will be independent, are likely to linger for historical reasons, not least because this is the official ISO 3166-1 alpha 2 code assigned to the United Kingdom in 1974 by the International Organization for Standardization and adopted by WIPO, the OHIM and the EPO.

If it chooses to move outside the UK, Scotland will need its own country code, though the choices are slim. .sc belongs to the Seychelles, .st to São Tomé and Príncipe and .sd to Sudan. In fact there are only 3 unassigned prefixes beginning with S, none of which appear appropriate. That might explain why .scot is the preferred new top level domain name.

Don’t flap

It is not only vexillologists who will be keen to learn as soon as possible about the possible appearance of the first new UK flag since 1801. Brands which incorporate this into their logo design will need to file again if the UK chooses to adopt a new flag without the blue saltires of Saint Andrew’s Cross. That also has a knock on effect for Australia, New Zealand and a handful of other states.

How business can plan ahead

All businesses should undertake a rationalisation and risk assessment process for existing IP rights, in particular to:

 ● ensure that any trade marks are used in Scotland and the rest of the UK to maintain their validity

 ● consider whether any “British” or GB branding is appropriate and versatile enough to adapt to any changes to the flag, country codes or national sentiment

 ● allocate additional budgets for re-registration of trade mark, design and patent portfolios in Scotland

 Scottish businesses should be prepared to:

 ● instruct UK representatives to prosecute and enforce Community trade marks, Community design rights and European patents.

First published in the World Trademark Review, 10 May 2014

By Robert Cumming and Adam Tindall

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