IP across the divide
Cherrie Stewart investigates the novel solution to Brexit that now prevails in Northern Ireland
The outcome of the UK’s 2016 Brexit referendum created a unique problem for Northern Ireland (NI) – one that required a novel solution.
NI is the only part of the UK that has a land border with the EU. The 1998 Good Friday Agreement, which helped bring an end to the Troubles in NI, stipulated that there was to be no hard border on the island of Ireland. The UK’s decision to leave the EU introduced a conflict here, since this requirement clashed with the EU’s need to ensure the integrity of its single market for goods by having proper checks on its borders.
The tension between these diametrically opposed requirements resulted in the agreement of the Protocol on Ireland/Northern Ireland (the Protocol), which, in its opening statements, “acknowledges the need for this Protocol to be implemented so as to maintain the necessary conditions for continued North-South co-operation, including for possible new arrangements in accordance with the 1998 Agreement”.
The Protocol and IPRs
With that overriding objective in mind, it was agreed that a limited set of rules related to EU customs and the EU’s single market would be applicable in NI. This, of course, has a direct impact on the enforcement of intellectual property rights (IPRs).
Under Article 5(4) of the Protocol, there are a number of provisions of EU law that now apply to IPRs in NI. Those specifically listed under s45 of Annex 2 relate to:
- Geographical indications of spirit drinks;
- Quality schemes for agricultural products and foodstuffs;
- Geographical indications of aromatised wine products;
- A common organisation of the markets in agricultural products; and
- Customs enforcement of IPRs.
A limited amount of protection is afforded to some Protected Geographical Indications (PGIs). The owner of a right in a PGI can request a customs action in an EU Member State for protection in NI of said rights. For example, NI can be selected as a territory for enforcement action in respect of protected PGIs by checking box XI under s10 of the “European Union – Application for Action” form or by filing a UK Application for Action for NI alone. In addition, decisions granting an application in respect of EU IPRs protected in NI under the Protocol can be made by the competent customs department in either the UK or an EU Member State.
The Protocol does not, however, contain any divergent provisions in respect of other types of IPR (eg, trade marks, patents and copyright), and an EU Application for Action does not cover said rights in NI. For example, in a notice to stakeholders related to exhaustion of IPRs, the EU stated that: “While the Protocol on Ireland/Northern Ireland provides that certain rules of the EU acquis in respect of goods apply to and in the United Kingdom in respect of Northern Ireland, it does not provide for the exhaustion of intellectual property rights in the EU in cases where a good has been legally put on the market of Northern Ireland.”
Customs and exhaustion
Just as in the rest of the UK, any IPRs in goods put on the market in NI are not exhausted in the EEA. However, there is now a difference between NI and the rest of the UK in that there is no requirement to file customs declarations to record the movement of goods, and there are no customs checks at the border between Ireland and NI – or indeed between NI and any EEA Member State, thus making it more difficult to enforce IPRs and prevent the spread of infringing and counterfeit goods.
Currently, goods entering NI from Great Britain (GB) must go through customs at ports on the Irish Sea. A declaration concerning whether a good, originating from GB or a third country, is “at risk of subsequently being moved into the EU, whether by itself or forming part of another good following processing” is therefore required under Article 5(1) of the Protocol.
Customs authorities have the power to seize goods that they suspect infringe the IPRs of rights holders. Then, once the right holders have certified that the goods are infringing, they can be destroyed.
However, an Application for Action in respect of EU IPRs cannot be enforced on goods coming from the rest of the UK or from a third country. Such an application would have to be filed in an EU Member State and would not be enforceable in NI in respect of any IPRs not specifically outlined in the Protocol.
Declaring that goods are “at risk of being moved into the EU” is a potential barrier to IP enforcement since some NI companies are finding that the consequences of making such a declaration can be highly detrimental to their businesses.
One Northern Irish company, a wholesaler and retailer of doors, floors and associated goods, included on a declaration on a pallet of goods being transported from its premises in England to NI that there was a chance of a very small minority of the goods being exported to Ireland due to the existence of their Irish retail website. A 6% duty was placed on the whole consignment of goods, thereby increasing costs by thousands of pounds. Consequently, the firm has now suspended internet sales to Ireland, and its plans to open a physical outlet there have been paused while it seeks a way to keep costs at a reasonable level in NI when exporting to Ireland.
IPRs in goods put on the market in the EEA are currently exhausted in the UK, including in NI. This may change once the 2021 consultation on what the UK should do about exhaustion and parallel trade in the future – which is now being conducted by the UK Government – is completed and a decision regarding the long-term UK position has been reached. The customs checks being where they are may make it difficult to prevent the circulation in NI of goods put on the market in the EEA whose IPRs are not exhausted if this position changes.
Opportunities and risks
Invest NI, the designated Economic Development Agency for the territory, has been understandably vocal about the opportunities afforded by NI’s unique position, making statements such as: “This dual market access position means that Northern Ireland can become a gateway for the sale of goods to two of the world’s largest markets and the only place where businesses can operate free from customs declarations, rules of origin certificates and non-tariff barriers on the sale of goods to both GB and the EU.”
However, concerns have been raised that the “unfettered access” promised by Article 6(1) of the Protocol (which also states that any EU rules invoked by the Protocol would only be applied to trade between NI and GB “to the extent strictly required”) will cause difficulties for the owners of IPRs.
Under the Protocol, there are no customs, regulatory checks or processes for “qualifying” NI goods moving from NI to GB. There are also no additional authorisations or approvals required for placing “qualifying” NI goods on the market in the rest of the UK, with some limited exceptions. For the majority of goods moving from NI to the rest of the UK, there are no export declarations, no import declarations on arrival in GB, no customs duties and no changes to how the goods arrive at ports in GB.
In December 2020, NI Assembly member Diane Dodds raised her concerns over the Protocol and the concept of a “frictionless” border, stating that it was vital that NI did not become “a backdoor for the bloc’s products”.
Of course, in the course of any regime change, teething problems are inevitable. The introduction of the measures required by the Protocol have proved to be no different. There has been friction on the streets of NI and complaints from businesses concerning the new processes and procedures. Due to the difficulties surrounding the implementation of Article 5 of the Protocol, in March this year the UK Government stated its intention to extend the grace period for implementing certain aspects of the Protocol concerning the movement of goods from GB to NI. The EU subsequently sent a formal notice to the UK Government concerning the “breach of its obligations under the Protocol”. At the time of writing, discussions were still ongoing.
We have been presented with the Protocol as a novel solution to the unique problem created by Brexit in NI, and it is unlikely that any substantive changes to the Protocol will arise from the ongoing discussions between the UK and the EU. Fundamentally, the Protocol sets out a framework that has implications for the owners of IPRs and with which we must engage. It is clear that the effects of the Protocol on parallel trade and IP enforcement in NI, and potentially in the rest of the UK too, will need to be closely monitored as we continue to operate in a post-Brexit world.
Cherrie Stewart is a Chartered Trade Mark Attorney and Director at MacLachlan & Donaldson (Ansons)Read the magazine
Trade Mark Attorney / Director, MacLachlan & Donaldson