Considered in Grand Committee
That the Grand Committee do consider the Designs and International Trademarks (Amendment etc.) (EU Exit) Regulations 2019.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee B)
My Lords, the Intellectual Property Office has been preparing for a range of outcomes to our negotiation with the EU. The regulations form part of that preparation and are intended to ensure that the system governing intellectual property rights in the UK continues to function in the event of no deal being agreed when we leave the EU on 29 March.
For designs, much of our existing domestic legislation derives from EU directives, which are implemented through the Registered Designs Act 1949. Under the EU design regulation, the appearance of a product can be protected under a registered community design, granted by the EU Intellectual Property Office. This system runs in parallel to our domestic system, so protection in the UK can currently be obtained by registration under either or both the EU or UK systems.
Shape and appearance can also be protected under the unregistered community design. This is automatically established when a design is first shown to the public and is particularly valued by design-intensive sectors such as the fashion industry. Like registered design, the UK provides a parallel domestic system. However, the terms of UK unregistered design are different from those of EU unregistered design. After exit, protection in the UK for existing registered and unregistered designs under the EU regulation will be lost. The draft instrument uses the powers provided by the European Union (Withdrawal) Act 2018 to address deficiencies in UK design law that would arise upon exit and to ensure that such EU design rights are not lost.
In addition to the rights granted by the EU Intellectual Property Office, businesses can obtain EU-wide registered design and trademark protection through an international system administered by the World Intellectual Property Organization. This system enables businesses to protect their designs and trademarks in multiple territories via a single application, filed in one language. Both the EU and UK are contracting parties to this system. Like registered EU rights, international EU rights are protected through EU regulations, meaning that a failure to act will result in the protections afforded to these rights also being lost.
This instrument ensures that replacement rights will be provided to those who own registered EU designs on exit day in the form of a “re-registered” UK design. We will preserve UK protection through the “continuing unregistered design” for those who hold unregistered EU design rights at exit day. These new UK design rights will be fully independent of the corresponding EU right. However, they will retain the effective date of the EU design and, in the case of a reregistered design, any other relevant dates that were filed as part of the original EU application.
Because the terms of EU unregistered design right are broader than those provided by existing UK unregistered design, we are also introducing a new type of UK right called “supplementary unregistered design”. In doing so, we will ensure that the full range of design protection provided in the UK prior to exit day will remain available after we leave the EU. This new right will function alongside existing UK unregistered design. An EU unregistered design that exists before exit day will continue to provide protection in the UK through the continuing unregistered design, while those who disclose new designs in the UK after exit day will enjoy continued access to the characteristics of EU unregistered design through the new supplementary unregistered design right.
The instrument also ensures that registered designs and trademarks which are protected in the UK through EU designations under the Hague agreement and the Madrid protocol will continue to be protected in the UK after we leave the EU. For international designs that designate the EU, we will create comparable reregistered UK designs just as we are with EU designs registered at the EU Intellectual Property Office. For international trademarks designating the EU, we will create a comparable UK trademark, taking an approach similar to that set out in the EU trademarks exit SI, recently approved by both Houses.
As with reregistered designs and comparable trademarks being created from registered EU designs and trademarks, these new rights will be fully independent of the corresponding international designs and trademarks, but they will inherit their effective dates and will be treated as if applied for and registered under UK law.
The instrument further explains the approach that will be taken for registered community design applications and international design and trademark applications which are pending on exit day. Those with such a pending application will be able to file a new application in the UK, claiming the earlier filing date of the EU application. To claim the earlier filing date, the application must be submitted to the IPO within nine months of exit day.
The instrument also sets out provisions to accommodate other particulars of EU and international design and trademark protection, including deferment of design publication and the use of subsequent designations to create multiple EU protections under a single international trademark registration. As these new UK rights can be challenged, assigned, licensed and renewed in their own right, the instrument also contains provisions to accommodate those procedures.
Finally, there are miscellaneous amendments to existing UK trademark and design law to reflect the fact that the UK will no longer be an EU member state or a member of the European Economic Area. Although this SI has not been subject to a formal consultation, the IPO has discussed options for preserving EU and international design and trademark rights with both UK stakeholders and the World Intellectual Property Organization. These regulations represent the culmination of those discussions. The IPO ensured that businesses and legal practitioners were made aware of these changes through technical notices published in September last year, and it will also provide full business guidance once the draft instruments are made.
The regulations are a small but vital part of ensuring that the intellectual property system continues to function if the no-deal outcome arises. I hope that noble Lords will support them and I commend them to the Committee.
My Lords, I thank my noble friend the Minister for setting out the scheme. I have just one or two questions so as to gain a greater understanding of the background.
The Explanatory Note, which forms part of the statutory instrument, states on page 69:
“An impact assessment has not been published for this instrument as no, or no significant, impact on the private, public and voluntary sectors is foreseen”.
The Explanatory Memorandum then sets out precisely what the costs are. If the department has not conducted an impact assessment, how can it be sure that no significant costs will arise? If a design is not reregistered, will it lapse? In the view of my noble friend and the department, is a deadline of nine months following exit day for reregistering a design sufficient, given the sheer volume of designs that I understand are in play? There seem to be different figures for the costings, and it would be helpful to know what those costings are.
Paragraph 7.10 on page 5 of the Explanatory Memo-randum, under the heading “Deferred publication”, says:
“Rights holders with a deferred design at EUIPO that request deferment in the UK will not be able to defer publication for more than 30 months overall”.
Therefore, there is a discrepancy, with one deadline being nine months and the other being 30 months. Does that mean that rights holders will have an extension between nine and 30 months? Presumably this would not be affected by something subsequently being negotiated in the event of a deal being agreed, as with earlier statutory instruments. Paragraph 7.10 goes on to say:
“As these designs will already be examined by the EUIPO, no formal examination … will take place at the UK IPO”.
That seems sensible indeed.
The 16th report of Sub-Committee B of the Secondary Legislation Scrutiny Committee concludes that a preliminary estimate of £375,000 is deemed to be the cost of converting some 700,000 RCDs owing to the comparable UK right. That is a major exercise. Clearly, this cost will not be a charge laid at the door of the IPO. The report goes on to state that it will be part of the fees. Does my noble friend or his department envisage a big increase in the level of the fees because of this? The figure of £375,000 was given as a preliminary estimate. However, on page 12 of the Explanatory Memorandum, an estimate of £63,000 a year is given for the average cost,
“in other fees associated with holding a registered design right”.
I would like the Grand Committee to have an idea of what the overall fees will be. On page 11, at paragraph 12.3, it is repeated that:
“Holders of RCDs will face the additional cost of renewing the new comparable right in addition to the original RCD”.
It goes on to say that, based on the UK renewal costs, the cost is estimated to be £500,000 a year.
We have two different costs: one of £375,000 and one of £500,000. It might be difficult for my noble friend to say what the projected costs will be. Is this something that should cause concern? Is it a one-off cost or an annual cost? Might it stifle future designs?
My Lords, as with the last SI, the noble Baroness has put her finger on a large number of issues. Although this SI does not compete with the 600-page one that is still to come, I am afraid that, even at 60 pages, its length demonstrates the number of rights that sadly are going to be lost and which are extremely valuable to designers, particularly fashion designers and particularly at events such as London Fashion Week.
I start by asking whether the Minister could expound the situation as far as the exhaustion of design rights of this nature is concerned. The situation was wonderfully simple for those who wished to exhibit new designs at London Fashion Week, for example, knowing that their designs would be protected on the continent—those who exhibited in Paris had them protected here, and those who exhibited on the catwalk here had them protected all over the EU. Perhaps the Minister will explain what the actual exhaustion situation will be, particularly with the new SUDRs.
The mechanisms are relatively straightforward. These are similar to those adopted for the equivalent of the EU trademark. As I read it, there is a level of automaticity about the registration of the new right. It would be churlish not to welcome the fact it will include the features that are characteristic of the European design right, in terms of lines, contours, colours, shapes, textures and so on. That is an extremely important aspect.
I assume that, although there is a level of automaticity—entirely as the noble Baroness said—the sting will come in the renewal at the end of the three years, or whenever it occurs. The Explanatory Memorandum talks about this costing a total of £500,000. It would be useful to know where that estimate derives from.
Again, we are told that relevant stakeholders were consulted. Can the Minister again unpack whatever round table it was that took place? It is rather like Colonel Mustard in the drawing room: where was the deed done on consultation? It is important that we know when examining these statutory instruments that the right people were consulted and are happy, as far as it is possible to be happy with a no-deal Brexit SI, with the proposals set out. I look forward to hearing what the Minister has to say.
My Lords, I am very grateful for the comments of the noble Baroness, Lady McIntosh, and the noble Lord, Lord Clement-Jones, which have covered much of the ground that I was going to raise, so I shall not go back over it. As both of them have said, this is a complicated area. My feeling from the comments made is that it is likely to become more complicated after a no-deal exit, not least because of an additional design right.
On that point, as the noble Lord, Lord Clement-Jones, pointed out, it has taken this rather odd set of circumstances to persuade the Government that there is a problem with our whole range of design rights. We have raised in the House before the question of why there is such a focus in the UK on registered design rights, as against the very much larger number of unregistered design rights used in fast-moving industries such as fashion and why those industries do not use the registration system at all. Bringing in another model just to try to fill a gap seems to overcomplicate the whole structure, although it provides additional cover, as the noble Lord said, and I welcome that.
Does the Minister recognise that an issue is looming here? Do we need another in-depth look at this whole area to try to unbottle some of the problems that we have caused in the past few years by bringing in additional layers of legislation and regulation and consider whether we need a new approach, because the industry has moved away from the current regulatory structures?
Having said that, a number of points raised need answers, and I look forward to hearing what the Minister will say. I have only a couple to mention. The noble Baroness mentioned paragraph 12 of the Explanatory Memorandum. I have two points on that. At paragraph 12.11, there is a rather odd piece of typography. It states:
“An Impact Assessment has not been prepared for this instrument because .”
There are just two square brackets, so we do not know why it was not prepared, although we can guess. Can the Minister confirm why we have not had an impact assessment and not leave us hanging? It is a bit like a missing third act.
I have a point about cost recovery, which was well argued by the noble Baroness. The resourcing issues of this are not small: they may be £500,000, they may be £375,000, but they are still substantial. On a cost-recovery model, who pays? Are we saying that designers currently registering designs—which is about 10% of the total design component of industry—are carrying the costs not only of the existing arrangements but the additional burden of having to produce another registered design system introduced because of the possibility of defects in the relationship of those registered on the European basis? It is all very well saying that this is a benefit to the designers, but it is at a cost. I should be grateful if the Minister would confirm my reading of the situation.
I asked this question on the previous statutory instrument, but I did not get a full answer. We seem again to be engaging in asymmetry. There would be an argument for saying that if we have to have a no-deal exit, when that happens, the arrangements for design protection must be limited to the UK because no reciprocity is promised from the EU, yet here we are saying that we in the UK will continue to recognise the registration process which takes place in EU countries after we leave but are unable to offer that right to those who register designs with the UK, even with the additional right. Why are we doing that? Is that an asymmetric approach, or is there something we do not know about the arrangements that have been made for that? I am not against what has been going on. However, if I am right, I think the consequences are that, while overseas or European designers may benefit from having their designs copyrighted—the catwalk example is a good one, in that you can have a fashion show in Paris and be confident that your designs will be covered in Britain—in Britain, we will not be able to do that because there is no necessary reciprocity. That seems unreasonable and I would be grateful to know who benefits from it when we hear from the Minister.
My Lords, I will start with consultation and explain what we did. I will not repeat what I said on the previous SI, but the important thing is that, although we were not able to consult fully in the way one might have wished, the IPO has engaged with businesses on the implications of exit ever since the referendum result. We have sought to maximise continuity in the no-deal scenario and in the early stages of negotiation on the future partnership. As I said earlier, revealing the details of our continuity approach through public consultation might have risked that. The individuals who took part in the technical review did so in a personal capacity; we invited all sorts and I hope we had a representative group. They were chosen because of their past experience as representatives of various stakeholder bodies which usually engage in consultation with the IPO.
I thank the Minister for giving way. We have been over this ground before and I do not want to prolong the debate. However, the essential difference that is now emerging across all the SIs that we have been considering is the question of whether consultation has been carried out under Cabinet Office rules or not. If it is done under Cabinet Office rules, there are procedures, processes and resulting consequences, including publication and the reporting of all evidence received. I think we all agree that this would probably have helped materially in the process of going through all these statutory instruments.
The second point is that the consultation has then got to be on an open and representative basis, rather than selecting people from organisations with which the department, quite rightly, has ongoing and continuing discussions. The problem with this approach is that it tends to give the impression that those who have been consulted are speaking in their official capacity, when the Minister is making the point quite clearly that that is not the case and that this is very much an informal, personal discussion, because the consultation is not happening under Cabinet Office rules. That is the point we are all making; I do not think we need to dwell on it, but we should accept that that is the situation so that we do not get mixed up between the two systems.
I am glad that the noble Lord is prepared to accept that point. Obviously, we could not follow the Cabinet Office rules—I was trying to make that clear. They are not strict in that respect and there was no absolute necessity to follow them on this occasion. However, we wanted to make sure that we consulted enough and consulted appropriate people to make sure that we were not going into this blind—not that we would have been doing so even if we had not consulted.
I move on to the other hardy perennial—the impact assessment. We assessed the impact using the better regulation framework in line with the Treasury’s Green Book guidance. The impact was deemed to be less than £5 million so a full impact assessment was not required. Analysis is focused on the direct impact of the relevant SI compared with the current legislation, and analysis of the wider impacts of the UK’s exit from the EU has previously been published in the form of the long-term economic analysis, which was published in November 2018. My noble friend asked how we could be so sure of that. I want to make clear that our renewal fee estimates are based on the proportion of registered community designs currently held by UK businesses. That figure is 7% and the calculation was based on that.
My noble friend then gave the figure of 375,000 or roughly half a million and asked whether the fees would increase because of this. UK-registered design fees were subject to significant reductions in 2017. We have no plans to increase these fees to accommodate the cost of converting registered community designs. My noble friend also asked whether a design would be allowed to lapse if it were not reregistered. Creation of a reregistered design will be automatic—the holder will be granted the reregistered design if he or she holds a registered community design on exit day.
My Lords, I understand that there is provision for reregistration—as the Minister describes it—for European designs that are in the pipeline.
I think the noble Lord is correct. If I have got that wrong I will write to him. He also asked about designers being able to disclose their unregistered designs in the UK and whether they would be protected from copying in the EU. A registered design will need to be disclosed in the EU first to be protected there should we leave without a deal. The statutory instrument provisions allow us to negotiate reciprocal arrangements on first disclosure with third countries—which may be the EU, individual countries within it or wider—but that has to be a subject for a future agreement.
My noble friend also asked about the discrepancy between the nine months’ deadline for pending applications and 30 months for deferred publication. The UK will honour the EU deferment period. We will not allow designs to exceed 30 months in total. Applicants will be allowed to file an application claim for a 12-month UK deferment within the nine-month period. However, in some circumstances the full 30 months will fall short. Unless already subject to deferment, applicants will have only 21 months in total.
Does the Minister think it is clear from the instrument that there is the 21-month discrepancy? He said in moving and introducing the regulations that it was nine months. I picked up from reading the statutory instrument that it was 30 months. He has now said that it will be 21 months. I am concerned that if I were a designer and not au fait with these instruments I would be confused about the period.
As I said, 21 months is 30 months less nine months. I was trying to make clear that the EU deferment period will not allow designs to exceed 30 months in total. Within the nine-month period, applicants will be allowed to file a UK application claim for a 12-month deferment. However, in some circumstances the full 30 months will fall short, unless already subject to deferment and then applicants will have only 21 months in total. I think it is clear—if not, I might have to write to the noble Baroness, Lady McIntosh, on that matter.
I will move on to the question asked by the noble Lord, Lord Stevenson, about the qualification for holding a UK unregistered design right. Currently, the UK law says that someone who lives in or carries on a business in a member state can claim UK unregistered design protection. That is because of Section 217 of the Copyright, Designs and Patents Act, which says that any qualifying person—someone who lives in or runs a business in the qualifying country, which is defined to include a member state—can claim a UK unregistered design right. If we did not make any change to this, after exit day people and businesses in the EU would be able to claim new UK unregistered design rights while people and businesses in the UK would lose their equivalent rights in the European Union. That would create an imbalance between the UK rights holders and the EU rights holders. The UK law is therefore being amended to limit the geographical criteria for a qualifying person to claim unregistered design protection. That means that, after the UK’s departure from the EU, a company based in a member state will not qualify for UK unregistered design.
Finally, I will address a point made by the noble Lord, Lord Clement-Jones, about what would happen if one had a registered community design application which was still pending in the EU Intellectual Property Office on exit day. Businesses with applications which are still pending on exit day must file new UK-registered design applications to obtain continued protection in the UK after exit. However, where a new UK application is filed within nine months of exit day, it will retain the earlier filing date recorded against the corresponding EU application. That will ensure that those with pending registered community design applications will not lose any rights in the UK.
I go back to the point raised by my noble friend, to try to make it a bit clearer, on the nine months provided for pending trademark and design EU applications. The time period was established following informal consultations, and stakeholders who were consulted were content in the main with those nine months. I appreciate it was not the full consultation the noble Lord would have liked.
I think I have answered most of the questions—
Before the Minister sits down, could he answer my question on exhaustion of rights?
I apologise to the noble Lord. Would he be happy to allow me to write to him on exhaustion of rights? I think that might make life easier.
I thank the Minister. It is of course a very important aspect for the fashion industry.
I fully accept that and will certainly write to the noble Lord as soon as possible. I beg to move.