IP and Brexit: The Software Industry

"Baby" the world's first stored program computer
Author Tom Jeffs
Source Wikipedia
Creative Commons Licence

As much of our intellectual property law derives from European directives and regulations our withdrawal from the EU is bound to affect the legal framework that protects investment in branding, design, technology and the creative works. I explored this topic generally in What Sort of IP Framework do we need after Brexit and what are we likely to get? 3 July 2016. As the impact is likely to vary from industry to industry I am addressing separately the situation of each industry.

In this article I focus on the software industry, that is to say the businesses that write and maintain systems and applications software, databases and web pages. According to IBISWorld  the industry employs over 125,000 persons in the UK and is expected to generate some £21.8 billion in revenue. I am posting it in IP North West because the software industry started in this region.

In most industries investment in developing new products and processes is protected primarily by patents but that is not possible for software because art 52 (2) (c) of the European Patent Convention ("EPC") and s.1 (2) (c) of the Patents Act 1977 exclude programs for computers from patent protection to the extent that the invention relates to software as such. Consequently, the industry relies heavily on the law of confidence, copyright and database rights to protect its technology.  The law of confidence prevents unauthorized disclosure or use of information that has been communicated in confidence or circumstances giving rise to an obligation of confidence. Copyright prevents copying of original literary works which specifically include computer programs, preparatory design material for computer programs and databases. Database right protects investment in obtaining, verifying or presenting the contents of a database.

The law of confidence is common or judge made law.  Its basic principles were summarized by Mr Justice Megarry in Coco v AN Clark (Engineers) Ltd. [1968] F.S.R. 415 [1969] R.P.C. 41:
"In my judgment, three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First, the information itself, in the words of Lord Greene, M.R. in the Saltman case on page 215, must “have the necessary quality of confidence about it”. Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it."
Trade secrecy laws are about to be harmonized across the EU by the Council's adoption of the  Trade Secrets Directive (Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure  OJ 15.6.2016 L 157/1) on 8 June 2016. I have discussed the directive in The Trade Secrets Directive  on 7 July 2916.

Copyright law is codified by Part I of the Copyright, Designs and Patents Act 1988. This statute has been modified many times to comply with EU directives, most particularly the Software Directive (Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs OJ L 122 , 17/05/1991 P. 42 - 46) and the Database Directive (Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases OJ L 077 , 27/03/1996 P. 20 - 28) but copyright law in the EU has never been harmonized as such.

The Database Directive has been implemented in the UK by The Copyright and Rights in Databases Regulations 1997 (SI 1997 No 3032). Database right is a new intellectual property right which did not exist before the 1997 Regulations came into force.

Patents are granted for the UK by the Intellectual Property Office ("IPO") pursuant to the Patents Act 1977 and the European Patent Office ("EPO") pursuant to the EPC.  There is not yet such a thing as an EU patent but there is an agreement to set up a Unified Patent Court ("the UPC agreement") and legislation to permit the EPO to grant patents for the territories of most of the member states of the EU including the UK, France and Germany to  be known as unitary patents.

Businesses in the software industry have trade marks which may be registered with the IPO for the UK alone under the Trade Marks Act 1994 or with the EU Intellectual Property Office for the whole EU including the UK under the EU Trade Mark Regulation (Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark OJ L 078 24.3.2009, p. 1).Art 50 (3) of the Treaty on European Union provides:
“The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”
It follows that all regulations will fall away and that HM government shall no longer be required to implement directives. Statutes and statutory instruments that have been passed to give effect to directives will continue to apply unless and until they are amended or repealed because they were made by or under the authority of Parliament.

Negotiations over the terms of British withdrawal from the EU are likely to take time which makes it highly likely that the UK will still be a member state on the 9 June 2018 when the Trade Secrets Directive is to be implemented.  As the directive provides an opportunity to codify secrecy law and bring it into harmony with the laws of countries with which we wish to do business and collaborate it is probably in our interests to implement it. Having said that, it was the opinion of the European Scrutiny Committee that our law already complies with that directive (see Documents considered by the Committee on 12 February 2014 - European Scrutiny Committee Protection of trade secrets).

As Parliament has already enacted legislation to enable the Secretary of State to ratify the UPC Agreement and the statutory instrument giving effect to ratification has already been drafted (see The Draft Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016 10 March 2016) it is also possible that the unitary patent and Unified Patent Court will come into being before the UK leaves the EU. However, the UK would cease to be party to the UPC Agreement upon our departure since the Agreement is open only to EU member states.

Copyright and database right law would remain the same as they were created by or under an Act of Parliament.

The only intellectual property right affecting the software industry that would actually cease to apply to the UK upon our departure would be the EU trade mark.  The courts in the UK that have been designated EU trade mark courts will lose their jurisdiction over EU trade mark matters. However, registrations under the Trade Marks Act 1994 would be unaffected and EU trade marks would continue to apply to the rest of the EU.

End user licences, software development, maintenance, escrow and other commercial agreements should be kept under review, particularly if the Trade Secrets Directive is implemented and the unitary patent comes into force before we leave the EU. They should be reviewed again if and when we eventually leave the EU. Proprietors of EU trade marks should register corresponding trade marks here if and in so far as they have not already done so.

I will be conducting seminars on IP and Brexit and its impact on various industries including the software industry in Liverpool on 14 Sept and London on 15 Sept. Should anyone wish to attend either of those seminars, he or she should  call me on 020 7404 5252 during office hours or get in touch through my contact form.