Brexit and IP: The Great Unraveling?

" Brexit and IP: The Great Unraveling? ," 39 Cardozo L. Rev. 967 (2018) (with Graeme B. Dinwoodie)

"Brexit and IP: The Great Unraveling?," 39 *Cardozo L. Rev.* 967 (2018) (with Graeme B. Dinwoodie)

Graeme B. Dinwoodie & Rochelle C. Dreyfuss, Brexit and IP: The Great Unraveling?, 39 Cardozo L. Rev. 967 (2018)

Graeme B. Dinwoodie
Rochelle C. Dreyfuss

As the pieces in this Issue suggest, Brexit will, in theory, free the United Kingdom (U.K.) from the constraints and burdens of membership in the European Union (E.U.). It will transfer sovereignty back to the people from what was perceived as the technocratic rule of Brussels; replace the jurisprudence of the Court of Justice of the European Union (CJEU or Court of Justice) with the adjudicative power of national courts; and allow the U.K. to tailor its market regulation to the particular exigencies of its own economy. Whether, as a general matter, the restoration of a classic Westphalian state enhances value either nationally or globally is an issue we leave to others to debate. We ask a different question: we explore how well the rhetoric of Brexit comports with the reality and the institutional economics of nation-state lawmaking in an era of global trade and digital communication technologies. We use intellectual property (IP) law as a concrete example. We think it a good context in which to consider the impact of the U.K.'s exit from the E.U. Copyrights are deeply intertwined with culture and education, patents have significant implications for health and safety, and trademark law sets the rules of the road for the marketplace in products and services. What is more, the public, judges, and legislators have come to realize just how much IP law-technical though it may appear-can interfere with access to things that are critical to their lives. For example, France was forced to withdraw a controversial antipiracy law intended to limit Internet access in the face of intense opposition (including judicial recognition of access to the Internet as a basic human right) 1 ; proposed U.S. legislation targeting the role of intermediaries in tackling Internet piracy was similarly scuttled by widespread opposition. 2 In 2000, the World Trade Organization's Seattle Ministerial meeting collapsed, in part because of massive public protest in the streets over patenting pharmaceuticals. 3 The Anti-Counterfeiting Trade Agreement (ACTA) 4 was concluded by ten signatories. 5 But widespread public distaste for its pro-IP owner stance led to ratification by only one, and the popularly elected European Parliament killed its adoption by the E.U. when the Parliament for the first time exercised its Lisbon Treaty power to reject an international trade agreement negotiated by the Commission. 6 More pointedly, U.K. judges have been scathing in their comments on the Court of Justice's inclination toward broad protection. 7 Since the critique of one-size-fits-all IP regimes is well known and widely accepted-and is specifically triggered by concerns about culture, education, health, and competitive markets-some might think that this is an area where the U.K. would quickly move to restore self-rule and put control over access to cultural and technological materials into the hands of a democratically elected legislature, accountable to the people for its actions. 8 And yet IP regulation that transcends the nation-state is intimately associated with the incentive system of the Knowledge Economy. Intellectual property mediates the infrastructure of the modernglobal-business environment. In this climate, worldwide protection is necessary. It protects innovators from free-riding rivals and permits firms to decouple research, production, and manufacturing functions and aggregate consumer demand. It is thus not surprising that nations with robust creative sectors embed themselves in a rich weave of international, regional, and bilateral obligations. For the U.K., that includes participation in the E.U., for that single political alignment situated the U.K. within that transnational web. Because exit would present a significant loss of the efficiency gains, the U.K. will, to maintain a robust creative sector, be forced to recreate much of what it previously enjoyed. We thus conclude that the projected sovereignty gains of Brexit are unlikely to be fully realized. By resituating itself in the international regime outside the E.U., we do foresee some room for the U.K. to reconstitute its IP regime and engage in national experimentation. But we also predict an increased importance of transnational private ordering as a means of securing efficiencies; the rise of other harmonization efforts, which may be no more transparently negotiated or balanced than was the case with measures developed through E.U. lawmaking institutions; and the development of new forms of political convergence. Some of these arrangements may present opportunities for innovation in knowledge governance, but others raise concerns about increased costs, decreased accountability, and other difficulties. We therefore question whether the transaction costs of the bureaucratic, diplomatic, and private machinations necessary to duplicate E.U. membership are worth the candle. While our study is limited to IP, we expect that many of the features that we discuss are true of other areas of law as well. Being freed from the constraints and burdens of E.U. membership will in theory open up substantial scope for the U.K. to revise its IP regime in ways that fit better with its own national policy interests. But this will vary by regime because the extent to which, and means by which, U.K. law has been Europeanized over the last forty-four years differs by the form of IP in question. 9 Copyright law in the E.U. has been harmonized by nine directives (not including horizontal directives such as the Enforcement Directive). 10 Thus, much of U.K. copyright law is now determined by E.U. law. But E.U. copyright harmonization is partial compared to other IP regimes. And relative to trademark or design law, a greater part of the harmonization in copyright law has been the result of judicial interpretation by the Court of Justice, rather than comprehensive legislative intervention-a phenomenon which has been critically received in the U.K. 11 Brexit would alter that. For example, it is possible that the U.K. courts would take the opportunity post-Brexit to depart from the 2009 Infopaq decision of the Court of Justice, which requires the same test of originality (whether a work is an "author's own intellectual creation") for all works and not just for photographs, databases, and computer programs, as the text of the directives provided. 12 And the U.K. may revert to a closed list of categories of protected works rather than the more generous open approach that might be anticipated by the suggestion in that same Court of Justice case law that all works constituting the "original creation" of authors should be protected. 13 This open approach might lead to copyright protection for controversial types of work such as perfumes; the U.K. could now resist any such evolution in protectable subject matter. 14 Post-Brexit, the U.K. will also be able to consider modifying other aspects of its copyright regime that were previously harmonized by E.U. legislation. It will, for instance, be liberated from the exhaustive list of exceptions set out in the E.U. acquis and thus be able to adopt a fair use exception modelled on the U.S. Copyright Act. 15 Moreover, even where an exception is presently listed as a permissible (but not mandatory) in the Information Society Directive, the Court of Justice has restricted the capacity of Member States to shape the precise contours of the exception under national law by demanding that every provision of the acquis have an "autonomous" E.U. meaning. 16 With Brexit, the U.K. might reenact its narrow, compensation-free private copying exception. This provision was struck down after judicial review in the U.K. courts as incompatible with E.U. law, on the ground that the Government had tendered no evidence that the harm to right-holders caused by private copying was minimal (such that might justify a royalty-free approach to the E.U. concept of "fair compensation" in the Information Society Directive). 17 And the U.K. courts might feel free to develop the parody exception which it introduced into U.K. copyright law in 2014, 18 and do so without regard to the concept as it was articulated by the Court of Justice in the Deckmyn case. 19 Finally, it might also reinstate Section 52 12 See Case C-5/08, Infopaq Int'l A/S v. Danske Dagblades Forening, 2009 E.C.R. I-6569. 13 See, e.g. ) (holding that perfume may be copyrightable subject matter). 15 See Information Society Directive, supra note 10, art. 5; see also 17 U.S.C. § 107 (2012). 16 See Information Society Directive, supra note 10, art. 5; see also 17 U.S.C. § 107 (2012) (noting that "the need for a uniform application of European Union law and the principle of equality require that the terms of a provision of European Union law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an independent and uniform interpretation throughout the European Union"); Case C-201/13, Deckmyn v. Vandersteen, EU:C:2014:2132, ¶ ¶ 14-17. 17 British Acad. of Songwriters, Composers & Authors v. Sec'y of State for Bus., Innovation of its Copyright, Designs and Patents Act (CDPA), which limited the term of copyright for designs to twenty-five years from first marketing when more than fifty articles embodying the designs were produced,foot_2 thus essentially confining copyright to the maximum term available under registered design law. The U.K. Government decided to repeal that provision in view of its (incorrect) reading of the Court of Justice's (incorrect) decision in Flos. 21 Trademarks in the U.K. are almost entirely regulated by E.U. law. 22 When the U.K. revised its national trademark law in 1994 to reflect the E.U. Trademark Harmonisation Directive, it substantially liberalized the subject matter that could be protected as a trademark. As recently as 1986, the House of Lords had held that the shape of the iconic Coca-Cola bottle could not be registered as a trademark. 23 Since joining the E.U., the U.K. courts have formally accepted the liberalization of subject matter, but have never dropped their skepticism about the capacity of shapes and colors to serve as trademarks. 24 Likewise, in implementing the Directive, the scope of protection offered a U.K. trademark was extended beyond uses that might cause confusion to protection against dilution. 25 Although the U.K. courts have been cautiously willing (even under domestic passing off law) to contemplate some forms of actionable damage beyond that caused by consumer confusion (for example, through blurring or tarnishment of the mark), 26 the robust form of dilution (or "unfair advantage") encompassing protection against "reaping where one has not sown" was clearly accepted by the U.K. courts only under protest. 27 And in the same case, where a strong form of anti-free riding was endorsed by the Court of Justice, the U.K. courts succumbed with evident fatigue to the pressure from the Court of Justice to limit comparative advertising. As Lord Justice Jacob commented, [m]y own strong predilection, free from the opinion of the ECJ, would be to hold that trade mark law did not prevent traders from making honest statements about their products where those products are themselves lawful. . . . . . . . I do not agree with or welcome [the contrary] conclusion-it amounts to a pointless monopoly. But my duty is to apply it. 28 This grudging acceptance of E.U. policy in the field has thus been seen in a number of trademark cases, where the U.K. courts have indicated dissatisfaction with what they see as unduly protectionist policies before obediently applying them. 29 Indeed, in the recent reforms of E.U. trademark law, the E.U. legislator has (over the objection of the U.K. and Dutch governments) further expanded the powers of trademark owners to stop goods in transit through the E.U. bearing marks that might be infringing in the E.U. without the need to prove an intent for those goods to enter the E.U. market. 30 There are only a very few areas of trademark law where the Court of Justice has allowed for variation in Member State law, most notably in regulating potential liability of online intermediaries such as Google or eBay for the trademark infringements and counterfeiting allegedly facilitated by their platforms. 31 Such liability, if any, would most likely arise out of arguments that these platforms are secondarily responsible for the 28 L'Oreál SA, [2010] EWCA Civ 535. 29 As another example, paradoxically going to the free trade roots of the European project, the U.K. national courts were the most reluctant adherents to the doctrine of E.U.-wide exhaustion (rather than international exhaustion). See Mastercigars Direct Ltd. v. Hunters & Frankau Ltd. [2007] EWCA Civ 176 ("The policy behind this rule has been called 'fortress Europe.' . . . . It means traders can use trade marks to partition Europe from the rest of the World Market. . . . . [G]enerally the rule is self-evidently rather anti-competitive and protectionist. Our task is not to consider whether the rule is good or bad from an economic perspective. It is to apply it."). Even the (very respected) British Advocate-General in the Silhouette expressed his preference, as a policy matter, for a different outcome. However, potential price competition and benefit to consumers were outweighed by the threat to the integrity of the internal market if one Member State provided for international exhaustion while another did not. Case C-355/96, Silhouette Int'l Schmied GmbH & Co. v. Hartlauer Handelsgesellschaft mbH, 1998 E.C.R. I-4799 (Advocate-General Jacobs). 30 infringements of their customers. However, secondary liability tests have not been harmonized. 32 Thus, in many areas of trademark law, the effect of Brexit will be to allow the U.K. to adopt national trademark law that reflects less protectionist policies more attuned to its historical preferences. Moreover, national autonomy over trademark law in the U.K. has for twenty years been circumscribed not only by E.U. harmonization of national U.K. law, but also by the overlay of a "federal" trademark registration that covered the entire territory of the E.U. (now known as the EUTM). 33 Under that arrangement, a single application secures a right valid throughout the entire territory of the E.U. and the right can be enforced in one proceeding via the grant of an E.U.-wide injunction even without the plaintiff having used its mark anywhere in the E.U. let alone the U.K. 34 Indeed, registration at the E.U. level does not even require an intent to use the mark (as is the case under U.K. national law), although (as in the U.K.) use is required to maintain the mark. 35 The availability of E.U.-wide trademark registrations created policy challenges because such easy-to-acquire E.U.-wide rights constituted earlier rights that would bar registration of similar marks in the U.K. (whether national marks or other EUTMs). 36 The U.K. Intellectual Property Office was one of the leading proponents of a stricter approach to registration, fearing the development of clutter on the register. 37 But such fears were less pronounced in non-English-speaking countries in Europe, and in the recent reforms of E.U. trademark law, only minor changes were implemented to address this problem. 38 In particular, although the Max Planck studyfoot_11 that prompted the 2015 reforms canvassed whether the EUTM system should adopt an "intent to use" requirement, the reforms did not include such a requirement. Because EUTMs will, after Brexit, no longer extend to the U.K., the clutter on the U.K. register could be substantially ameliorated making it potentially easier for U.K. traders to clear rights in the U.K. Of the major IP rights, patent law will be the area where the U.K. will formally reacquire the least sovereignty as a result of Brexit. There is very little substantive E.U. patent law at present; the most significant E.U. instrument in the field of patent law is the Biotechnology Directive, although the Enforcement Directive (which applies to all forms of IP) affects the remedies available under patent law. 40 Instead, in 1973 (the same year that the U.K. joined the institutions that later became the E.U.), a number of European states concluded an international convention, the European Patent Convention (EPC), which now substantially regulates patentability law throughout Europe (though it also, albeit minimally and indirectly, addresses questions of infringement). 41 The EPC is not part of E.U. law and the U.K. Government has made it clear that it intends to abide by its commitments under international law, which includes the EPC. Indeed, the EPC already has ten adhering states which are not E.U. Member Statesfoot_14 ; the U.K. will simply join those ranks. Brexit could affect the enforcement of patent law beyond matters of [Vol. 39:967 biotech patents and remedies, however, insofar as it might endanger U.K. participation in the Unitary Patent system that is hoped will come into effect in early 2018. 43 For decades, the E.U. has been trying to establish an E.U.-wide patent that could be enforced throughout the E.U. 44 At present, patent rights secured through the (transnational) EPC system constitute a bundle of national rights and efforts to enforce such rights on an E.U.-wide basis through a liberal reading of E.U. law on jurisdiction, and recognition and enforcement of judgments have been largely thwarted by the Court of Justice. 45 In late 2012, a compromise solution was reached, which is to be implemented in part by an E.U. regulation and in part by an international agreement, the Unified Patent Court Agreement (UPCA), that is formally a "special agreement" concluded by the Member States of the EPC. 46 Under this arrangement, a right holder will be able to enforce a single patent (the Unitary Patent) throughout participating E.U. states through a single patent court (the Unified Patent Court or UPC). 47 Because the system is established by an international agreement (rather than E.U. legislation), Brexit might be assumed not to affect the new judicial arrangements. However, in order to accommodate the treatment of an earlier institutional arrangement by the Court of Justice, the UPC has been conceptualized as "a court common to the Contracting Member States [of the E.U.] and . . . part of their judicial system" with an obligation to refer to the Court of Justice the supposedly few questions of E.U. law that will arise in proceedings before it. 48 If the U.K. Government adheres to its political position that the U.K. will not in any way be subject to E.U. law and the jurisdiction of the Court of Justice, then it is hard to see how the U.K. can participate in the new scheme. 49 Indeed, because the agreement establishing the system requires the ratification by the U.K. in order for it to start functioning, 50 the U.K.'s indication of intent to withdraw from the E.U. could have meant that the entire system would not go into effect even for the remaining Member States. Under this view, Brexit would likely effect a change in U.K. patent law not because of the exercise of enhanced sovereignty but because the lack of E.U. membership would disempower the U.K. and preclude its membership of the new European patent system. Surprisingly though, the U.K. has recently confirmed it will ratify the UPCA. 51 At least for now, the new system has apparently been saved (though to what real effect, and with what British involvement, is not yet entirely clear). This derogation from the U.K. Government's political position as regards the total expungement of the Court of Justice and E.U. law from the U.K. might, in light of the currently minimal scope of E.U. patent law, fly below the political radar. But it has already attracted the attention of the (hard line Brexiteer) popular newspapers in the U.K. 52 And it is not clear how much political turbulence the Government is willing to withstand-or how far it is willing to stretch the case law of the Court of Justice without seeking its opinion-to ensure U.K. participation. The discussion in this Part suggests that there is substantial theoretical room for the reacquisition of sovereignty by the U.K. But, as we discuss below, this theoretical sovereignty is overstated. The U.K. will regain far less "sovereignty" than one might think because of the web of the international, regional, and bilateral obligations that exist in the field of IP, the benefits that this harmonization brings to the creative environment, and the practical integration of markets that has occurred in part through the sixty years of the E.U. and in part because of the rise of global trade and digital communication technologies. (WTO) members, and added obligations regarding the protection of computer programs and performances. 57 Two years later, two treaties tackling online issues were negotiated under the auspices of the World Intellectual Property Organization (WIPO). These so-called WIPO Internet Treaties enhanced the power of right holder to control Internet uses. 58 For patents, the account is similar. Absent a right to obtain patents in foreign markets, inventors could not protect themselves from free riders outside their countries of origin. To promote broader dissemination of technical knowledge and its fruits, the Paris Convention of 1883 imposed an obligation of national treatment and rules that facilitated serial application across member states. 59 The TRIPS Agreement incorporated the obligations of the Paris Convention and added substantive obligations creating rights to exclude others from making, using, selling, offering to sell, or importing the patented invention in, or into, the state. 60 Both Paris and TRIPS also recognize trademark rights, 61 where the need for international agreement is, in some sense, even greater than it is for patents and copyrights. Trademarks protect the ability of producers to convey information to consumers about the source and quality of their products; absent multilateral protection, consumers who travel from one country to another, read foreign publications, hear foreign broadcasts, or see remote Internet transmissions could become confused about the meaning of the marks they see. Furthermore, the marks could as a result lose their cognitive impact and their capacity to differentiate goods in a competitive marketplace. Paris and TRIPS solve the problem by extending national treatment obligations to trademark rights, by facilitating registration of identical trademarks in all Paris (and later, WTO) countries, and through provisions that protect against unfair competition, including uses that are likely to confuse (and perhaps dilute) the mark. 62 These instruments also entitle well known marks to enhanced protection, even when not in use in a particular country. 63 But even with these fairly comprehensive agreements, which delineate rights and limit exceptions to them, there is considerable agitation for more protection. 64 The Internet and collaborative platforms such as Google Drive and Dropbox facilitate communication, collaboration, and joint venturing. Moreover, value chain business models mean that operations are increasingly unbundled and disaggregated geographically. To protect information wherever it travels and avoid friction among a wide range of actors (e.g., commercial firms, universities, government, private-public partnerships) located in multiple jurisdictions, globally enforceable rights are necessary. In pursuit of that goal, it is helpful if the details of national systems are similar. 65 (And a system that ensures that each participant reaps an award commensurate with the knowledge it added is normatively desirable for other reasons.) A new round of bilateral, regional, and megaregional trade agreements, with enhanced ("TRIPS-plus") obligations, has been initiated to meet these new demands. 66 These agreements are, however, hard-fought. While raising the standards of protection is important for producers, users of information products are considerably less enthusiastic. For IP, one person's input is the next person's output; strong protection can inhibit the ability of others to build on earlier works, extend the frontiers of knowledge, and prevent the introduction of novel products that consumers might well value. 67 Most importantly, increasing the level of protection is not in the national interest of every country. In particular, for net importers of information products, high levels of protection reduce access to important resources-medicines, textbooks, cultural materials-that are necessary to keep the population healthy and allow it to reach the intellectual frontier and become the beneficiary of strong IP protection. 68 Many of these countries entered into trade agreements in order to access markets for their commodities and have found the price of joining TRIPS-let alone TRIPS-plus protection). 63 See TRIPS Agreement, supra note 57, art. 16; Paris Convention, supra note 59, art. 6bis. 64 See supra text accompanying notes 62-63; infra text accompanying notes 65-75. 65 agreements-much higher than they expected. 69 For these reasons, further harmonization at the international level has been slow in coming. TRIPS is a minimum standards agreement and there has been no successful effort in the WTO or elsewhere to obtain more thorough harmonization. 70 ACTA failed; the Trans-Pacific Partnership (TPP) has been weakened and no longer includes the United States 71 ; and observers have suggested that absent backstops that set positive limits on protection, a moratorium on international IP lawmaking is in order. 72 Significantly, this critique does not apply with the same force in the E.U. Although the Member States are not homogeneous, they are not as dissimilar culturally, economically, or technologically as the countries that belong to the WTO. 73 Furthermore, there are broader and ongoing politically negotiated redistributive mechanisms within the E.U. that might ease the burden of accepting high levels of protection. Moreover, a collective commitment to deep market integration makes it imperative to develop an IP system that permits knowledge products to move freely throughout the Union and offers an efficient method for enforcement. And because E.U. integration facilitates more trade than does the looser WTO scheme, the benefits each member derives from membership is high enough to outweigh the cost of agreeing to levels of protection that exceed the domestic optimum. As a result, harmonization within the E.U. context is much tighter than that which WTO law seeks to effect. Lawmaking within the E.U. is also very different. Negotiations are in some ways easier because they occur among like-minded countries and benefit from the standing institutions of the E.U. (the Commission and the Parliament), which, thanks to successive reforms of the founding treaties, have the authority to issue regulations and directives that harmonize IP rights at a level of substantial detail. 74 The Court of Justice has also ensured strict compliance with the harmonized norms, and has effected common law development that has allowed quick dynamic adjustment to changing circumstances. 75 Closer relations among the actors in a deeply integrated market can give rise to industry standards and memoranda of understanding that substitute fine-grained norms for blunter legislation. 76 Finally, the E.U. has the backstops that are missing at the international level. The Charter of Fundamental Rights has led to the "constitutionalization" of IP law through its recognition of the interests of users, competitors, and IP right holders 77 ; E.U. competition law has similarly exerted a strong countervailing influence. 78 When Brexit occurs, the U.K. will have to seek the benefits of harmonization through the same international process that has been the subject of sustained resistance as well as scholarly critique, rather than under these more efficient E.U. mechanisms. Given the many advantages of harmonization in the IP realm, the self-governance benefits of exiting the E.U. may be far less than it might appear. In the short-term, much of U.K. law that is derived from E.U. legal imperatives will remain; indeed, the Government's proposed "Great Repeal Bill" will start from the default position that U.K. law on the day before Brexit will be the same on the day after. 79 Commercial certainty requires as much. Exercise of any reacquired sovereignty will therefore occur over time. Directives have been implemented into the U.K. through amendment of the national legislation; thus, the content of IP directives is embedded in domestic statutes. Even if there is room to replace that E.U.-inspired law with different U.K. law, the work of revising U.K. law to remove the vestiges of the underlying E.U. law is likely to take many years. Furthermore, even a brief look at the principal IP regimes demonstrates that the room for replacement is, as a practical matter, limited. Indeed, there may be instances where the replacement will do no more than mirror (sometimes rather weakly) the advantages the U.K. previously enjoyed through its membership in the E.U. The most immediate change will be in areas where E.U. law has been made effective in the U.K. through the use of regulations. Once the U.K. leaves the E.U., regulations will cease to have effect in the U.K. immediately without the U.K. Parliament or Government having to do anything. Trademark law furnishes an example as EUTMs are unitary rights valid throughout the territory of the E.U., which after Brexit will no longer include the U.K. 80 While the U.K. has retained its own national trademark system to which right holders can resort, the loss of EUTMs will give rise to several commercially significant problems. Trademark holders have a strong need for international agreement in order to protect the signaling function of their marks. To a large extent, consumers have a similar interest: they too want clear signals because such marks save search costs and ensure the quality and source of the products consumers buy. Accordingly, it is important to make sure that the rights of (1.2 million) existing EUTM holders be protected in the U.K. after Brexit. If they have to apply anew for U.K. national rights, it will be at great cost and with the risk of losing their rights to subsequent traders who jump in quickly to obtain a prior U.K. registration. Reciprocally, owners of EUTMs who had relied exclusively or substantially on use in the U.K. to maintain their E.U. rights throughout the rest of the E.U. (who are likely disproportionately to be U.K. businesses) may find their EUTMs vulnerable to revocation after Brexit. A number of options for resolution of these commercial uncertainties have already been floated. 81 in self-help in advance of Brexit by filing for U.K. national rights and maintaining EUTMs by making use of their marks on a trans-border basis. However, these might be second-best strategies, either legally (because a new filing will carry a later priority in the U.K.) or commercially (because earlier than anticipated trans-border use might interfere with a trader's roll out plans). A comprehensive solution will inevitably require political intervention. On its face, it appears that there will be sufficient mutual interests among the U.K. and remaining E.U. Member States to conclude some arrangement that accommodates all groups of mark owners equally, though the broader political climate may cause strategic analysis by Brexit negotiators of the extent to which these risks are equally shared by the U.K. and non-U.K. rights owners. Whatever deal is reached-and one is likely-the U.K. is expected to insist that former EUTM owners whose rights in the U.K. post-Brexit will emanate from some sort of politically secured national rights show an intent-to-use in the U.K. Thus, although mutual commercial interests will probably preclude the U.K. in practice from eliminating protection for 1.2 million marks, it is likely that the U.K. will be able to exercise its sovereign muscle to make it somewhat easier to clear rights in the U.K. post-Brexit. The difference, however, is modest: U.K. traders who wish to do business in the E.U. will need to comply with E.U. law to obtain and maintain EUTMs. And, as described in greater detail with regard to copyrights, U.K. national trademark law must continue to meet the requirements of the TRIPS Agreement. Thus, for example, repealing protection against dilution could run into a challenge at the WTO, 82 or would be difficult to reconcile with the likely content of future bilateral or plurilateral trade agreements, which experience suggests will include such protection in their TRIPS-plus provisions. Likewise, any attempt to give effect to the historical skepticism of U.K. judges towards nonconventional marks by excluding them entirely from registerable subject matter would raise difficult questions under existing TRIPS obligations and about-to-be negotiated trade agreements 83 (if they bear any resemblance, as they must, to those presently in place among other countries with which the U.K. would wish to negotiate). Finally, developments in the relatively minor space presently left for national trademark law by E.U. legislation suggest some of the mechanisms by which U.K. traders are likely to pursue the benefits of harmonization without access to E.U. institutions and the certainty of E.U.-wide norms. In particular, commercial actors are likely to adopt more expansive forms of private ordering to secure the gains denied by political rupture. In a U.K. case replicated in several countries, L'Oréal v. eBay, L'Oréal argued that the eBay auction site was secondarily liable for the trademark infringements allegedly committed by the sellers of goods who unlawfully used L'Oréal marks in their auction site listings. 84 The Court of Justice held that secondary liability for trademark infringement was a matter of national law. 85 E.U. law was, however, potentially relevant in immunizing eBay from liability under that national law by virtue of Article 14 of the E-Commerce Directive, which provides a hosting safe harbor heavily tied to a notice and takedown scheme, not unlike that found in Section 512 of the U.S. Copyright Act. 86 But the Court held that whether eBay was within the protection afforded by the safe harbor would, as a threshold matter, depend upon how active it was in the allegedly illegal activity. 87 Significantly, the determination of that question was left to national courts. 88 Likewise, Article 11 of the Enforcement Directive requires Member States to ensure that "rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right . . . ." 89 The Court of Justice held that trademark owners might be able to require assistance from eBay under this provision, 90 but its ruling did not definitively answer many questions regarding the nature of that assistance. Indeed, in the copyright context, the Court has made clear that the procedures adopted by Member States to implement this obligation can be shaped to reflect their different legal cultures. 91 In this climate of uncertainty, the process in Europe took a turn toward private ordering. eBay and L'Oréal are parties to a 2011 Memorandum of Understanding (MOU) among over thirty stakeholders consisting of brand owners and Internet platforms regarding their respective roles in tackling counterfeiting online. 92 The MOU arguably commits parties to obligations beyond those that might presently flow from hard law secondary liability standards. Among other things, the parties are required to operate notice and takedown systems, and agree to details that differ from the type of system that is currently thought to flow from legislation regarding secondary liability or intermediary safe harbors. In particular, the MOU commits platforms to what are called "[p]ro-active and [p]reventive measures" that prevent future infringement by ensuring that offers of counterfeit goods do not appear online. 93 And in implementing their proactive and preventive measures, platforms will act not only on item-based notices but also on notification by trademark owners of sellers who are generally engaged in the sale of counterfeits. In addition, the MOU tackles abuse of the notice and takedown system. 94 The MOU is limited to the provision of services in the European Economic Area (EEA). 95 However, such agreements can more easily be extended beyond the E.U. than formal legal harmonization instruments. 96 Indeed, in July 2013, the European Commission "inquired whether the global players among the [s]ignatories with operations in North America and Japan might be ready to progressively apply the [MOU] in those regions." 97 Signatories "responded positively." 98 Brexit would not appear to preclude the continued participation of U.K.-based companies in this scheme; indeed, insofar as Brexit has limited formal harmonization of law, it has made this private ordering even more important. But elevating this type of mechanism has costs and benefits as compared to legal harmonization. The MOU reduces litigation expenses and the process through which it has been drafted and applied creates flexibility to adapt procedures to reflect both new forms of trading and changing technological capacity. However, to the extent that the MOU limits opportunities for concrete judicial development of the legal obligations under which intermediaries operate, it impedes a process Liability for Online Trademark Infringement: The International Landscape, 36 COLUM. J.L. & ARTS 463 (2014). 93 Memorandum of Understanding, supra note 76, ¶ 25. 94 See Dinwoodie, supra note 92, at 470. 95 Memorandum of Understanding, supra note 76, ¶ 1. 96 See Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: Enhancing the Enforcement of Intellectual Property Rights in the Internal Market, ¶ 4.2, COM (2009) 467 final (Sept. 11, 2009), http://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A52009DC0467. 97 Memorandum of Understanding on the Sale of Counterfeit Goods via the Internet-Spring Meeting-1 July 2013-Summary, EUR. COMMISSION (July 15, 2013), http://ec.europa.eu/ DocsRoom/documents/10081/attachments/4/translations/en/renditions/pdf. 98 Id.; see also FLORINA TELEA, THE MEMORANDUM OF UNDERSTANDING ON THE SALE OF COUNTERFEIT GOODS VIA THE INTERNET 6, 8 (Feb. 24, 2014), http://ec.europa.eu/internal_ market/iprenforcement/docs/022014-observatory-mou_en.pdf (noting goal of "developing these MOUs at [the] international level by including within it operators from third countries such as the US"). that would over time inculcate greater certainty. Furthermore, the system is dominated by a specific set of stakeholders and uses technocratic procedures that are difficult for outsiders to assess. As concern grows generally in a number of countries about the extent to which the practice of notice and takedown causes excessive enforcement of IP rights-a concern acknowledged by the Court of Justice-some degree of publicly enforced transparency is important to allow critical scrutiny. 99 The European Commission (which has superintended the adoption and implementation of the MOU) has disseminated information about the practices developing thereunder, 100 but greater detail will likely be dependent in the short-term on disclosure by the market actors. In the long-term, participation by non-E.U. parties will require a new oversight mechanism. In the long-term, the U.K. Parliament and courts can be expected to act on some of the autonomy realized through no longer having to comply with the directives that have been used to implement E.U. copyright policy. But this too can be overstated, for here is a place where the network of continuing regional and international obligations will have considerable bite, as will the need to secure the benefits of harmonization discussed in Part II without relying on the E.U. mechanisms. As to the former, as a member of the WTO, the U.K. will be required to adhere to the TRIPS Agreement, the Berne and Paris Conventions, and the WIPO Internet Treaties. Thus, unless it pulls out of these agreements (and it is unthinkable that the U.K. would exit the WTO absent a broader weakening of that system such as might be occasioned by U.S. withdrawal) any new IP law that it makes must still meet the minimum standards set out in those measures. Indeed, to the extent that the U.K. strikes a deal with the E.U. through a free trade agreement (FTA), the U.K. may well have to comply with some of the current E.U. acquis since every E.U. FTA with the rest of world comes with a detailed IP chapter which obliges the other party to comply with some features of E.U. law. The same is true if the U.K. chooses the option of joining the EEA or the European Free Trade Association (EFTA); indeed, membership of the latter would subject the U.K. to another international court (the EFTA Court), this time without a say in the form in the development of the legislation being considered by that 99 court. 101 The U.K. Government's Hard Brexiteers have touted the ability to replace existing trade arrangements with the E.U. or EEA with a series of bilateral trade agreements with partner nations around the world. 102 But there too, the U.K. might in effect have to comply with some of the E.U. acquis. Thus, even if it secures trade agreements only with countries such as New Zealand, Australia, or South Africa, the acquis will have an impact because such countries are often themselves bound by bilateral agreements with the E.U. 103 (or with countries that have done deals with the E.U.). The network of bilateral and plurilateral obligations in the field is substantially framed by a loose amalgam of much E.U. and U.S. law. The U.K. will also not free itself of all the institutional and substantive backstops that have been cabining copyright law in Europe. For example, even though the Charter on Fundamental Rights will no longer be effective in the U.K., the U.K. is a member of the Council of Europe and is subject to the European Convention on Human Rights (ECHR) as well as its own Human Rights Act (which implements the ECHR and renders its provisions, and judgments of the European Court of Human Rights, effective in the U.K.). 104 Although the Government has on occasion pledged to repeal the Human Rights Act, withdraw from the Convention, and enact a "U.K. Bill of Rights," this no longer appears to be high on the Government's agenda. 105 And, even if the effort were renewed, it would encounter domestic political resistance unless the new measure replicates the substance of the rights presently afforded U.K. citizens under the Convention. These realities can be observed by considering some of the possible copyright reforms mentioned in Part I. As noted there, absent the constraints of the E.U. exceptions clause, the U.K. could revive an approach that permits unauthorized private copying without compensation. But even if that approach is no longer subject to conformance with E.U. standards, it will still have to pass muster under the TRIPS Agreement, including the stringent three-step test on allowable exceptions found in Article 13 of that Agreement. 106 Of course, the E.U. also subjected exceptions-even if permissible under the terms of Article 5(3) of the Information Society Directive-to the rigors of the three-step test in Article 5(5) of that same Directive. 107 But there arguably is-and should be-a difference between the margin of appreciation afforded national interpretation under E.U. law and under WTO law. 108 Thus, even though the private copying exception failed to meet E.U. standards, it may be found to conform to WTO obligations. The U.K. courts may also wish to develop the parody exception freed from the "autonomous" E.U. meaning of parody that the Court of Justice announced in Deckmyn. 109 However, that decision was grounded in the E.U. Charter on Fundamental Rights. 110 Although the Charter will no longer apply, provisions parallel to those relevant to the decision are largely found in the ECHR, to which the U.K. at least for now remains a party. 111 Thus, a new parody exception cannot stray far from the one the court delineated. Likewise, although the legislature might wish to revisit the reaction to Flos after Brexit, the U.K. may well decide not to reinstate the shorter term of Section 52 if it believes it will face difficult questions concerning its ability to curtail property rights under Article 1 of the First Protocol to the ECHR, as government policy is currently to maintain the U.K.'s membership of this treaty arrangement. 112 Moreover, even where the U.K. is free of both E.U. law and the ECHR, the desire for commercial certainty may urge caution. For example, the judicial harmonization of originality that was effected by Infopaq has to some extent been embedded in U.K. law through domestic jurisprudence in the U.K. appellate courts. 113 That case law creates expectations concerning the protectability of copyrighted materials and it is not clear that the legislature will be eager to act promptly to revise these expectations. Indeed, there may be good reasons to respect them. 114 Furthermore, it is unlikely that the courts will rush to exercise the sovereignty that has been conferred on Parliament when Parliament has not exercised it itself; the Great Repeal Bill would bless CJEU decisions with the precedential status of decisions of the U.K. Supreme Court, suggesting a strong desire for stability. Similarly, the U.K. may decide not to make drastic changes in the scope of copyright protection, lest the differences from E.U. protection make it more difficult to export copyrighted works into the E.U. 115 Finally, as with trademarks, notice and take down procedures regarding Internet infringements could be made subject to a MOU that will itself be shaped by actors operating primarily under E.U. law. 116 To be sure, there are some areas of IP law where the E.U. had little role and thus Brexit will have little effect. As noted earlier, this is most notably true of patent law. The U.K. belongs to the European Patent Convention in its own right, and because the European Patent Office (EPO) has always issued national patent rights, those validated in the U.K. will continue to exist. Indeed, to the extent that E.U. patent law does exist (e.g., the Biotechnology Directive), it will continue to hold sway in U.K. law through the U.K.'s membership of the EPC, whose organs have paid regard to the Directive (and the views of E.U. institutions). 117 For patents, however, the question of institutional structure is of considerable significance-and may prove far more important than some Brexiteers might have expected. In the case of the UPC, Brexit has endangered or altered (rather than augmented) U.K. sovereignty. Transborder enforcement of IP rights can be difficult, particularly for registered rights like patents, because courts are reluctant to pass on the validity of foreign rights. 118 Because the UPCA solves that problem, it is not surprising that the U.K. Government and the patent profession in the U.K. desperately wish the U.K. to remain within the unified patent court system. Further, they would do so notwithstanding the decision of the Court of Justice in Opinion 1/09, which appears to require the supremacy of E.U. law (and the Court of Justice) in certain matters. 119 There is an intriguing calculation being made by different parties in the process here, which speaks in implicit terms to a revised conception of sovereignty. Non-U.K. Member States (such as Germany, the other principal player) understand that the success of the new system might be undermined by the absence of the U.K., which represents a significant part of the market in the E.U., and whose experienced judges are of central importance to the new court (which is slated to have one of its central divisions in London). Leading patentees may therefore not wish to risk the incompleteness (or uncertainty) of the new system without clear U.K. involvement, and strenuous efforts are underway to sketch out a way in which the U.K. can participatemost notably by elevating the conceptualization of the UPC as an "international court" rather than a court "common to [all participating] Member States [of the EU]." 120 But the U.K.'s leverage to negotiate a new deal is unclear, for one of the paradoxes of market integration-contrary to the policy impulse of broader IP rights occasioned by global trade-is that global or regional results might be achieved through positive relief in a major nation-state or in one large market. 121 Thus patentees might determine that protection (and efficient enforcement) within the rest of the E.U. may be sufficient to force infringing competitors out of Europe. That would make the U.K. market (and U.K. enforcement) an unnecessary sideshow as far as the rest of the E.U. is concerned. Neither the E.U. nor the U.K. can be entirely sure which calculation patentees will make. Indeed, the calculations may vary by industry and size of applicant. Behind this veil of uncertainty, a reconfigured understanding of sovereignty is taking shape. The U.K. will, it might be argued, achieve greater control over patent policy in the U.K. by acceding to a system where questions might be referred to the Court of Justice, a tribunal on which it will (post-Brexit) have no judge, to be decided according to 118 See Kur, supra note 45. 119 laws (such as the Biotechnology Directive) to which it will (post-Brexit) have no say in drafting. Yet if the U.K. is part of the UPC system, its judges and patent practitioners can be expected to have a dominant role in the shape of European patent law. This will be a far more influential posture, it is assumed, than the barren and meaningless "sovereignty" of a nation-state. This is a new conception of sovereignty, reflecting integrated regional and global markets and the importance of judicial development of the law. Furthermore, this calculation is not static. The current assumption is that the content of E.U. patent law is very small, but over time, participants in the UPC may find that the Charter, E.U. competition law, and other E.U. policies (not to mention new substantive patent law enacted by the U.K.-less E.U. legislature) come to govern far more extensively the relationships among patent holders, licensees, and users. If the U.K. were to seek a close relationship with the E.U. and join EFTA, the relatively quiescent EFTA court would receive a barrage of questions from an important economic state (the U.K.) with an experienced IP judiciary. It is possible, however, that the Hard Brexiteers and hardliners in the remaining twenty-seven Member States will ultimately reject even an attenuated relationship between the U.K. and the E.U. But if they do, we would suggest that the benefits of harmonization in IP matters are such that new arrangements will soon develop. 122 In addition to those canvassed above, some arrangements may take the form of new types of political convergence. The EPC modelbringing together member states from within and outside the E.U. under the umbrella of an international agreement-and the dogged pursuit of a Unified Patent Court despite apparently insurmountable political hurdles-suggest that there may also be potential for institutional innovation for copyright and trademark. 123 Given the ubiquity of the Internet and the many difficult questions raised by digitization, it is already clear that greater harmonization on the European continent may be desirable (and is under discussion even as the U.K. departs, with efforts to ensure cross-border portability of user rights). 124 These efforts could usefully include substantive rules on the secondary liability of Internet platforms, as well as further convergence on procedural devices for ensuring intermediary assistance in countering infringement. 125 Pending proposals on the obligations of intermediaries and developing attitudes toward standard-setting recognize the role that private agreements will play. 126 Such arrangements might more easily cross the English Channel than broad political agreements. Enforcement problems might be mitigated at an intergovernmental level, where the Hague Conference on Private International Law has been working on an instrument that would facilitate the enforceability of foreign judgments. 127 Recently, courts in both the U.K. and elsewhere in the E.U. have also taken a more generous view of the scope of their authority to resolve transnational cases. 128 These initiatives all possess the potential to fill some of the harmonization gaps that the U.K. might bemoan after Brexit. Finally, new or revived negotiations at the international level may lead to higher levels of IP harmonization. And the U.K. would desperately want-and even more so post-Brexit, need-to be part of any arrangements that flow from those negotiations. For example, WIPO has had a longstanding project to promulgate a Substantive Patent Law Treaty (SPLT), which would bring member state patent laws into closer alignment. 129 Negotiations in the WTO have been dormant, but could resume, and many countries continue to be involved in negotiating mega-regional agreements that include IP. 130 For the reasons suggested in Part II, these may not lead to as much convergence as an E.U. agreement, but the U.K. would presumably negotiate them on its own behalf. Thus, while entering these agreements would sacrifice sovereignty, the instruments would also be an exercise of sovereign authority. As in other areas where the U.K. may have less flexibility than the concept of exit suggests,foot_18 it remains to be seen whether these new arrangements return to the U.K. advantages equivalent to that of full E.U. membership (and whether the costs of creating and maintaining those arrangements exceed the supposed costs of E.U. membership). However, at the very least, these arrangements are unlikely to create accountability or a fully democratic approach to IP lawmaking beyond that found under the present regime. † Professor of Intellectual Property and Information Technology Law, University of Oxford; University Professor, IIT Chicago-Kent College of Law.† Pauline Newman Professor of Law, New York University School of Law. & Skills [2015] EWHC 1723 (Admin); British Acad. of Songwriters, Composers & Authors v. Sec'y of State for Bus., Innovation & Skills [2015] EWHC 2041 (Admin); see also Information Society Directive, supra note 10, art. 5(2)(b).18 The Copyright and Rights in Performance (Quotation and Parody) Regulations 2014, SI 2014/2356, § 5 (Eng.).19 See Deckmyn, EU:C:2014:2132, ¶ 30 (incorporating "principle of non-discrimination based on race" into analysis of parody). Copyright, Designs and Patents Act 1988, c. 48, § 52 (repealed 2016) (Eng.). Case C-168/09, Flos SpA v. Semeraro Casa e Famiglia SpA, 2011 E.C.R. I-181; Enterprise and Regulatory Reform Act 2013, c. 24, § 74(2) (Eng.). See generally Lionel Bently, The Return Google France SARL, 2010 E.C.R I-2417, ¶ 107. Council Regulation 40/94 on the Community Trade Mark, 1990 O.J. (L 011) 1 (EC); see also Council Regulation 2017/1001, 2017 O.J. (L 154) 1 (EC). See generally Graeme B. Dinwoodie, Territorial Overlaps in Trademark Law: The Evolving European Model, 92 NOTRE DAME L. REV. 1669 (2017). National systems within the European Union can, under the Trade Mark Directive, require intent to use as a precondition to application. See, e.g., Trade Marks Act 1994, c. 26, § 32(3) (Eng.). See Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to Approximate the Laws of the Member States Relating to Trade Marks, 2008 O.J. (L 299) 25, art. 4(2)(a)(i) (definition of "earlier mark" for purposes of assessing applications for registrations under national law includes earlier EUTMs). See, e.g., GEORG VON GRAEVENITZ ET AL., TRADE MARK CLUTTERING: AN EXPLORATORY REPORT (2012), https://www.gov.uk/government/uploads/system/uploads/attachment_data/ file/312092/ipresearch-tmcluttering.pdf; GEORG VON GRAEVENITZ ET AL., CLUTTERING AND NON-USE OF TRADE MARKS IN EUROPE (2015), https://www.gov.uk/government/uploads/ system/uploads/attachment_data/file/568675/TM_cluttering_report.pdf. See generally Barton Beebe & Jeanne C. Fromer, Are We Running Out of Trademarks? An Empirical Study of Trademark Depletion and Congestion, 131 HARV. L. REV. (forthcoming 2018). See, e.g., Regulation 2015/2424 of the European Parliament and of the Council of 16 December 2015, Amending Council Regulation 207/2009 on the Community Trade Mark (EC) and Commission Regulation 2868/95 Implementing Council Regulation 40/94 on the Community Trade Mark, and Repealing Commission Regulation 2869/95 on the Fees Payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs), 2015 O.J. (L 341) 21, art. 1(26) (eliminating the "three classes for one fee" rule). MAX PLANCK, STUDY ON THE OVERALL FUNCTIONING OF THE EUROPEAN TRADE MARK SYSTEM (2011), http://ec.europa.eu/internal_market/indprop/docs/tm/20110308_allensbach-study_en.pdf. See Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the Legal Protection of Biotechnological Inventions, 1998 O.J. (L 213) 13; Case C-34/10, Brustle v. Greenpeace e.V., 2011 E.C.R. I-9821; see also Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the Enforcement of Intellectual Property Rights, 2004 O.J. (L 195) 16; HTC Corp. v. Nokia Corp. [2013] EWHC 3778 (Pat), [26]-[32] (Eng.) (reading patent remedies subject to E.U. law). See Convention on the Grant of European Patents (European Patent Convention), Oct. 5, 1973, 1065 U.N.T.S. 199, 13 I.L.M. 268; see also Fujifilm Kyowa Kirin Biologics Co. v. AbbVie Biotechnology Ltd., [2017] EWCA (Civ) 1, [5]-[15] (Eng.). In fact, most countries of the E.U. have adopted statutory language on infringement that is in line with the defunct Community Patent Convention, and scope of infringement is to some extent further harmonized within the EPC system by a Protocol on the Interpretation of Article 69 of the EPC. See The European Patent Convention: Protocol on the Interpretation of Article 69 EPC, EUR. PAT. OFF., https:// www.epo.org/law-practice/legal-texts/html/epc/2016/e/ma2a.html (last visited Dec. 30, 2017); see also Robin Jacob, The Herchel Smith Lecture 1993, 15 EUR. INTELL. PROP. REV. 312, 313 (1993) ("We had no statutory definition of infringement before the [1977 Patents] Act. Now we have section 60 reflecting Articles 29 to 31 of the CPC. Again other countries have got the same law, but may interpret it differently"). See Member States of the European Patent Organisation, EUR. PAT. OFF., https:// www.epo.org/about-us/foundation/member-states.html (last visited Nov. 21, 2017). Under TRIPS, "[m]embers shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder." TRIPS Agreement, supra note 57, art. 13. See Information Society Directive, supra note 10, art. 5(5) ("The exceptions and limitations provided for in paragraphs 1, 2, 3 and 4 shall only be applied in certain special cases which do not conflict with a normal exploitation of the work or other subject-matter and do not unreasonably prejudice the legitimate interests of the rightholder."). See, e.g., RCEP & Intellectual Property, BILATERALS.ORG, https://www.bilaterals.org/rcepip (last visited Nov. 25, 2017). See, e.g., Wolf-Georg Ring, The Irrelevance of Brexit for the European Financial Market (Univ. of Oxford Legal Res. Paper Series, Paper No. 10/2017), https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2902715. 14 See HR June 16, 2006, NJ 2006, 375 (Kecofa B.V./Lancôme Parfums et Beauté et Cie S.N.C.) (Neth. 68 See generally Jerome H. Reichman & Rochelle Cooper Dreyfuss, Harmonization Without Consensus: Critical Reflections on Drafting a Substantive Patent Law Treaty, 57 DUKE L.J. 85, 86 (2007). 80 The same is true for Community Registered and Unregistered Designs. See Council Regulation 6/2002 of Dec. 12, 2001, Community Designs, 2001 O.J. (L 003) 1. 81 See Arnold, Bently, Derclaye & Dinwoodie, supra note 9. 121 See Dinwoodie, supra note 34.

I. GAINS OF LEAVING: ENHANCED SOVEREIGNTY

121 See Dinwoodie, supra note 34.