Brexit and Trump: A new age of innovation?

A cartoon of Theresa May and Donald Trump

This week has been a big one for the UK and USA: Theresa May confirmed that the UK will not remain within the European Single Market and Donald Trump is finally taking office.

Although the UK will no longer be part of the European Single Market, it will still however remain part of the Unitary Patent Court (UPC). Mrs May has signed up to the UPC which means accepting the supremacy of Europe’s top patent court (although the UPC is a European court, it is not an EU institution).

On the other side of the Atlantic later today, Donald Trump will be taking the oath of office, signalling a number of considerable changes to US policies including the scrapping of the Trans Pacific Partnership (TPP) deal. The impact of this on intellectual property throughout the US as well as other jurisdictions involved is uncertain.

Will Brexit end the UPC?

For the past 43 years, the UK has been one of the 28 states of the EU, and subject to European directives and laws. The triggering of Article 50, “Brexiting”, unbounds the UK from all laws. The effects of this are diverse and many unknown and have been the subject of almost ceaseless discourse.

The laws surrounding patents and their subsequent influence on the creativity of British industries are equally open to scrutiny.

Presently, if someone wants to gain patent protection in Europe, they must file through either the national patent office of a member state or to the European Patent Office (EPO) which will file it in each of the countries that you require. However, this involves paying application fees for each of those countries.

The upcoming Unified Patent Court (UPC) is a system that will allow European patents to have unitary effect in all EU member states through one application. The UPC Agreement must be ratified by at least three EU member states for it to take effect. Germany, France and the UK have already ratified; when the UK is no longer an EU member state and therefore removed from the UPC agreement, the next country to ratify would be Italy in order to enact the system.

Despite Brexit the UK will continue to be a part of the European Unified Patent Court

Despite this, Mrs May has stated that the UK will continue to be a part of the Unified Patent Court. This will allow UK applicants to file a patent within EU member states with a single application even after Brexit. This boon is due to Article 142 of the European Patent Convention which states, “any group of contracting states, which as provided by a special agreement that a European patent granted for those states has a unitary character throughout their territories, may provide that a European patent may only be granted jointly in respect of all those states.”

Therefore, although Brexit will lead to the loss of binding EU regulations and directives, being a member of the UPC Agreement would strengthen the patent system in the.

Trump dumps TPP - Will there be an IP reform?

Discussions regarding the Trans-Pacific Partnership (TPP) have rarely been anything less than heated. Typically, when we think of trade we think of tangible assets yet a crucial part of the TPP concerns the intangible assets protected by intellectual property.

During Barack Obama’s presidency the TPP has retained its pivotal role in relations between all the participating nations (US, Japan, Vietnam, Singapore, Malaysia, Brunei, New Zealand, Australia, Peru, Canada, Chile and Mexico). The deal aims to reduce barriers in trade including certain tariffs on import and export and to create stricter legal protections for IP.

However, Donald Trump has promised to remove the US from the TPP on “day one” of his administration. This would be a considerable loss for the participating TPP members, according to Japanese Prime Minister Shinzo Abe, “the TPP would be meaningless without the US”.

"The TPP would be meaningless without the US"Shinzo Abe, Prime Minister of Japan

One of the TPP’s major limitations concerns patents and intellectual property, particularly in the pharmaceutical and biotechnology sectors.

Some of the agreements for patents include:

  • Adjusting patent term for unreasonable delays, such as delays in gaining marketing approval
  • New uses of product
  • New methods of using product
  • New processes for known product

This is to encourage innovators to target low hanging fruit.

According to DG Shah, CEO of Vision Consulting Group, Indian Pharmaceutical Alliance, the patent adjustment provisions in the TPP have many implications including:

  • It could enable the patent right holder to delay launching a product in low priced markets
  • It could delay launch as innovators provide incomplete data to drug regulators in an attempt to show the approval process as inefficient
  • It could deny access to new medicines in lower priced markets
  • Even after expiry of patents in a developed country, monopoly status in developing countries could be retained.

Opting out of the TPP could actually have a positive effect for biotechnology and pharmaceutical companies as a lot of these regulations will no longer affect them. This way they do not have to worry about the consequences that the new provisions will have on their intellectual property rights. The TPP would however reduce the availability of cheap generic drugs.

In addition to this, the free trade agreements of the TPP contribute to income inequality in higher wage countries by promoting cheaper goods from lower wage counties – IP owners subsequently receive more of the income gains.

Furthermore, Trump’s aim to focus on growing the US economy hinges largely on scrapping the TPP. The absence of reduced tariffs between the US and TPP members means higher taxes on trade with the US. Although this is a disadvantage for the TPP members, it is an advantage for the US, as it would contribute to the growth of the economy.

More companies are likely to choose to stay in the US and insource their R&D activities, creating a larger hub for innovation and therefore increasing intellectual property rather than outsourcing it cheaply to other countries.

More companies are likely to choose to stay in the US and insource their R&D activities

Donald Trump and his campaign stir more than the average amount of controversy yet his wealth, a lot of which comes from the intellectual assets in various businesses, hopefully suggests significant business acumen. He evidently knows how to commercialise these assets and this trait is something his supporters are hoping he will be able to apply to America. If he manages to achieve this, a growth in intellectual property would be an inevitable by-product.

What is the reality?

Scrapping the TPP and Brexit don’t look so bad after all for intellectual property. Scrapping the TPP will be good for pharmaceutical and biotech companies and British innovators will still be able to obtain patent protection easily.

With both the UK and the US entering uncertain waters it’s worth bearing in mind that some of the most pivotal innovations in history have come during times of conflict.

The next few years will certainly be interesting.