U.S. businesses with a strong presence in the U.K. must confront a series of questions about how to handle their European Union trademarks in a post-Brexit world.

The success of U.S. multinational companies, including McDonald’s and Forever 21, hinges in part on how well they maintain and use their trademarks, which increase the value of brands, technology, goods, and services. Trademark attorneys are advising U.S.-based companies on how to safeguard trademark rights in the U.K. and continental Europe after a Brexit, amid uncertainty about the final outcome.

Nearly 79,000 U.S. businesses and individuals own EU trademarks and designs, according to EU Intellectual Property Office records. For example, Nike Inc. owns 42 EU trademarks; Eli Lilly and Co. owns 869, the records show.

With or without a deal, U.S. businesses in the U.K. will still have valid EU trademarks—plus equivalent, automatically cloned U.K. trademark rights—after a Brexit. But companies have more time to plan under the deal scenario. With a deal, there would a long transition period, from March 30, 2019-Dec. 31, 2020, during which intellectual property rights would be unchanged, giving trademark holders more time to adjust. Under a no-deal Brexit, trademark regulations would change as soon as the U.K. leaves the bloc.

“For a business which is operating in other jurisdictions, the brand is key,” Iain Stewart, a London-based partner at Kilburn & Strode, said. “It’s a just useful reminder to do all they can to maximize the potential to drive benefit from their trademarks and ensure the ability to enforce those rights against third-parties, to keep giving them the commercial advantage,” he said.

EU trademark owners have until five years after registration to put their mark to use in the EU, after which they are vulnerable to cancellation challenges for nonuse. After Brexit, EU trademark use in the U.K. won’t count as use in the bloc for the purpose of maintaining that EU right, according to a 2018 EU directive.

On the other hand, U.S. businesses that use their EU trademarks only in the U.K. will want to reassess their portfolios, Stewart said.

Another critical step, in both regions, is updating customs paperwork to ensure that screening for counterfeit imports doesn’t screech to a halt anywhere, he said.

“The main difficulty is the question of timing,” Stewart said.

To be sure, the final outcome of the U.K.'s decision to leave the EU is unclear. But thinking ahead can help reduce risks to brand value, minimize the administrative costs of protecting a mark in both U.K. and the EU, and avoid legal hassles after a Brexit, attorneys said.

The U.K. government has promised minimal administrative costs to secure equivalent U.K. rights for EU trademark holders in a no-deal scenario, but hasn’t provided details.

Territorial Use

Already, McDonald’s lost some EU trademark rights to its Big Mac sandwich name in January because it couldn’t show it was using it there, Stewart said. “It shows that for a big brand like McDonald’s even they can trip up, and I see Brexit as no different to that,” he said.

The U.K. often serves as an entry point into EU markets for smaller U.S. brands, Jennifer Taylor, who chairs Morrison & Foerster LLP’s trademark group, said. With Brexit looming, U.K.-based American startups may feel pressured to expand to continental Europe sooner than they might otherwise want out of fear of losing their EU trademarks if they don’t use them in a member state, attorneys said.

“That’s going to affect smaller companies and it’s going to be a cost for them,” Taylor said.

An EU-wide application filed in one EU member state for customs recordals—a way to register trademark rights with customs authorities to block counterfeit goods—won’t offer protection in the U.K. after Brexit, Stewart said.

If one of those applications was filed in the U.K., after Brexit it would only apply to the U.K. Likewise, “If you filed in Germany, it’s not going to extend to the U.K.,” he said.

Companies could renew EU trademarks set to expire before Brexit so they will be automatically cloned in the U.K., according to EU rights regulations the U.K. government has drafted to prepare for a Brexit. Companies with pending EU trademark applications could apply for equivalent U.K. rights within the nine-month window that opens on the day the U.K. leaves the bloc, in order to get the same priority filing date in the U.K. as in the EU, the regulations say.

Filing dates are crucial to give applicants priority over other applications with later filing dates, and to claim rights in trademark disputes.

Bracing for Change

EU trademark owners from computer consultants to cosmetic manufacturers must be prepared to make changes based on where they use trademarks. Stewart advises making sure the right records, including evidence of trademark use, are accessible.

“If you are litigating a trademark dispute in the U.K. that involves an EU trademark, the U.K. court will not be able to issue a pan-European injunction anymore,” Paula Jill Krasny, a partner at Levenfeld Pearlstein LLC, said. “You’re going to step back and say, ‘What territories are important?’”

U.S. brand owners could also weigh whether to continue using equivalent U.K. trademark rights if use in England is forbidden in certain agreements, including settlement deals, after Brexit, attorneys said.

In that case, “You could be in violation if you don’t opt out of the cloned U.K right,” Krasny said. Companies can stop the automatic conversion of their EU trademark rights to corresponding U.K. trademarks by opting out as early as the day after Brexit, according to the draft EU rights regulations.

“Fundamentally, there are some easy steps the businesses can take so they are covered and protected and have the continuity,” Stewart said.

But the question is when to act, he said. “Unfortunately, I don’t have a crystal ball for that.”