Post-Brexit consultation on UK IP exhaustion rights launched

The government has proposed three exhaustion regimes: a continuation of the unilateral exhaustion regime which came into effect on 1 January 2021; an international regime; and a mixed regime.

The government has ruled out adopting a ‘national’ regime which does not allow the automatic import or export of goods from any country because of the resulting inconsistency with the Northern Ireland Protocol, which means no checks are needed on goods crossing the border with the Republic of Ireland.

The principle of IP exhaustion of rights sets a limit on how far the owners of IP can control their rights, and helps enable the parallel import and export of physical goods that are already on the market.

The current unilateral regime allows the parallel import of goods from the European Economic Area (EEA), while goods can only be exported from the UK to any country with an international exhaustion regime, which does not include any EEA country.

An international regime would automatically permit the import of goods from any country, assuming there was separate authorisation for regulated goods such as medicines, while exports would be automatically permitted only to other countries with an international regime.

In a mixed regime, the ability to parallel import goods would depend on any decision on the treatment for a specific IP right, good or sector.

The government said it did not currently have a preferred option, and would consider evidence received to the consultation before making a decision. However, it said it had entered into treaties that limited its options.

In particular, the government had assessed that the Northern Ireland Protocol meant it needed to allow parallel imports into Northern Ireland from Ireland and other EEA countries. 

IP law expert Emily Swithenbank of Pinsent Masons, the law firm behind Out-Law, said: “It is noteworthy that the UK government has already laid down a marker that while it is considering input from businesses on a national exhaustion of rights regime, it does not consider that such a regime will be an option due to the Northern Ireland Protocol.”

“If the UK were to pull up the drawbridge and implement a national exhaustion regime enabling brand owners to assert their IP rights over non-UK goods, this would potentially cut across the protocol which guarantees the flow of goods from the Republic of Ireland and the rest of the EEA into Northern Ireland,” Swithenbank said.

Swithenbank said the prospect of an international regime would be of concern to brand owners and manufacturers, as such a regime would likely increase competition, drive down prices and potentially create new supply routes through which counterfeit products can be brought into the UK.

“It should be noted that while under such a regime brand owners would not be able to prevent the first sale in the UK, they may still be able to assert their IP rights if there is a difference between the UK and non-UK goods such that it would damage the reputation of the trademark or cause safety concerns among UK consumers if the two products were marketed using the same brand,” Swithenbank said.

The choice of regime is likely to have a particular impact on regulated markets such as medicines, and Swithenbank said medicines could be left out of a potential international regime.

“It is yet to be seen how the Medicines and Healthcare products Regulatory Agency will handle parallel import licence applications as the UK and the EU regulations gradually begin to diverge. The position would be even more challenging for the UK medicines regulator in respect of medicines coming from further afield. As a result we may well see medicines carved out of any international exhaustion regime put in place in the future,” Swithenbank said.

“Alternatively, the UK regulator may require that at least for non-EU originating products full marketing authorisation must be obtained rather than the short-cut parallel import licence, which would have the same result of blocking trade of medicines into the UK, ” Swithenbank said.

The consultation is open until 31 August 2021.