March 30, 2022
The UK Government has decided to do further research before making any changes to the UK position on exhaustion of intellectual property rights: the extent to which goods put on the market abroad can circulate freely within the UK without infringing third party IP rights.
When the UK left the EU on 1 January 2021 (Brexit), most EU law was carried over into UK law, including the IP exhaustion regime. From that date, when a product is placed on the market in the UK or the EU by an IP proprietor or with their consent, the proprietor’s UK rights in that product are “exhausted”; i.e. they can no longer be enforced against that product.
However, since Brexit, the regime in the EU/EEA is that a product first put on the market in the UK cannot be marketed in the EU[EEA] without permission from the rightsholder. The UK and EU/EEA regimes are thus obviously not reciprocal. The asymmetry means that EU/EEA importers to the UK are in a better position than UK exporters to the EU/EEA.
Faced with this imbalance, in June 2021 the UK Government launched a public consultation on the UK’s future exhaustion of intellectual property rights regime. The UK Government was considering whether to
- continue with the asymmetric UK + EU exhaustion (UK+),
- adopt purely UK exhaustion (national exhaustion)
- move to an international regime under which a proprietor’s UK IP rights would be exhausted when products were put on the market with their authority anywhere in the world (international exhaustion) or
- move to a “mixed” regime; renegotiating a reciprocal EEA exhaustion regime or another form of regional exhaustion regime with a set of specific countries (mixed exhaustion)
The purpose of the consultation was to seek evidence and views from respondents to understand what the most appropriate exhaustion of IP rights regime would be for the UK. The consultation ran for 12 weeks and closed on 31 August 2021.
The consultation received many responses, most heavily from the pharmaceutical industry and the creative industries. It became very clear that different sectors of business had very different interests, and the issue was not helped by a divergence of views as to whether the Northern Ireland protocol would preclude national exhaustion anyway.
The Government has now issued a statement (18 January 2022) in which it states that any change to the Exhaustion of Rights framework in the UK has the potential to affect many business sectors and consumers. However, it does not have enough data to understand the economic impact of any alternatives to the current regime. It has said that further development of the policy framework needs to happen before it reconsiders the evidence and makes a decision on the future exhaustion of the IP rights regime. There is no current timeframe for a decision.
We think this is the right decision. Any change to the exhaustion regime would have major impacts on businesses from all sectors, particularly if the new regime were international or mixed exhaustion. Introducing different regimes for different business sectors would be fraught with difficulty, but introducing a different “one-size fits all” regime is equally challenging. Given how hard it would be to introduce a new regime that pleases all industries, keeping the current regime for now is the best option. It gives commercial certainty, and gives the UK Government the time and flexibility to explore specific, reciprocal regimes with territories that it considers are economically aligned with the UK.
To read the summary of responses in full, click here.