IP exhaustion: Whilst legislative changes will make it easier for UK courts to depart from retained EU law from January 2024, UK regulations come into force to preserve “UK+” status quo 

The UK’s current IP exhaustion regime ensures that once specific goods have been legitimately placed on the market in either the UK or the European Economic Area (“EEA”), the relevant IP rights (such as trade marks) in those goods are “exhausted” in the UK.  This means that, unless certain exceptions apply, the IP rights holder cannot rely on its IP rights to restrict further dealings in those specific goods, for example, to prevent the import of those goods from the EEA into the UK.

When the UK was part of the EU pre-Brexit, IP rights were “exhausted” in this way on an EU-regional level. However, EU and UK did not agree any reciprocal arrangements for the “exhaustion” regime as part of the Brexit arrangements. Instead, post-Brexit, the UK Government unilaterally chose to continue to apply EU-regional exhaustion to provide certainty and stability for businesses operating in the UK – this has been described as “UK+EEA exhaustion”. The reverse is not so – post-Brexit, an IP rights holder can rely on their IP rights to restrain importation into and further dealings in the EU of any goods which were first put on the market in the UK. So, the system is currently asymmetrical.

In June 2021, the Government issued a consultation seeking feedback on the various exhaustion regime options available to the UK.  These options include: the current asymmetrical UK+ EEA exhaustion regime, a more limited national/UK-only exhaustion regime; broadening to a fully ‘international’ exhaustion regime; or a mixed exhaustion regime comprising different approaches for different sectors, products and/or IP rights.  The Government has not yet reported on the responses received or its conclusions following that consultation.

In the meantime, the Government has now enacted the Retained EU Law (Revocation and Reform) Act 2023 (the “REUL Act 2023”).  This has an impact on both UK case law that derives from EU case law, and UK legislation that derives from EU legislation.

So far as case law is concerned, under the Brexit Withdrawal Agreement decisions of the Court of Justice of the EU (“CJEU”) became part of UK law as “Retained” EU law, having the same precedent status as UK Supreme Court decisions. This included various CJEU decisions directly relevant to the exhaustion regime, in particular in relation to the exceptions that sometimes apply.  As a result of the REUL Act 2023, the status of “Retained” EU law has changed, and it will now be easier for UK courts to depart from CJEU decisions, for example where there is a relevant change in circumstances and where Retained EU law restricts the proper development of UK domestic law.

In order to ensure that the asymmetrical UK+EEA exhaustion regime will continue to operate despite the forthcoming changes arising from the REUL Act 2023, the Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 have now been introduced. The effect of this Statutory Instrument, which came into effect on 28 November, is to amend several UK IP-related statutes to ensure that the existing “UK+” exhaustion regime will continue to operate beyond the end of 2023 and until a long-term decision on the UK’s approach to ‘exhaustion’ has been made.

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