July 31, 2019

The UKIPO has published an independent feasibility study from Ernst & Young LLP (EY) designed to determine whether it would be possible to identify the scale of parallel trade across the UK economy, in order to inform the Government’s assessment and analysis of possible exhaustion of IP rights following the UK’s anticipated exit from the EU.

EY explains that the study “builds understanding of the existing data to estimate parallel trade, what could be collected, its quality, and whether the data could be used to infer quantities of parallel trade. It also establishes the views of a sample of stakeholders on different potential regimes and their assessment of the consequences of a change of the IPR exhaustion regime”.

EY says that, in terms of scope, the study “does not suggest or recommend a future exhaustion regime but establishes the current data on parallel trade and what, if any, future work could improve from this baseline”.

EY undertook: (i) a review of economic data and literature on parallel trade; (ii) stakeholder interviews across a number of sectors; and (iii) a telephone survey.

EY found from the literature review that, apart from the pharmaceutical sector, there is limited data on parallel trade and limited quantitative academic work. EY says that the “lack of empirical quantification across the range of academic work suggests that quantifying parallel trade is likely to be challenging”.

As for the telephone survey, EY explains that this included asking businesses across a range of sectors “a series of questions to gather data on the current extent of parallel trade, assess what data could be available, and gauge views on different possible future IPR exhaustion regimes”. The stakeholder interviews were conducted with companies from a number of sectors including trade bodies, rights holders and manufacturers. The principal aim of these interviews was “to establish the extent of current parallel trade within specific sectors”.

The chief finding was that, again, there is limited data on the scale of parallel trade (except for pharmaceuticals). Further, EY says, businesses are not actively tracking it and were “unable to provide data on its current extent or possible changes from moving to a different IPR exhaustion regime”. EY found that “business favours maintaining the current regional (i.e. EEA-wide) regime” and “[c]oncerns were raised over a move to an international regime, with representatives from the publishing sector seeing it as a very significant threat to their industry”.

EY says that, overall, the lack of data is “indicative of it being a fundamentally difficult area to quantify”. The report therefore goes on to suggest various options for future research and ways of using current data to understand the situation better.

EY says that, in summary, “no research option that has a strong likelihood of successfully measuring parallel trade and its impact, has been identified. Although this feasibility study identifies potential avenues for future research, these are not without complications and there is not a clear and conclusive research methodology that can reliably estimate the scale and impacts of potential changes to the parallel trade regime in the United Kingdom”. To access the study, click here.