In June 2021 the UK government launched a public consultation on the UK’s future exhaustion of intellectual property rights regime. Exhaustion is also sometimes referred to as the “first sale doctrine”.

After Brexit, the UK left both the EU’s internal market and the European Economic Area (“EEA”) market. This provided the opportunity for the UK to change its IP rights exhaustion regime.

Background

The existing regime provides for UK plus EEA-wide exhaustion of IP rights, that is, if a product protected by an IP right in the UK is sold with the permission of the IP owner anywhere in the UK or EEA, then the exclusive right of the IP owner to control sale or commercial use of the product can no longer be asserted. This allows the purchaser of the product to re-sell or import the product into the UK without the IP owner’s permission, as long as the product was first sold in the UK or EEA. Such re-selling or importing is referred to as “parallel trade”.

The EEA includes the European Union member states, plus Norway, Iceland, and Liechtenstein, but not the UK which left on 1st January 2021 as a consequence of its departure from the European Union. 

Result of the consultation 

In an update published on 18 January 2022, the UK government concluded that there is not enough data available to understand the economic impact of alternatives to the existing regime, and therefore declined to make a decision on changes to the exhaustion framework. As a result, the current “UK plus” system of EEA- wide exhaustion of IP rights will remain, at least for the time being. 

The government has not ruled out a change to the regime in the future but believes that further development of the policy framework must take place before the issue is reconsidered. No timeframe has been provided for such policy framework development.

A summary of responses to the public consultation can be found here

Comment

The result of the consultation is perhaps unsurprising in the context of a report commissioned by the UKIPO and drawn up by Ernst & Young on the exhaustion of IP rights, which highlighted the lack of available data on the scale and range of parallel trade. This is reflected in the responses to the consultation, which provided mainly qualitative evidence on the issue.

The UK government’s decision to stay with the current regime continues the strange asymmetry for IP right- holders in which sale in the EEA exhausts their rights in the UK, but sale in the UK does not exhaust their rights in the EEA. This may provide continued opportunities for holders of rights in the EEA to assert those rights against parallel importers from the UK, which was not possible before Brexit, and highlights the need for anyone engaging in parallel importation of goods from the UK to the EEA to carefully consider whether those goods are protected by unexhausted IP rights in the EEA.