On 28 November 2018, the UK government published a draft version of a statutory instrument (Exhaustion of Rights SI), and explanatory memorandum, which together explain the changes which will be made to UK intellectual property law relating to exhaustion of rights, in the event of a no-deal Brexit. The purpose of the SI is to correct any deficiencies in the retained EU law relating to exhaustion of rights, arising as a result of Brexit.

The UK is currently part of the EEA intellectual property rights exhaustion of rights scheme. This means that once goods bearing a registered trade mark or which are otherwise protected by certain intellectual property rights have been sold (with the rights-holder’s consent) anywhere in the EEA the rights-holder cannot prevent those goods from being resold anywhere within the EEA. The government’s stated aim with the Exhaustion of Rights SI is to ensure that, post-Brexit, once a product has been legitimately placed on the market in the EEA that product can continue to be re-sold into the UK without being prevented by the rights-holder. However, unless the UK comes to an agreement with the EU on a reciprocal exhaustion regime, the UK will be left with a one-way exhaustion regime. This means the EU may allow rights-holders to restrict the importation of certain goods from the UK into the EEA that have not been previously put on sale in the EEA from Brexit day.

Whilst the government’s draft SI, if it comes into force, will ensure continuity in relation to goods being imported into the UK from the EU, as we said in our earlier blog on the government’s no-deal notice on intellectual property, what is not clear is what will happen in relation to the UK’s relationship with the rest of the world. As with the no-deal notice, the Exhaustion of Rights SI is silent on the rules that will apply in relation to non-EEA countries. The impact of the SI could be that, for goods first placed on the market outside the EEA, the UK reverts to an ‘international exhaustion’ regime which applied prior to the UK joining the EU. Under the old regime, a first sale in a third country could result in a right-holder not being able to prevent parallel imports of genuine goods into the UK.

The Exhaustion of Rights SI will come into force on Brexit day if approved by both Houses of Parliament. There is some uncertainty as to whether an international exhaustion regime will apply to trade in goods originating outside the EEA after Brexit. The consequences for businesses of such a fundamental change will be difficult to predict.