UK Government consultation seeks views on the future regime for exhaustion of intellectual property rights

29 July 2021

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Following Brexit, the UK now has the freedom to decide the future of its intellectual property (“IP”) framework. The decision is vitally important for the UK as it will govern future rules on parallel imports into the UK. In light of this, the UK government needs to make a decision on the most appropriate exhaustion regime for the future. There are a number of options available which will need to be tested with evidence and views required on what regime should be implemented on a permanent basis, and if there is to be a change, how a new regime should be implemented. As a result, the UK government has published a consultation to seek evidence and views on these issues.

The intellectual property system has always been required to strike a balance between the protection offered to creators and investors, and the need to allow fair competition, wide consumer choice and fair market pricing. This balance is expressed through many parts of the IP system: in the term of available protection, in the definition of infringing acts and applicable sanctions, and through the principle of exhaustion of rights. The principle of exhaustion is one way this balance can met by limiting the ability of IP rights holders to control the distribution of their goods.

Under the current regime, the first sale of the protected goods within the European Economic Area is the point at which the control of the right holder expires. In effect, this allows buyers to purchase protected goods and re-sell them within the same territory without infringing IP rights. The principle of exhaustion maintains parallel trade by allowing the sale of genuine physical goods that have already been put on the market, whilst retaining the ability of rights holders to prevent imports into the EEA of goods they have sold elsewhere.

Given the significance of exhaustion rights on parallel trade, the current regime of goods being sold in the EEA must now be reviewed in light of the UK’s departure from the EU, to determine whether this is the best approach for the UK. To facilitate this review, the government is now seeking views on the future of exhaustion rights by way of a consultation. The principle of exhaustion affects copyright, designs, patents and trademarks. The government is therefore seeking views from owners and users of all these rights. It is important to note that parallel trade is the trade of genuine physical goods. As such, IP rights in digital goods are not included within the scope of this consultation.

There are currently four possible options for the future of exhaustion rights:

  1. Application of regional EEA regime: This option maintains the existing regime.
  2. National: Under this option, IP rights would be considered exhausted only in the UK once the goods were put on the market in the UK.
  3. International: Under this option, IP rights would be considered exhausted in the UK once they had been put on the market in any other country.
  4. Mixed: Under this option, specific goods, sectors and IP rights would be subject to one regime and all other goods, sectors and IP rights would be subject to a different regime.

The newly launched consultation will run for 12 weeks, closing at 23:45pm on 31 August 2021. Responses must be made in prescribed form, templates of which are made available here.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.

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