Ever since the Government’s consultation on the exhaustion of IP rights ended in August 2021, businesses which trade between the UK and EU have been waiting for further developments in this post-Brexit conundrum.
We now have an answer – at least for now. On 18 January 2022, the Government announced that nothing would be changing at this stage:
“Unfortunately, there is not enough data available to understand the economic impact of any of the alternatives to the current UK+ regime. As a result, it has not been possible to make a decision based on the criteria originally intended. However, the government remains committed to exploring the opportunities which might come from a change to the regime. Further development of the policy framework needs to happen before reconsidering the evidence and making a decision on the future exhaustion of IP rights regime.”
No timeframe for a decision has been given, but further updates will apparently follow “in due course”.
So what does this mean?
To re-cap, pre-Brexit, the UK and rest of the EU subscribed to the concept of EEA exhaustion e.g. IP rights were exhausted when goods entered the market anywhere in the EEA with the IP owner’s consent. The EEA or European Economic Area comprises the EU member states, plus Norway, Iceland and Liechtenstein.
Since Brexit, in the UK we’ve been applying a concept of asymmetric regional exhaustion. That is to say: rights are exhausted in the UK for goods entering the market in the EEA with the IP owner’s consent, but not vice versa and goods entering the market first in the UK will not lead to an exhaustion of rights in the EEA.
In practical terms, this means goods can be imported freely from the EEA in to the UK, but not necessarily the other way round and IP owners can potentially block the import of UK-originating goods in to the EEA. For this reason, distributors/parallel importers have been checking if they need consent to import from the UK in to the EEA. Similarly, IP owners have been considering their distribution chains and agreements and whether or not they want to block UK-originating parallel imports.
This arrangement had been viewed as a temporary measure until a more considered review could take place, but in light of the Government’s recent announcement, this could continue for months more if not years.
The Government’s 2021 consultation
To decide the longer term strategy, the Government had originally been engaging with businesses and consumers in a consultation that ended at the end of August 2021. This looked at all options for exhaustion:
national exhaustion (potentially but not definitely incompatible with the Northern Ireland Protocol which guarantees free movement of goods between Northern and Southern Ireland; there were also concerns over consumer choice and price increases if imports were made harder);
regional exhaustion (the status quo) – also called UK+
international exhaustion (which would have been a huge change, amid concerns about the weakening of IPRs)
something bespoke (e.g. different rules for different goods/services – which would have been a nightmare from a practical perspective)
A summary of the responses was subsequently published.
Both politically and practically, it had seemed that UK+ was the most likely outcome - which is what has happened, but apparently only for now, rather than as a fully reasoned final decision.
No doubt further analysis will take place over the coming months (and years?) and we will wait to hear more. As before, we have no idea when a decision ultimately will be made, but we are at least likely to have decent notice if any changes are introduced, to allow businesses time to adapt and plan.
For further information or assistance, please get in touch with Rowena Tolley or your usual Kilburn & Strode adviser.