INTA Engages in Consultation on Exhaustion in UK

A consultation on the future regime for the exhaustion of intellectual property (IP) rights in the United Kingdom opened last month that should interest brand owners worldwide, as it has deep implications for the treatment of parallel imports into the UK in the wake of the country’s departure from the European Union. INTA’s Parallel Imports Committee and Brexit Task Force are actively engaging with the consultation, and INTA has invited interested brand owners to submit responses.

The UK has indicated an openness to all options based on a data-driven decision, but there are some indications that adopting an international exhaustion regime may be the front runner.

While the UK was a member of the EU, and until the expiry of the Brexit transition period on December 31, 2020, its trademarks and designs were part of the European Economic Area (EEA) regional exhaustion regime. Under this regime, trademark and design rights would be exhausted across the EEA for products put on the market there by the rights owner or with its consent, unless in the case of trademarks there existed legitimate reasons to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market).

Post-Brexit, the UK has continued unilaterally to maintain this regional exhaustion regime although this has not been reciprocated by the EU. However, this is not intended to be permanent, and the UK government has launched a consultation as to which exhaustion regime the UK should permanently adopt.

The closing date for responses to the open consultation is August 31, 2021. A response form is provided. Responses can focus on areas of interest and do not need to address every question.

The UK government has outlined four different exhaustion regimes. The government analyzes them in some detail in the Impact Assessment attached to the consultation. Below is an overview.

1. A “UK+” regime

This is a continuation of the current unilateral application of the EEA+UK regional exhaustion regime and is the “do nothing” option.

The UK government considers this regime to be compatible with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Tariffs and Trade (GATT).

However, the EU is unlikely to reciprocate, which might make this politically unpalatable. However, it should be noted that reciprocity is typically not a determinant of whichever exhaustion regime a country adopts.

2. A national exhaustion regime

The UK government does not consider this regime to be reconcilable with the Northern Ireland Protocol, whose purpose is, inter alia, to ensure the free flow of goods between Northern Ireland and the Republic of Ireland.

It is understood that this is on the basis of legal advice provided to the government and it would welcome any robust challenge/alternative views. However, unless the government can be persuaded that a national regime is not inconsistent with the Northern Ireland Protocol, it appears that the UK is unlikely to adopt this regime.

3. An international exhaustion regime

Although the UK government recognizes that this regime could devalue IP rights, it notes that this could increase consumer choice and supply and may also mean a reduction in prices of goods. However, it acknowledges that this regime could cause consumer confusion and consumer safety issues, as well as the risk of parallel goods being commingled with counterfeit goods (which it notes is already a risk with the current regional regime).

The UK government also accepts that such a regime could mean that goods intended for least developed countries may be parallel imported into the UK as they would be sold cheaper in those countries, which may affect the availability of these goods in the developing countries.

There is political support for an international regime within the government, as can be seen from the report of the Taskforce on Innovation, Growth and Regulatory Reform. The section headed “Proposal 17.4: Liberalise parallel imports laws to reduce prices and increase choice for consumers” strongly advocates for an international regime while acknowledging there “may be some limited areas where it is justified to restrict parallel imports for example when drug companies make drugs available in less developed countries at low prices compared with their prices in wealthier countries.”

Despite this indication, it is understood that the UK government is genuinely open to the other three options and wants to be driven by data they receive in the consultation.

4. A “mixed” exhaustion regime

This is where the exhaustion regime will be determined by the IP rights, products, and/or sector concerned.

The UK government notes that any mixed regime would need to align with the provisions of the Northern Ireland Protocol, and that evidence would be needed why this regime would be beneficial to the UK. However, it adds that this may be complex and difficult to understand and implement.

This consultation offers a genuine—and probably final—opportunity for IP owners to have their say as to which exhaustion regime the UK adopts.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest.

© 2021 International Trademark Association