What's the development?
The UK government has announced that it intends to maintain the current 'UK+' exhaustion of rights regime. It means the UK is left with an asymmetric exhaustion regime, with goods generally being able to flow freely into the UK from the EEA but not vice versa (if there are IP rights in the way).
What is exhaustion of rights?
The exhaustion of rights regime determines IP owners' ability to control what happens to goods bearing their IP rights once those goods have legitimately been put on the market. In particular, it determines their ability to prevent goods from crossing territorial borders (so-called parallel trade).
What regime does the EU operate?
A basic principle of EU law is the free movement of goods within the EU. It will be no surprise then that IP owners cannot generally rely on their IP rights to prevent the free flow of goods throughout the EEA – once those goods have legitimately been put on the market in the EEA, the IP owner's rights are said to be 'exhausted'.
They can only object in limited circumstances - where the IP owner hasn't consented to those individual goods being put on the market in the EEA or there are legitimate reasons for the IP owner to object (eg the condition of the goods has been changed or impaired).
However, IP owners can rely on their IP rights to prevent goods flowing from outside of the EEA into the EEA. This prevents parallel importers from taking advantage of price differentials and eg importing cheaper pharmaceuticals or clothing from outside of the EEA into the EEA. Since the UK is no longer part of the EEA, it means that IP owners can rely on their IP rights to prevent goods flowing into the EEA from the UK.
What regime has the UK been operating?
Since the end of the Brexit transition period, the UK has been unilaterally operating as though it is still part of the EU (called 'UK+'). This means that IP rights generally cannot be used to prevent goods legitimately put on the market in the EEA from flowing into the UK. Once goods have been legitimately put on the market either in the UK or EEA, they must generally be free to circulate within the UK.
Again, there are exceptions - where the IP owner has not consented to those individual goods being put on the market in the UK/EEA or there are legitimate reasons for objection.
The UK+ regime was stated to be a temporary measure to ensure the continued flow of goods, such as pharmaceuticals, from the EEA to the UK post-Brexit.
Why has the UK maintained the current UK+ regime?
The government consulted on the future regime back in 2021/22, giving four possible regimes that could be adopted. It received marginally more support for maintaining the UK+ regime, although it said that it could not come to a firm view as it did not have sufficient data.
Despite the pros and cons of the regime, the announcement that the UK will now maintain the current UK+ regime is not surprising. The government had already cast doubt on the other three options as being incompatible with its Brexit commitments (UK only regime), unworkable (mixed regime) or undermining IP rights/uneconomic (international regime).
What's the net result?
The net result is as follows:
-
EU regime: IP owners cannot generally use their IP rights to prevent goods legitimately put on the market in the EEA from flowing throughout the EEA. However, they can use their IP rights to prevent goods coming into the EEA from outside the EEA (including from the UK).
-
UK regime: IP owners cannot generally use their IP rights to prevent goods legitimately put on the market in the UK or EEA from flowing throughout the UK. However, they can use their IP rights to prevent goods coming into the UK from outside the UK/EEA.
What does this mean for you?
While nothing has changed since the end of the Brexit transition period, there will continue to be an impact of UK+ for some UK businesses. This arises from the fact that goods can flow from the EEA into the UK (increasing supply/competition on the UK market) but not vice versa.
Brand owners and their licensees should continue to use the usual methods to ensure that they can determine the source/origin of individual goods and are alive to what's coming into the UK market.
If you would like to discuss the issues, please contact a member of our team or your usual Taylor Wessing contact.
