28 Jun UKIPO consultation on future of IP Exhaustion
As the UK has now formally left the EU, the UKIPO (on behalf of the government) has opened a public consultation to galvanise opinion on the most suitable exhaustion regime to adopt for the UK going forward and also seeks views on how the regime should be implemented. IP exhaustion not only concerns trade marks but relates to copyrights, designs, and patents. The Consultation opened on 7 June 2012 and will close on 31 August 2021 link.
In the Ministerial Forward, the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng MP states “…the UK is no longer bound by the EU legal framework, and is no longer a member of the single market. This means that we need to look again at how the principle of exhaustion should work for the UK as a standalone sovereign nation” while simultaneously recognising that “…the choice of a new regime will be a difficult and possibly a contentious one.”
Since 30 December 2020, the UK exhaustion regime has allowed for parallel imports of IP-protected physical goods into the UK where they were first placed on the market in the EEA but there is no exhaustion of IP rights for goods going the other way. Importers of IP-protected goods first put on the market in the UK thus require the IP rights holder’s permission before importing the goods into the EEA.
What are the Exhaustion Regimes being considered?
There are four options:
- UK’s unilateral application of regional EEA regime (“UK+” or “do nothing”): this is the least costly option for businesses reliant on the EEA for the supply of goods and raw materials but simultaneously provides the same level of choice for UK consumers. However, there is no guarantee of reciprocal arrangements with EEA member states.
- National: IP-protected goods will be exhausted in the UK once they have been placed on the market in the UK. Parallel imports from outside UK would infringe IP rights without the rights holder’s permission. While this option clearly offers greater benefits for IP rights holders and would foster innovation and creativity, there would be less choice for UK consumers, less competition and an inevitable increase in the price of goods.
- International: IP rights in goods would be considered exhausted in the UK once they had been put on the market in any other country (incl. the EEA). Goods could therefore be parallelly imported into the UK from any country without the IP rights holder’s permission. Consequently, IP rights could be perceived as weakened compared to under the national regime and this may subsequently reduce innovation and creativity if the IP right holder is unable to control pricing in the UK to compete against the potential influx of lower-priced goods through parallel trade.
- Mixed: A mixed regime is where a specific good, sector or IP right is subject to one regime while all other goods, sectors and IP rights are subject to a different regime. Having a mixed regime could prove challenging for businesses to understand. This is because many goods in practice are protected by multiple IP rights and, accordingly, businesses could find it difficult to determine where the different IP rights in e.g. a vacuum cleaner, are exhausted.
It’s important to note that because the national regime is incompatible with the Northern Ireland Protocol under the Brexit Withdrawal Agreement, there are really only 3 options in contention: UK+, International and Mixed.
Other issues
Parallel trade is the main driver of the exhaustion of IP rights but other factors also effected by the exhaustion of IP relate to: Licensing, territorial rights and contracts; Products made from component parts and transformed goods; Transition goods; Consumer choice and potential consumer confusion; Interaction with unregistered design rights. These issues are all considered in the Consultation Paper and clearly highlight the complexities of choosing a new exhaustion regime and its implementation in a post-Brexit era.
It is therefore important for UK brand owners and the organisations that represent them to have their say by responding to the Consultation.
If you would like to discuss the Consultation and any issues surrounding exhaustion and parallel imports further, please get in contact here.
