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BREXIT - Future Exhaustion of IP Rights Regime in the UK - January 2022 Update
By Simon Miles, ECTA International Trade Committee Member


Following the closure of the UK government’s consultation on 31 August 2021 seeking views from stakeholders on the most appropriate IP rights exhaustion regime in the UK following Brexit, the UK government has now published its summary of the responses received (see here), but has decided that it cannot arrive at a decision based on the criteria originally set out.

Outcome

In the update posted on 18 January 2022, the UK government has concluded that following its initial analysis, there is not enough data available to understand the economic impact of any of the alternatives to the existing UK+ regime. The government has announced that it will develop the policy framework further, reconsider the evidence and make a decision at a later date, but does not give a timeframe for when this will happen. Whilst this is a little unsatisfactory, it is surely sensible to once again maintain the status quo taking into account the importance of the subject matter and the relatively short period of time since Brexit in which to gather data.

The public consultation

The consultation was considered necessary by stakeholders because after Brexit on 31 December 2020 the UK chose to retain the EEA’s regional exhaustion regime with regards to imports of goods into the UK from the EEA - EU rights holders continue to be free to export goods into the UK. However, it has become an asymmetric system because the EU has not reciprocated. IP rights in goods first placed on the market in the UK are no longer considered exhausted in the EEA. This means that owners of UK IP rights are not able to prevent parallel imports from the EEA into the UK, but owners of EEA rights will be able to prevent goods put on the market in the UK from being sold in the EU.

The public consultation was launched for the purpose of obtaining the views of respondents on the most appropriate exhaustion of IP rights regime for the UK. Four options were outlined during the consultation, a unilateral EEA (UK+) regime, a national regime, an international regime and a mixed regime. Respondents were asked to provide their views and supporting evidence on what regime should be implemented, and how that implementation would take place.

The consultation responses

The UK government’s summary sets out the main views of the respondents to the questions posed in the consultation, as well as the views of interested parties in ministerial meetings and meetings with UK Intellectual Property Office officials during the consultation period.

In relation to what is considered the most appropriate of the four options it was clear that most respondents favoured the current position. There is some suggestion that this has something to do with the respondents’ familiarity with the current rules notwithstanding the lack of reciprocity relating to parallel imports between the EEA and the UK.

Over a third of respondents favoured a national exhaustion regime believing that competition would be boosted which would provide UK businesses with a competitive advantage over their EEA competitors because it would permit parallel imports from anywhere in the World.
An international exhaustion regime was not popular with respondents – over half actively opposed it. This might be explained by the fact that the pharmaceutical and creative industries provided the heaviest number of responses. Only a small proportion of respondents favoured a mixed exhaustion regime and around a quarter of respondents expressed no preference.

It is clearly a complex situation which requires further analysis. The parallel trade of legitimate physical goods takes into account many different stakeholders. Views are obviously going to differ, for example between those whose livelihoods were dependent on commercialising parallel traded goods and rights holders. Interestingly, most respondents were unable to provide estimates on the scale of parallel imports either at business or sector level, and obtaining reliable figures was deemed difficult due to volatility or data not being tracked.
Further, respondents explained that supply chain management for a given product could involve a complex national or international chain of stakeholders and provided mechanisms by which they exerted control over supply chains. Additionally, the position is obviously complicated by other factors which had an impact, such as international price differentials resulting from market landscape and government price controls.

Many respondents were in agreement that there would need to be a period of time to embed any changes. That period would depend on the extent of the change, the impact on supply chains and any regulatory impact.

In light of all of this, the UK government considers it is reasonable for further consideration to be given to the subject.
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