The UK Government has launched a much-anticipated consultation on the exhaustion of IP rights. It is widely recognised that there will not be a consensus given the contentious nature of this subject, but the Government needs to make a decision on the future regime governing exhaustion. It is therefore calling for as many responses as possible to help in gauging the volume of parallel imports and the impact of any changes to the rules.
On Brexit, the Government put in a place a temporary measure for the exhaustion of IP rights. It had to accept that, having left the EU, IP rights in goods put on the market in the UK would no longer be considered exhausted in the EEA and could be stopped at the border by the rights' holders. Where the Government had the freedom to decide, it provided that the IP rights in goods put on the market in the EU would be exhausted in the UK. This unilateral acceptance of an asymmetric regional EEA exhaustion regime is now being called the "UK+" regime and is explained in more detail in my previous article. In the absence of any reciprocity, this was the closest that the Government could come to preserving the status quo. However, it was always intended to be a short-term measure pending a decision on what regime should be implement on a permanent basis.
The Government has now launched a consultation on the four possible options for a future exhaustion regime. They are:
Of these, the Government has stated that national exhaustion is not a possible outcome since it cannot be reconciled with the Northern Ireland Protocol. Therefore, it is included in the consultation only for completeness and to gather what evidence is available on economic impact. The mixed regime, would also need to be in line with the Northern Ireland Protocol and could be complex and challenging for businesses and consumers to understand and expensive to administer. Therefore, although the Government states it does not have a preferred option, it appears that the decision will be between doing nothing, or rather, keeping the UK+ regime and moving to a regime of international exhaustion.
In addition to the highly contentious issue of what regime should govern IP rights in the UK, there are a number of other difficult questions relating to exhaustion. However, the consultation specifically states that it does not apply to the exhaustion of IP rights in purely digital goods, such as music and books bought and downloaded online, nor does it mention the tricky issues relating to patents and whether the doctrine of implied licence applies where exhaustion does not.
Why is the consultation important?
The Government needs to make a decision on the most appropriate exhaustion regime for the UK. Its stated objective is to preserve a balance between incentivising innovation and the creation of new technology, products or cultural works, while enabling competitive markets, consumer choice and fair access to IP-protected goods for the benefit of society.
The Government is aware of the arguments for and against the different exhaustion regimes. These include, under a national regime, the benefits to the IP right's holder of being able to control their distribution channels and being able to exercise greater control over the quality and safety of their products. In contrast, under an international regime, consumers in the country of import may potentially benefit from cheaper products and more choice. However, the Government lacks the data to be able to quantify the impact of the four options and what happens when a country changes its exhaustion regime across all IP rights simultaneously.
It is therefore calling for evidence to identify the size of the market for parallel imports and how different sectors and parties might be affected. If you want to influence the Government's decision on the future exhaustion regime, you should respond to this consultation.
How to get involved?
The consultation is accompanied by an impact assessment and a response form which can be downloaded from the Government's website. The deadline for submitting a response is 31 August 2021. We would be very happy to advise you on and help you structure your response. Please get in touch with either Katharine Stephens ([email protected]) or Peter Brownlow ([email protected]) for more information.