Exhaustion of Rights in a "no-deal" Brexit scenario

On 24 September the UK Government published a series of technical notices on the impact on various areas of intellectual property, including exhaustion of rights, in the event of the UK leaving the EU without agreement (a ‘no deal’ scenario). The notice clarifies that the position would remain the same in relation to goods first placed on the market in the EEA, but that the situation would dramatically change in relation to goods first placed on the market in the UK.

At present, the UK is part of the EEA exhaustion scheme under which IP rights in a product are exhausted when goods are placed on the market anywhere in the EEA by, or with the consent of, the rights holder. Once an IP right is exhausted, the rights holder loses the ability to control the distribution and resale of the goods. Parallel imports are non-counterfeit goods imported into a country where the IP rights in the goods have already been exhausted, a practice often used to take advantage of differing prices and market conditions.

The technical notice clarifies that IP rights in goods placed on the EEA market by, or with the consent of, the rights holder will still be considered exhausted in the UK. This means that such goods will still be able to be imported into the UK from the EEA. Parallel imports of goods from the EEA will therefore remain unaffected. This announcement is good news for many industries, including the pharmaceutical businesses, which trade in parallel imports.

However, IP rights in goods placed on the UK market by, or with the consent of, the rights holder will not necessarily be considered exhausted in the EEA. This is unsurprising since this is a matter for the EU to legislate on, and would be out of the UK’s hands in the event of a ‘no deal’ scenario. So, it would be necessary to check whether the rights holder’s consent may be required before exporting such goods from the UK to the EEA.