Government announces that UK+ IP exhaustion regime is here to stay

With all the usual excitement that comes with the announcement that "nothing will change," the IPKat was interested to see the news today that the "UK+" IP exhaustion regime will remain in place.

Background

An exhausted Kat. Photo by Peng Louis.

The exhaustion of intellectual property rights was a hot topic during the Brexit negotiations (see previous coverage in the IPKat here), since the UK was also leaving the European Economic Area (EEA). 

After Brexit, the exhaustion of IP rights became rather one-sided. Once authorised goods are placed on the market in the UK or the EEA, then IP rights holders cannot stop further distribution or resale of those goods in the UK. However, goods placed on the market in the UK may no longer be considered exhausted in the EEA.

This so-called "UK+" approach reflected the importance of parallel importation in most sectors of the UK’s economy. This regime officially commenced at the end of the transition period on 1 January 2021.

The Consultation and Outcome

In June 2021 [Merpel: four years and almost as many Prime Ministers ago...], the previous UK Government launched a public consultation on this exhaustion regime to see whether it should change. It sought feedback on four options:

1. Maintain the "UK+ regime".
2. Shift to a national exhaustion regime, although this didn't seem reconcilable with the Northern Ireland Protocol and therefore was not a practical option on the table.
3. Move to an international exhaustion regime.
4. Move to a mixed exhaustion regime, with customised rules for a specific good(s), sector(s), or IP right(s).

During the 12-week consultation period, the government received 150 responses from across UK industry. The Government Response to the consultation, released today, explained that there was a lack of evidence from comparable jurisdictions about the effects of changing the exhaustion regime: other countries like Australia and New Zealand never left a trade bloc or changed their exhaustion rules for all IP rights simultaneously, so these did not provide relevant evidence to consider the impact if the UK overhauled its system.

Perhaps more importantly, the majority of consultation respondents and subsequent engagement with stakeholders reported that the "UK+ regime" is working well. More than a third of respondents favoured a national exhaustion regime, despite the massive legal problems this would create for Northern Ireland. Overall, however, the consultation showed that "Maintaining the UK+ regime will avoid transition costs arising from amending business models." Therefore, the government formed the view that businesses, consumers, and investors would benefit from the assurance that there will be balanced, well-designed parallel importation laws under the UK+ regime.

Of course, some respondents to the consultation noted that the lack of reciprocity placed parallel exporters based in the EEA at an unfair advantage compared to parallel exporters based in the UK, which would not serve the UK’s interests well in the long term. However, the overall views were in favour of preserving legal certainty and avoiding another change to the exhaustion regime.

Therefore, the Government decided to maintain the UK+ regime, so it graduated today from an "interim" system to the permanent exhaustion regime.