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European Commission gives notice of change to the exhaustion of intellectual property rights in UK-EEA post-Brexit trade

21 July 2020
With the rules governing the exhaustion of intellectual property rights set to change after expiry of the transition period, this article examines the latest update provided by the European Commission.  

The European Commission has provided a Notice to Stakeholders (the "Notice") discussing the exhaustion of intellectual property rights ("IPR") in light of the UK's withdrawal from the EU.
As it stands, the IPR in a product placed lawfully on the market within the EEA by the rights holder, or by someone with their consent, is generally said to be "exhausted". 

This means that the rights holder (such as the owner of a trade mark which is applied to the product) cannot prevent the subsequent resale or distribution of the product across other areas of the EEA on the basis of its IPR.

However, the Notice explains that this position will change after expiry of the transition period, which is due to occur on 31 December 2020.

Products first sold lawfully in the UK and exported to the EEA

The Notice states that the IPR in a product first put on the market in the UK will not be exhausted in the EEA after the end of the transition period. 

This means that a rights holder, or someone with their permission, may object to a third party exporting the product to the EEA for commercial exploitation where such action would infringe the right-holder's IPR.

This position should be contrasted with how the IPR in a product first lawfully sold in the EEA and exported to the UK is considered after the transition period. 

Products first sold in the EEA and exported to the UK

The Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2019 (the "Regulations") are due to come into force on expiry of the transition period. The Regulations amend the law relating to trade marks, copyright, databases and registered designs to retain the existing exhaustion regime, so that the IPR in a product first marketed in the EEA will still be considered to be exhausted in the UK.

In light of the position set out in the Notice, the Regulations mean that the IPR in products first sold in the UK will be treated differently from those first sold in the EEA after the transition period. 
It is currently unclear whether the Government intends for these regimes to remain different in the long term.

Consequences for exporters and holders of IPR 

Moving forward, exporters who purchase products originally lawfully marketed in the UK for onward distribution or resale in the EEA should consider whether those products are protected by IPR. Where this is the case, exporters will require the consent of the rights holder to export those specific products to the EEA (unless they were lawfully placed on the market in the UK or EEA by the rights-holder or with its consent prior to the expiry of the transition period as per the Withdrawal Agreement).

Exporters should consider engaging with the rights holder early to overcome any problems that may arise. Indeed, guidance issued by the Intellectual Property Office suggests that exporters may need to review their business model or supply chain based on the outcome of such discussions.  The guidance recommends the following action points:

Actions for exporters of IP-protected products from the UK to the EEA 

  1. Check whether you currently export IP-protected products to the EEA (for example, products branded with a trade mark) that have been lawfully placed on the UK market and where the rights holder’s permission to export those products is not currently required.
  2. You may need to contact the rights holder to get permission to continue after 1 January 2021. The IP rights holder may not provide permission for their IP-protected products to be exported to the EEA.
  3. You may need to review your business arrangements, business model or supply chain based on the outcome of the discussion with the IP rights holder.

Actions for IP rights holders

Businesses which own IP rights (for example, a trade mark) may wish to seek legal advice if their IP-protected products are exported from the UK to the EEA. You will need to consider if you want to allow exports of your IP-protected products from the UK to the EEA after 1 January 2021.

Accordingly, those holding the IPR in products that may be exported in this way should consider whether they wish to permit exports to the EEA and if so, on what terms.

In contrast, by virtue of the Regulations, it may feel like business as usual for those exporting, or holding the IPR in, products first sold in the EEA even after the transition period. However, such parties should pay close attention to whether the Government seeks to amend or even revoke the Regulations in the future in light of the differing regimes.

If you have any questions related to the contents of this article, please get in touch with one of the below contacts.

This article was authored by Jenny Davies.

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