Exhaustion of IP rights: what happens if there is no Brexit deal
15 October 2018
Client Alert | EU | Brexit | Intellectual Property
The UK Department for Business, Energy & Industrial Strategy recently published guidance on the exhaustion of rights in the event that no Brexit deal is reached prior to the UK leaving the EU.
The guidance notes that "the UK is currently part of a regional European Economic Area (EEA) exhaustion scheme, meaning that IP rights are considered exhausted once they have been put on the market anywhere in the EEA with the rights holder’s permission." This means that the later sale of goods in Europe of goods originally put on the market in the UK cannot be objected to on the basis of intellectual property rights (and vice versa).
However, after Brexit the UK will no longer be part of the EU or the EEA unless some agreement is reached. In the event that no agreement is reached, the usual default legal position would be that the export of goods from the UK to Europe by parties other than the IP rights owners (or without the rights owners' consent) can be prevented by the rights owners (and vice versa).
Of interest in the guidance is that it is the stated intention of the UK in the immediate (temporary) term after Brexit to consider UK rights to be exhausted by the placing of goods on the market in Europe. The UK is said to intend to enact legislation, but none may be needed for trade marks since the exhaustion provision of the Trade Marks Act 1994 (section 12) already deals with this. Essentially, the UK intends to continue the status quo as regards the conditions under which it considers rights to be exhausted.
There may therefore be a temporary period during which rights owners will be able to decide what goods to allow into Europe from the UK but not the other way around. Those rights owners who were expecting two-way control after Brexit may need to reconsider their plans and should ensure that distribution agreements and other arrangements adequately reflect the control that the rights owners wish to exercise. Rights owners should also consider that the UK position may be temporary and that there may be opportunities for further control in distribution arising if the UK later reverts to a definition of national exhaustion.