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Consultation on exhaustion of IP rights – no decision yet due to lack of data

Posted on 19 January 2022

The UK IP Office has published the outcome of the Government's consultation on the framework of the UK's exhaustion of IP rights regime.  As discussed in our overview of the consultation, the Government had set out four potential options for the UK regime, namely:

  • A 'UK+ regime' – preserving the status quo in operation since 1 January 2021, in that the UK unilaterally participates in the EEA-exhaustion regime (and so parallel imports from the EEA can continue, but there is no reciprocity);
  • National (UK) exhaustion – which the Government said it only included for completeness, as it did not think it was reconcilable with the Northern Ireland Protocol;
  • International exhaustion;
  • A 'mixed' regime.

For now, the outcome is there is no decision on the future framework, and so the UK+ regime remains in place pending further consideration of the policy issues. The UKIPO states in its release:

"Unfortunately, there is not enough data available to understand the economic impact of any of the alternatives to the current UK+ regime. As a result, it has not been possible to make a decision based on the criteria originally intended. However, the Government remains committed to exploring the opportunities which might need to come from a change to the regime. Further development of the policy framework needs to happen before reconsidering the evidence and making a decision on the future exhaustion of IP rights regime".

There is no timeframe for any subsequent decision yet, but the UKIPO will provide a further update in due course.  

An initial review of the summary of the consultation responses indicates some interesting points:

  • There were 150 responses, with the pharmaceutical and creative industries most heavily represented. The UKIPO suggests the 'dominance' of these sectors is reflected in the choice of preferred option/s out of the four potential options proposed.
  • Most respondents were unable to provide estimates on the scale of parallel imports either at business or sector level (this chimes with a 2019 EY study commissioned by the UKIPO which concluded there was a paucity of data on this issue).
  • In terms of the preferences as to the four different policy options:
    • The majority who expressed a preference (one quarter did not) favoured the UK+ regime i.e., retaining EEA exhaustion.  Some respondents qualified their preference by stating it was the next best alternative to national exhaustion, given that the consultation had, in effect, suggested national exhaustion was ruled out because of the Northern Ireland Protocol.
    • Over one third favoured a national exhaustion regime (with over one fifth indicating opposition to a national regime).
    • A small number favoured an international regime. Whilst over a half opposed an international regime, the UKIPO notes that this was influenced by the volume of responses from the creative industries and brand owners.
    • Few respondents favoured a mixed exhaustion regime.
  • The Government notes that a 'large proportion' of respondents accepted its assessment in the consultation that a potential national exhaustion regime was incompatible with the Northern Ireland Protocol.  However, it also notes that some respondents in the creative industries and rights holders in the pharma industry contested its assessment of the implications of the Protocol and argued that it did not preclude a national exhaustion regime. 

It will be very interesting to see the future path of this consultation - given the lack of easily available data, the responses to the consultation, and also in the context of the challenge to the Government's interpretation of the Northern Ireland Protocol. 

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