EU's Exhaustion of Rights Doctrine to Remain in Force in UK

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Jane Lambert

Shortly before the UK-EU Summit on 19 May 2025, the Intellectual Property Office announced that the doctrine of exhaustion of rights will continue to apply to the UK even though the UK has left the European Union and notwithstanding that the doctrine will not apply in the opposite direction (see IPO press release Certainty for businesses and choice for consumers as UK maintains IP rights regime 15 May 2025).  In view of the furore over the so-called reset of relations between the UK and EU with threats from the Leader of the Opposition and Reform UK to reverse the deal it is surprising that the IPO's announcement has received so little attention in the press (see Badenoch vows to reverse Starmer's EU Deal The Telegraph 19 May 2022).

Exhaustion of Rights

The doctrine of exhaustion of rights was developed by the Court of Justice of the European Union to reconcile the tensions between arts 30 and 34 of the Treaty on the Functioning of the European Union.  Art 30 provides:

"Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature."

Arts 34 and 35 supplement art 30 by prohibiting restrictions on imports and exports.  However, art 36 allows some exceptions:

"The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."

In Case 16/74 Centrafarm v Winthrop [1974] ECR 1183, the Court said:

"[7] Inasmuch as it provides an exception to one of the fundamental principles of the common market, Article 36 in fact only admits of derogations from the free movement of goods where such derogations are justified for the purpose of safeguarding rights which constitute the specific subject-matter of this property.
[8] In relation to trade marks, the specific subject-matter of the industrial property is the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purpose of putting products protected by the trade mark into circulation for the first time, and is therefore intended to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that trade mark.
[9] An obstacle to the free movement of goods may arise out of the existence, within a national legislation concerning industrial and commercial property, of provisions laying down that a trade mark owner' s right is not exhausted when the product protected by the trade mark is marketed in another Member State, with the result that the trade mark owner can [oppose] importation of the product into his own Member State when it has been marketed in another Member State.
[10] Such an obstacle is not justified when the product has been put onto the market in a legal manner in the Member State from which it has been imported, by the trade mark owner himself or with his consent, so that there can be no question of abuse or infringement of the trade mark.
[11] In fact, if a trade mark owner could prevent the import of protected products marketed by him or with his consent in another Member State, he would be able to partition off national markets and thereby restrict trade between Member States, in a situation where no such restriction was necessary to guarantee the essence of the exclusive right flowing from the trade mark."

In Case C-9/93 IHT Internationale Heiztechnik GmbH and Uwe Danzinger v Ideal-Standard GmbH and Wabco Standard GmbH. (Free movement of goods) [1994] ECR I-2789, [1994] EUECJ C-9/93, the Court explained the principle of exhaustion of rights at para [34]:

"So, application of a national law which would give the trade-mark owner in the importing State the right to oppose the marketing of products which have been put into circulation in the exporting State by him or with his consent is precluded as contrary to Articles 30 and 36. This principle, known as the exhaustion of rights, applies where the owner of the trade mark in the importing State and the owner of the trade mark in the exporting State are the same or where, even if they are separate persons, they are economically linked. A number of situations are covered: products put into circulation by the same undertaking, by a licensee, by a parent company, by a subsidiary of the same group, or by an exclusive distributor."

 Brexit

Although art 61 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community provided that intellectual property rights which were exhausted both in the EU and in the UK before the end of the transition period under the conditions provided for by EU law should remain exhausted both in the EU and in the UK, the doctrine ceased to apply to the UK after the end of that period.   The IPO published guidance entitled 
Exhaustion of IP rights and parallel trade on 30 Jan 2020.

Consultation

In a Consultation document on the UK’s future regime for exhaustion of IP rights, first published on 7 June 2021 and subsequently updated, the IPO noted:

"The concept of exhaustion has built up over many decades. When the UK was part of the EU, the UK was part of the EU’s regional exhaustion regime. The principle of exhaustion of rights is derived from the provisions concerning the prohibition of qualitative restrictions in the Treaty on the Functioning of the EU (and the EEA Agreement) as interpreted by EU case law and was specifically recognised in various EU Directives as implemented into domestic legislation. As a result of domestic legislation concerning EU exit this principle continues to have the same effect in domestic law as it had before the end of the implementation period (the UK’s unilateral application of the EEA regional regime). In particular, the principle of exhaustion is relevant to section 7A of the Registered Designs Act 1949, sections 18 and 27 of the Copyright, Designs and Patents Act 1988 and section 12 of the Trade Marks Act 1994."

Between 7 June and 31 Aug 2021, the IPO consulted on the following options:

• UK’s unilateral application of a regional EEA regime, otherwise known as a “UK+” regime:  Inbound parallel import of goods only automatically permitted from EEA countries (assuming there is separate authorisation for regulated goods such as medicines);
• National: Inbound parallel import of goods not automatically permitted from any country; 
• International: Inbound parallel import of goods automatically permitted from any country (assuming there is separate authorisation for regulated goods such as medicines); and 
• Mixed: Ability to parallel import will depend on any decision on treatment for a specific IP right, good or sector.

None of those options provided for parallel export of goods except to countries with an international regime.   The consultation document explored each of those options.   A response form asked consultees for their views.

Response 

According to para 45 of the Government response to the consultation on the UK’s future exhaustion of intellectual property rights regime. HMG received 150 responses:  120 from businesses and organizations, 17 from individuals and 13 from respondents who failed to state whether they were businesses, organizations or individuals.   A list of the corporate respondents can be found in the Government Response at para 46.  The responses are summarized in UK’s future exhaustion of intellectual property rights regime: Summary of responses to the consultation.

Outcome

According to the IPO's press release, HMG has opted for UK+.   This will not require new legislation. The Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 SI 2023 No 1287 will continue to apply.

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