Exhaustion and parallel trade: what’s next for pharma TMs?

Ever since the UK announced its intended departure from the European Union (EU), there has been much speculation about whether and how the UK would amend its trademark exhaustion and parallel trade regime. Following the recent UK government consultation, the position has become clearer, although the government has not ruled out the possibility of making further changes in the future.

What do we mean by exhaustion and parallel trade?

The doctrine of exhaustion of IP rights is a principle that limits an IP owner’s power to enforce their rights once the goods have been placed on the market by the IP owner or with their consent. Parallel trade is the import and export of genuine goods which have already been put on the market and in which the IP owner’s rights are exhausted. Together, laws on exhaustion and parallel trade help to strike a balance between the limited monopoly created by IP rights and the need to encourage competition in the market.

For some time, the EU has adopted a model of European Economic Area (EEA) regional exhaustion. This means that once goods have been put on the market in the EEA under a trademark, either by the trademark proprietor or with their consent, the proprietor’s rights are exhausted and they cannot subsequently control or object to other dealings with the goods on the basis of trademark rights.

The UK left the EU on January 31 2020 and the ‘Brexit’ transition period ended on December 31 2020. Since this time, the IP rights in goods first placed on the market in the UK have not been considered exhausted in the EU, and instead a business importing IP protected goods from the UK to the EU could require the consent of the EU rights owner.

Conversely, the UK has continued to unilaterally participate in the EEA regional exhaustion regime. Consequently, the IP rights in goods first placed on the market in the EEA are considered exhausted in the UK, and these goods can be imported into the UK without the rights owner’s permission, subject to certain conditions.

UK government consultation

In June 2021, the UK government launched a public consultation on the UK’s future exhaustion of the IP rights regime. The consultation ran for 12 weeks and closed on August 31 2021. In total, the government received 150 responses to the consultation, including from Bayer, GlaxoSmithKline, Merck Sharp & Dohme, Novartis, Pfizer, Roche, the Chartered Institute of Trade Mark Attorneys and the Chartered Institute of Patent Attorneys.

Four possible exhaustion regimes were considered: