Parallel Imports Into the UK: No Change to the Law Yet

The UK IPO has announced that the current exhaustion regime will continue in place for the time being. It has advised that there is currently insufficient data available to understand the economic impact of any of the alternative schemes. 

Parallel Trade - The Current Position

The laws on the exhaustion of IPR determine the ability of IPR owners to control the sale of their products after they have been first placed on the market. A key aspect of such exhaustion schemes is the extent to which IPR owners can prevent their products from being traded across borders ie parallel trade.

The EU operates a regional exhaustion of IPR scheme. This means that, broadly speaking, once a unit of product is placed onto the market in the European Economic Area (EEA) by the IPR owner (or with its consent), the rights owner cannot prevent the product from being traded within the EEA. However, IPR owners can prevent traders from importing into the EEA products which are first sold outside the EEA.

Following Brexit, the UK has become a third country in relation to the EU. This means that IPR owners can prevent units of product first sold in the UK (after 1 January 2021) being imported into the EEA. By contrast, the UK has continued to operate the pre-Brexit exhaustion of rights scheme. This means that traders can continue to import into the UK products which are first sold in the EEA. The UK Government implemented this arrangement as a temporary measure to ensure the continued supply of key products such as medicines.

The Consultation's Four Options

The UK IPO's consultation was open from 7 June to 31 August 2021 and received 150 responses. Unsurprisingly, the pharmaceutical sector was very well represented in those replies, from big pharma to parallel traders. The UK IPO's paper set out four options:

• Unilateral EEA (UK+) regime: Maintaining the current situation, in that goods can be freely imported into the UK from the EEA, but not from the UK to the EEA.

• National regime: The IPR of owners would be exhausted in the UK only where goods are first put on the market in the UK. The UK Government advises that it is unlikely to select this option because it considers this would be inconsistent with the UK's obligations under the Northern Ireland Protocol.

• International regime: The IPR of owners would be exhausted in the UK when goods are put on the market anywhere outside the UK.

• Mixed regime: Different rules would apply depending on the particular IP right, product or sector in question.

The Future of Parallel Imports

The divergence of views on IPR exhaustion just within the pharmaceutical sector shows the difficulty of the UK government's task in balancing the interests of the various interested parties. That said, it appears that any change to the current exhaustion scheme is unlikely to happen in the near future. The UK IPO has advised that, ''further development of the policy framework'' needs to happen before making any decision to effect such change. This is a somewhat opaque statement but may partly refer to the perceived difficulties presented by the Northern Ireland Protocol. Even if a change were to be implemented, the UK IPO has acknowledged that a transitional period would be needed to allow businesses time to prepare for it. 

If you have any views on exhaustion of rights or want to speak with us about parallel trade, please contact Tom Cahill in our Pharmaceuticals and Life Sciences team on 07976 550 923, or complete the form below.