Cross-border Flow Of Goods And IP Protection

Published date02 August 2021
Subject MatterIntellectual Property, Government, Public Sector, Food, Drugs, Healthcare, Life Sciences, Patent, Trademark, Constitutional & Administrative Law, Biotechnology & Nanotechnology
Law FirmMills & Reeve
AuthorMr Richard Plaistowe and James Fry

The UK is consulting on what type of IP exhaustion regime to adopt following its departure from the EU. This is important for all businesses that rely on IP rights to protect their activities, and particularly those in IP-heavy sectors like life sciences. We consider the options.

For goods protected by trade marks, patents and similar proprietary rights cross-border movements are often restricted. IP rights are national or regional in scope. So a product sold in one country may infringe local rights if imported to another.

There are limits to this ability to mount barriers at borders however, notably in the 'exhaustion' concept.

Within a country, IP rights in a product are considered 'exhausted' when that product is placed on the market by or with the consent of the owner of relevant IP rights in it. This means that onward sale of the product (even without the authorisation of the owner) cannot infringe those IP rights.

Different ways to be exhausted

How this applies if the product crosses borders is dealt with differently from country to country. There are several different possibilities:

  • A national exhaustion regime: Under this system, IP rights are exhausted only in respect of products placed on the market within that country. Products placed on the market in another country and imported into that country would not be covered unless the IP owner had consented to importation through a licence agreement, for example.
  • An international exhaustion regime: This system deems IP rights in products as exhausted wherever in the world the product is placed on the market with the IP owner's consent.
  • A regional exhaustion regime: This is similar to national exhaustion but regionally based. IP rights in products are exhausted only if they are placed on the market in a particular international region (the EU, for example).
  • A 'mixed' exhaustion regime: Here the applicable exhaustion regime depends on the sector or goods involved (eg medicines) or the IP rights concerned (eg patents trade marks).

And a further tweak: it is typical that if the condition of goods has been changed or impaired after they were put on the market, exhaustion no longer applies and onward sale will then infringe the relevant IP rights.

The EU regional exhaustion system is based on Article 34 of the Treaty on the Functioning of the European Union (TFEU). Art. 34 seeks to prevent measures having equivalent effect to quantitative restrictions between EU countries. The EU Court has...

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