Exhaustion Of Patent And Trademark Rights In The United Kingdom

• Published date: 10 March 2022
• Subject Matter: Intellectual Property, Patent, Trademark
• Law Firm: Gowling WLG
• Author: Mr Gordon Harris and Ailsa Carter

Are you familiar with what the 'exhaustion' of intellectual property rights means in UK law? Or that this area of the law governs whether the import of genuine IP-protected goods into the UK is lawful or not?

If your business is involved in or interested in the movement into the UK of genuine goods protected by an IP right, then you need to understand what the law in the UK is regarding the exhaustion of the relevant right. The term 'exhaustion' means the law governing whether the owner of an IP right in the UK can enforce its right, for example to prevent import into or sale in the UK, against genuine goods (i.e. those placed on the market by the right holder's business), or whether the right has been 'exhausted' in respect of those goods and is therefore no longer enforceable.

(There is an important distinction to be appreciated between 'genuine goods' and 'infringing goods'. Genuine goods are those manufactured and placed on the market (somewhere) by, or with the consent of, the owner of the relevant IP (in the country of import). Infringing goods are those manufactured and placed on the market (somewhere) by a person or entity unrelated to the owner (in a broad sense) of the relevant IP and which impinge upon that IP. Exhaustion principles concern genuine goods only).

So what is the law regarding exhaustion in the UK? The answer depends upon the type of intellectual property right concerned, where in the world the genuine goods originated/were first placed on the market, and the circumstances in which the goods were first placed on the market.

Following a consultation in 2021, the UK Government has made no proposal to update the UK's exhaustion regime. The clarification and development of this area of the law therefore rests with the courts.

Some aspects of UK law on exhaustion are clear and, as a consequence of Brexit legislation, will not be changed significantly by the courts. Some aspects of UK law on exhaustion are clear but could be re-directed by the courts. Further aspects of UK law on exhaustion are in need of clarification.

The future direction of the law on exhaustion of IP rights in the UK will therefore in large part be a matter for the courts. In an appropriate case the analysis is likely to engage the law in the UK preceding and outside of EU law, what exactly was kept as 'retained EU-law', what the courts are permitted to do in view of the Brexit legislation in the UK, and how courts in comparable common law jurisdictions have developed their doctrines of exhaustion in recent years.

We now set out to explain, for patents and for trademarks, what the law on exhaustion presently is in the UK, what will remain the same for now (i.e. unless Parliament legislates), and where the law is likely require consideration and clarification by the courts in the near future. In other words, where there is uncertainty that can be explored by interested businesses.

Trademarks and passing off

Passing off - the law now and what is expected in the future

'Passing off' is a cause of action in English law that protects goodwill (for example in a trade name or sign) against misrepresentation that leads to damage. The predecessor to the UK's first registered trademark system, passing off remains a cause of action under the common law that is independent from any cause of action brought under the modern registered trademark system.

In cases of alleged passing off challenging the importation of or dealings in genuine goods, the question of whether the acts complained of amount to a wrongful act depends upon whether the elements of passing off are established. These are: goodwill (in the UK); misrepresentation (in the UK); and damage. In applying and assessing these elements, imported goods are treated no differently to goods sold by the brand owner within the UK. Genuine goods rarely entail a misrepresentation simply as a consequence of their geographical origins, so the regime may be viewed as international. However, where circumstances are such that a misrepresentation is present (for example as to compliance with certain standards), passing off could, potentially, be established.

Originating and remaining a part of the English common law, by long-standing authority, passing off was not impacted by Brexit and is expected to remain settled in the near future.

Trademarks - the law now and possible review in the future

For registered trademarks today, the UK continues to recognise and apply the EEA-regional exhaustion regime, both for trademarks originally registered as UK rights and for trademarks extracted from an EU trademark following Brexit. The EEA-regional exhaustion regime has two fundamental features: (1) exhaustion in respect of goods placed on the market in the EEA (or the UK) by the trademark owner or with their consent, and (2) no exhaustion for goods placed on the market outside the EEA by the trademark owner or with their consent.

The first of the fundamental features of the EEA's regional exhaustion regime was introduced by the Court of Justice's 1974 ruling in Centrafarm v Sterling¹ and subsequently incorporated into EU and UK trademark legislation. The second of the fundamental features was introduced by the Court of Justice's 1998 ruling inSilhouette v...