kostyantyn lobov quote web

Exhaustion of rights’ is the legal concept that permits ‘parallel trade’ or ‘grey market’ imports of genuine branded goods (not counterfeits). But rights are not always ‘exhausted’ on re-sale. In 2001 Levi Strauss successfully brought an action against Tesco for selling cut-price (but genuine) Levi’s 501 jeans sourced outside the EU. Whether or not businesses think of themselves as parallel traders, if they buy or sell branded goods that cross the UK border, this is something they should get right.

Under EU law it is lawful to buy genuine branded goods in one EU (or EEA) country and resell them in another, provided those goods were first put on the market in the EEA by the brand owner or with its consent. The brand owner cannot bring an action for infringement of intellectual property rights because the rights are said to have been ‘exhausted’ when the first sale in the EEA took place.

But if the goods were first put on the market outside the EEA, importing and selling them into the EEA would infringe the brand owner’s rights, unless the seller has a licence. The key question is where they were first put on the market (not where the reseller purchased them). Buying from an EU supplier does not guarantee that goods can be sold on, unless that supplier is an authorised distributor or can show the goods originated from one.

When Britain leaves the EU/EEA, buying genuine branded goods first put on the market in the EU and reselling them in the UK would infringe the rights of the brand owner.

Post-Brexit, the government will need to decide what the rules will be. The UK could adopt a narrow ‘national exhaustion’, which means only goods first put on the market in the UK by a brand owner could be lawfully resold in the UK. Or, the UK could adopt ‘regional exhaustion’. It could enter such agreements with non-EU countries, such as Australia.

Another option is ‘international exhaustion’, where goods first put on the market anywhere could be lawfully resold in the UK. International or wider regional exhaustion could open up new opportunities for business with non-EU suppliers.

Kostyantyn Lobov is a specialist in intellectual property at Harbottle & Lewis

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