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Parallel importers warned over impact of 'no deal' Brexit

Out-Law News | 27 Sep 2018 | 12:59 pm | 2 min. read

Businesses involved in repackaging medicines placed on the UK market and exporting them for sale elsewhere in the EU could be in breach of intellectual property (IP) rights in a 'no deal' Brexit scenario, the UK government has warned.

The warning over parallel imports to remaining EU countries from the UK was contained in a new technical notice on the exhaustion of IP rights if there’s no Brexit deal that the government has issued.

The guidance is part of a series of technical notices the UK government has already issued that highlight the potential implications of Brexit for businesses should the UK and EU not reach agreement on the terms of the UK's withdrawal from the trading bloc before 29 March 2019. Those documents include 'no deal' Brexit guidance on other IP issues, including patents, copyright, trade marks and designs, as well as on protecting geographical food and drink names.

Currently, trade mark holders in the EU have the exclusive right to control when and where their goods are first placed on the EU market. However, rights holders cannot control subsequent distribution of the goods once the goods have been placed on the EU market.

Some businesses, particularly in the pharmaceuticals sector, buy goods placed on the market in one EU country and sell them in another, seeking to take advantage of the different market conditions, including often in relation to the pricing of the goods. Those businesses are known as parallel importers.

In its guidance paper, the UK government explained that a 'no deal' Brexit would not change the current position in relation to parallel imports into the UK. However, it warned that UK-based parallel importers could face restrictions on exporting goods to countries in the European Economic Area (EEA), which includes the EU27 nations.

"While there will be no change for the importation of goods into the UK, there may however be restrictions on the parallel import of goods from the UK to the EEA," the guidance said. "Businesses undertaking such activities may need to check with EU right holders to see if permission is needed."

"The government is currently considering all options for how the exhaustion regime should operate after this temporary period. The government is undertaking a research programme to support this decision," it said.

The government said businesses might want to seek legal advice on how the potential new arrangements could affect their business model or IP rights.

It said: "Intellectual property-protected goods placed on the EEA market by, or with the consent of, the right holder after the UK has exited the EU will continue to be considered exhausted in the UK. This means that parallel imports of these goods from the EEA to the UK will be able to continue unaffected."

"Goods placed on the UK market by or with the consent of the right holder after the UK has exited the EU will not however be considered exhausted in the EEA. This means that businesses exporting these goods from the UK to the EEA might need the right holder’s consent," it said.

Helen Cline, an expert in IP law and life sciences at Pinsent Masons, the law firm behind Out-Law.com, said the UK government's announcement confirms the position on parallel imports of medicines into the UK set out  in a previous notice this month and could help alleviate a potential shortage of medicines in the UK post-Brexit.

Cline said the policy also compliments the government's announcement that the UK will recognise marketing authorisations granted for medicines in EU27 countries for two years if there is no Brexit deal.

The paper represents the UK's 'no deal' policy. The EU27 could take a different position.