Mark the line

29 Aug 2018

Current EU principles of trade mark exhaustion provide that, other than in very limited circumstances, EU trade mark owners can control the point at which their genuine branded goods first enter the EU market, but cannot control any further sales beyond that.  Following that first legitimate sale into the EU, the EU trade mark owner’s rights become exhausted.  Sometimes called the first sales doctrine.

The doctrine of exhaustion is primarily intended to allow the trade mark owner to control the price at which its branded goods are sold in different territories.  Goods selling for 40 Brazilian Real, might sell for £80.00 in the UK (100% more); understandably trade mark owners want the entry price of their goods to reflect their value in a particular market and the relative wealth in different territories.

This is how it works: if the owner of a well-known trade mark, which was registered in the EU, had its products made in Turkey and used a distributor based in France to sell its goods in France, it could not (using it’s EU trade mark rights at least) prevent further re-sale of those products in other EU countries, including the UK.  This allows free movement and re-sale of genuine branded goods within the EU market.

What the Turkish EU trade mark owner can do is prevent parties from buying its products in Turkey and selling them in the EU at a higher price without the EU trade mark owner’s consent (the so called grey market or parallel importation).  This is because the trade mark owner has not controlled the timing and terms on which the goods first enter the EU market.

The prospect of a no deal Brexit raised the possibility that EU trade mark owners could prevent the onward sale of branded products into the UK, where they had been legitimately first marketed in the EU.  The UK would become a grey market for EU trade mark owners allowing them to prevent further re-sale of their own products which they had already sold in the EU.  This would not be good for the UK consumer who may be prevented from accessing genuine branded products available at lower prices in the EU market.

So the Government’s guidance - UK government's preparations for a 'no deal' scenario (published on 24 August), has been well received, by trade mark lawyers at least.  While made in the context of the pharmaceutical sector, it confirms that the UK will unilaterally adopt the EU principles of exhaustion in the event of no deal, at least in the short term. 

Good news for those of us who enjoy our international brands (and buy the genuine article!).

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