One of the benefits for business and consumers from EU membership has been the existence of the single market; goods placed legitimately on the market in one member state can travel freely throughout the common market.

Hence traders are able to purchase cheaply in one country and sell in another where the local price is higher; the theory is that this will lead to some alignment of prices towards the lowest level to the benefit of consumers. This is all due to a legal concept known as “exhaustion” of trademark rights.

 In terms of Article 13 of the European Trademark Regulation (Council Regulation 207/2009/EC):

 “A Community trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.”

 Basically, this means that if goods are lawfully placed on the market the trademark owner cannot prevent those goods being onsold in the EU. However, EU law only applies trademark exhaustion within the EU (or EAA) – hence the trademark rights are not exhausted if the goods were first placed on the market in the USA. Imports of trademarked goods from the USA without consent of the EU trademark holder would constitute infringement.

 Once the UK leaves the European Union, all this will change; exactly how it will change will (may) become clearer in the next 23 months as the UK’s exit and new trading relationship is agreed, but there is no existing parallel in any of the other arrangements which the EU has presently with third countries – either those in the EEA (Iceland, Liechtenstein and Iceland), or in EFTA (Switzerland).

 Both of these scenarios could be a possible solution for the UK, but if the present stance on Brexit is maintained (or the UK is unable to reach a solution on the UK’s exit and new trading relationship before the 31 March 2019 deadline), we will be left with a situation in which the UK will be outwith the scope of EU wide exhaustion and UK exports into the European Union may be blocked on trademark grounds.

 For the UK, a decision will need to be made as to what type of trademark exhaustion the UK wishes to have; other countries have adopted a worldwide exhaustion approach in which trademark rights are held to be exhausted if the goods in question have been placed legitimately on the market anywhere in the world. For trademark holders, this is unlikely to be attractive and the possibility of further market segmentation will permit the maintenance or establishment of higher prices in a closed market but for consumers in the new interconnected world, there must be a very strong argument that this is a once in a lifetime opportunity to end market partitioning through trademark right enforcement. The question will be, which lobby will prevail.

 

MacRoberts is running a series of events around Brexit throughout 2017. We recently hosted two successful events in Glasgow and Edinburgh on “What does Brexit mean for Scotland?” where delegates heard the views of business leaders. Our next event, on 15 June, will focus on the impact of Brexit on the Food & Drink sector, where we will hear views of thought leaders in Scotland’s food and drink industry. For more information, please click here.