 I'm delighted to be here and what a great act to follow. I have been asked to speak about IP exhaustion and parallel trade. Now make no mistake, if there were strong feelings expressed about the last subject, there are equally strong feelings to be expressed about this subject. On the one hand we have the rights owners who are protecting their rights and on the other hand we have the free and fair competition interests. The other topic that I was asked to touch upon is Brexit and of course that has stirred up all these emotions all over again and has given the UK an opportunity to say what sort of exhaustion regime it wants and where the balance lies between those two interests. So a brief recap, I'm talking about the sale of genuine goods and the point at which the IP rights holders control over protected goods expires. We need to talk about a little bit more competition law but before I do that I wanted to say that there are basically two series in relation to exhaustion. First one is not exhaustion at all, it's an implied licence and that goes back to an old UK case of Betsan Wilmot which was a 19th century case where the judge said that the goods are transferred with the licence to use them and that when a man has purchased an article he expects to have the control of it and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser that control. So that was one theory. The other theory is this exhaustion theory so that when you put the goods onto the market the IP rights in them have been exhausted, in other words they have been extinguished, they are no longer there so they cannot be asserted. There's nothing left to assert and the rationale behind that is that otherwise the IP rights will stick remora-like to the goods as they flow through the markets. Now that expression comes from a US case of Lexmark and I don't know, I had to look up what a remora was. That's one of those blood-sucking fishes that you see on the underside of the giant manta rays of Wales and they're hanging on and that's what the judge in that case thought of the IP rights hanging on to the product and stopping the free flow of that product through the market. So two different theories and then exhaustion comes in a number of different flavours. You can have national exhaustion of rights where you put your product on the market in the country and that exhausts the rights only in that particular country. And then some countries have a theory of international exhaustion so if the goods are put on the market anywhere in the world the IP rights are exhausted. Well the former of those the national exhaustion was a little bit of a problem when it came to the European common market and the ECJ as it then was quickly woke up to the fact that national intellectual property rights could stop the free movement. And so they put a stop to that using articles 34 as it now is to say that the goods are exhausted on a regional basis for the whole of what was then the community then the EU and now the EEA. And article 36 places some limits on that but it is construed extremely narrowly. Now the UK has adopted international law various these principles on exhaustion and I've just set out in this slide the provisions in the Trademarks Act which comes from the directive and the Copyright Designs and Patterns Act and the Registered Designs Act. I'm going to take as my example for looking into this in more detail the Trademark Law. These two provisions in section 12 mirror article 7 of the directive and then again article 34 and 36 of the TFEU. The first one is the basic rule that once the goods are put on the market with the consent of either by the proprietor or with his consent then they are exhausted. The first challenge to that basic rule was though came up in oh dear this is gone in the wrong order but came up in a case of silhouette and the question there was having taken this law into the principles under the TFEU into our national law had that in any way changed the law in relation to international exhaustion. So those countries that had a principle of international exhaustion was that changed and the answer was yes in a series of three cases it was yes yes and yes when we said yes we meant yes. The first case was this silhouette case which was all to do with old stocks of fashion spectacles which were being moved from Bulgaria into Austria before Bulgaria joined the European community. The question was whether they could be stopped as they came into Austria and the answer was yes because article 7 does not leave open to member states the option of providing for international exhaustion. And that was repeated in this Sabago case all about the doxide shoes. What the parallel importers tried to say there was because identical goods were already on the market the rights have been exhausted and the ECJ said no that's not correct exhaustion only applies in relation to each item. And then there were a couple of referrals which were joined the Davidoff and the Levi jeans case from the UK where again this question came up and what the ECJ said in that case was when looking at consent as to whether you have consented to the goods being imported into the EU. Or not it's effectively you've got to prove there have there has been express consent on the path of the rights owner because they are effectively giving up the right to stop the goods coming over the border into the EU. And that those rules also apply to other harmonised rights in relation to the distribution right under copyright. The advocate general said in the laser disson case that he sees no reason not to interpret those provisions in exactly the same way as the trademark rules. So for harmonised rights we've got a harmonised set of rules for when exhaustion occurs. Now I'm going to look at the exception to that when is it legitimate for the proprietor to oppose further dealings in the goods. And this particular provision has really been tested to destruction by the pharmaceutical community because of course that there are so many issues arising in relation to pharmaceuticals. And some of the questions that have been asked is well because of different regulatory requirements in different countries goods are sold in different quantities in different countries. So can I take goods purchased in one country and repackage them take them all to bits and repackage them to be able to sell them in another country. And if I am doing that and there's one trademark applied in one country and another trademark in the country of importation can I put the trademark. Can I change the trademark and put the trademark of the country of importation onto the packaging. And the answer in both those cases has effectively been yes provided that you comply with what are called the BMS requirements. So in other words you can re-box and you can rebrand the products provided they comply with these five requirements. In other words you've got to show that it is necessary to repackage the product to be able to access the second market the market of the country of importation. That there is no effect on the original condition of the product. There's a clear identification of the manufacturer and importer. The presentation isn't damaging to the trademark and notice has been given to the trademark proprietor. That effectively as Robin Jacob explained was because re-fixing a trademark rebranding a product does have the capacity to jeopardize the reputation of the trademark. But in these circumstances there is an exception if you comply with the BMS criteria. And just to show you how this works in practice I'm going to take a more recent case of SEP or Speciality European Farmer against Doncaster. And in that case the judge was saying well the principles by now and this was in 2015 are pretty clear. But it's just applying those principles that was obviously difficult in this case. What was happening is that Doncaster was importing into the UK a French product called Keras which was a 20mg trospium chloride product. And they were also importing into the UK a German product at the same product called Urivesc and they were renaming it Regurin. And at first instance Aspin said that they could not do that because it was not objectively necessary to have access to the market. Because they could still have access to a large generic market under the generic name trospium chloride. So she held that the trademark was infringed. In the Court of Appeal they overturned that and said well no that's not correct. Because unless Doncaster rebranded the product they could not have access to the branded market. And they said that doctors are likely to use the name Regurin when they're writing out the prescription. And the pharmacist is not in those instances allowed to swap in the generic product. And so Doncaster is losing out in supplying products that can be fulfilled that prescription. So you can see how these rules have been applied again and again and again against the trademark owner. Now what about de-branding? Well you would have thought that if you took the trademark off the product altogether there would be nothing to complain about. There would be nothing but infringed the trademark owner's trademark because you've taken the trademark off the product altogether. Well you'd be wrong and this is the CJU case that says you're wrong. This was all about the importation of forklift trucks and Duma was taking off the Mitsubishi mark. And that was held nevertheless to be an infringement because it derived the trademark owner of the benefit of the essential right and affected the function of the trademark. So effectively you're damned if you do and you're damned if you don't. Now those are the rules that we presently have moving on to Brexit. Now we have left the EU and we are in the transition period. What are we going to do about all these rules? The withdrawal agreement doesn't really help us. All it says in the withdrawal agreement is that if a good has been put on the market and is exhausted on the date of exit then it remains exhausted. So is this really an opportunity for the UK to reconsider its rules on exhaustion? Well the UK asked the government asked Ernst and Young to do a study on the exhaustion of intellectual property rights to help it answer this question. They asked Ernst and Young to ask the community about national, international and regional exhaustion. The conclusion was however that it was a fundamentally difficult question, no prizes there, and that they couldn't quantify it in any market except the farmer sector. And they weren't going to come up with any suggestions or recommendations but they did know that most people wanted to retain the status quo. And I plucked out of the report some of the figures that they mentioned which are, you know, just shows the size of the market here. Parallel trade in the EEA of approximately £5 billion and in the UK of £1 billion. Actually I'll stick on that slide. They did go through some of the arguments and I thought it would be useful actually to collect them here to show you why this is such a hard fought fight between the farmer companies and the parallel interporters. Farmer companies point out that prices are controlled and vary across the EU between about 20% and 50% which allows arbitrargers to make a profit of something between 10% and 15% just moving goods from one country to another country. That means that money is being taken away from them which they might invest in R&D. It encourages them not to supply to poorer countries which might pay less for the goods and so increasing the sums of money that can be made by these arbitrargers. And it impacts the safety of the products because it makes it more difficult to tell whether you've got a genuine parallel imported product or a counterfeit. On the other hand, the arguments are all about competition and consumer access. Parallel importers argue that it decreases pressures on national health budgets and we can see here that the NHS is saving approximately £100 million per annum through the purchase of parallel imported products. They point out that the only competition for impatent pharmaceuticals comes from parallel imported products which drives prices down they estimate by about 3%. On Brexit, of course, farmer is very, very against international exhaustion and pro either regional or national exhaustion and parallel importers of course want lots of international exhaustion. And they point out that if you suddenly went to a national exhaustion that would cause drug shortages and over the long term would of course increase prices. Well, what the government has in place at the moment is something which would apply in the event of a hard Brexit and the aim is to preserve the status quo as much as possible. This is this Intellectual Property Exhaustion of Rights, SI. And I put up here the amendment that is made to the Trademarks Act. They've slipped in the words and the UK so that there's exhaustion in the UK and the EEA. But of course they can't do anything in relation to what the EU is doing in relation to countries that are now outside the EU. The UK has thrown itself outside fortress Europe and so effectively what this does is give you an asymmetric exhaustion regime. Holders of IP rights in the EU can stop products coming across from the UK into continental Europe. And the patent provision, more complicatedly worded, but has the same effect. The government's advice on this, they do recognise this, is go and talk to your lawyer. And just before you think, well, you know, we're a rich country, goods are never exported from the UK to Europe. Well, think again, there was this case of all about the export from the UK to Spain of Schwepp's tonic water, which in that case the EU said was okay because the two companies that have been split in the trademark ownership but the two companies were co-ordinating to promote the global trademark image. But that sort of import into Spain now will be stopped under because of Brexit. The big question remains, what about goods imported from third countries? Well, under the SI, the SI is effectively silent about it. But under the European Union withdrawal act, it's quite clear that Silhouette and Laserdiscan are intended to be retained in the UK store. So effectively, we are retaining this sort of fortress Europe provision. Sorry, we are retaining the fact that we no longer recognise international exhaustion of rights. And that is until the Supreme Court or a relevant court or parliament decides otherwise. As I've said all along, patents are slightly different. The principle of implied licence still relates to international sales of goods. And so the principles in Betson-Wilmott still apply to patents. I put here on the slide if I'm wrong in relation to Silhouette and Laserdiscan being retained case law. Well, that is because there's a provision in the European Union withdrawal act about the law being modified. And whether this retained case law is still applicable and those questions have been raised. I believe that actually relates to the law being modified in Europe. And so I think Silhouette and Laserdiscan do apply until we come to some change. But what of the future? Well, as I said, the government is consulting. But it can't force the European Union to reciprocate so we can't have the old system as it used to be. So should we keep this asymmetric system that we've now got under the SI or should we tear it up and go either to national or international exhaustion? Well, the SI scheme has been criticised because some say it's not consistent with the WTO rules and trips. I think there's also another problem with it in relation to the fact that we will adopt the EU case law. But we won't be subject to the rules of the CJEU so that law might change in Europe if we're stuck with an older version of it. So should we move? Well, I'm not really going to answer that. I've sat on the fence for ages. I suppose I mostly believe in free movement of goods and therefore I would be in favour of international exhaustion but I think the pharma industry is different and some of those arguments that they do raise, the humanitarian arguments in relation to moving drugs from poorer countries to rich countries, are powerful ones. I suppose the only point to add is that in Switzerland they've been grappling with these issues before we have had to grapple with them. They have an international exhaustion in relation to trademarks and to copyrights but some years ago they changed their regime in relation to patents so they have a regional exhaustion, EEA-wide exhaustion in relation to patents except for a few specific instances and one of them is where prices are fixed by the state and then they have national exhaustion of patents to preserve the market for pharmaceuticals. I think that may be something that is worth looking at by the government but what of course everybody is concerned about is really what is best for us in this changing world and what is best for our health. Thank you.