Whether you're a rights holder trying to protect your pricing and distribution networks from parallel imports and the second-hand market, or a business that resells, repackages or parallel imports genuine third-party goods, you need to understand IP exhaustion.

This note introduces the key concepts of "IP exhaustion" and "parallel imports", explains why the UK government's 2025 decision to retain our "UK+" exhaustion regime matters, and examines recent UK and European cases showing how these principles play out in practice.

Basic principles of IP Exhaustion

Our suggestion is that the most helpful way to think about Exhaustion of IP Rights is like this:

  • Owners can use their IP rights to control how each IP-protected item in their product range is first put on the market (so, they use their IP rights to control the “first sale” of each protected item).
  • In practice, this means that first sale of a particular IP-protected item must be made by the IP owner or with their consent; if the first sale was made by someone else - or without the IP owner’s consent – that would infringe the owner’s IP.
  • But once a particular item has been put on the market by the IP owner, or with their consent, they cannot use their IP to control that item’s subsequent resale or distribution.
  • So their IP rights in that particular item are said to have been “exhausted”, i.e. the IP rights are used up and can no longer be enforced to prevent resale/distribution of that item.

To take a very simple example, the publisher of a book (e.g. Oxford University Press - OUP) can use its IP rights in a book (e.g. the Oxford English Dictionary) to prevent anyone else making the first sale of copies of that dictionary. But once any particular copy of the dictionary has been sold by OUP, its IP in that copy has been exhausted and it can be re-sold second-hand to another person.

  • But exhaustion applies only to the particular items put on the market; other identical items (e.g. the further unsold dictionaries still in OUP’s factory/warehouse) remain protected by the owner’s IP until they are each individually put on the market.
  • Importantly, exhaustion also only applies to the IP owner’s control of distribution/resale of physical items/products.  So a copyright owner’s other rights to prevent copying, rental and lending, or communication to the public of a work (such as OUP’s dictionary) are not exhausted and remain enforceable.  And the EU Court of Justice has ruled that exhaustion usually only applies to physical copies – so it doesn’t apply to the resale of digital products like e-book downloads for example, which can therefore be prevented by the copyright owner.1
  • And exhaustion only applies to the IP rights owner’s genuine products: action can always be taken against counterfeit products or against competitors developing new products that infringe.
  • In principle, exhaustion applies in much the same way to all of the IP rights: copyright, trade marks, patents, designs, etc.

So a complex product such as a car may be protected by numerous trade marks, patents, designs, etc, all at the same time – but once an individual car has been put on the market by the rights owner or with their consent, all of the IP rights relating to the distribution of that particular car are exhausted, and someone else can re-sell that car (second-hand) without infringing.  However, the rights-owner’s IP in its stock of new unsold cars remains unexhausted until each individual car is put on the market.

How Exhaustion regimes vary between countries (and regions), and relate to Parallel Imports

In the previous section we talked in general terms about exhaustion occurring when you “put items on the market” for the first time, but in practice it is crucial to know what the relevant “market” is, and what its rules are.  This varies depending upon where you are doing business:

  • Some countries operate a national regime of exhaustion, so for them the relevant “market” is the national territory (let’s call it Country N) and only the sale of an item within Country N will exhaust the IP rights in Country N. If a particular item has been put on the market somewhere else in the world (even by the IP owner or with its consent), it still cannot be freely “parallel imported” into Country N for resale or distribution there as the IP owner still has unexhausted rights to enforce within Country N.

    The term “parallel imports” is used to describe genuine products (not counterfeits) that are imported into a territory without the permission of the owner of the IP rights in the products.  Sometimes also called “grey market” goods, the products are imported for sale outside of (i.e. “parallel” to) any official authorised sales and distribution systems that the IP owner might have.  The business logic behind parallel imports is usually that the importer has purchased them in a different territory where prices are lower and can now potentially under-cut the prices charged by the IP owner or its official distributors.  

    Whether such parallel imports infringe the IP owner’s rights depends upon whether the IP rights have been exhausted by being first marketed in another territory. In countries with a “national” regime of exhaustion that will not be the case – sales made elsewhere don’t exhaust the rights, even if made by the IP owner or with their consent – and so the rights owner will be able to take infringement action against a parallel importer.
  • Other countries (for example, let’s call one Country I) take an international exhaustion approach, so for them the relevant “market” would be worldwide and the sale of an IP-protected item either in Country I or anywhere else in the world would exhaust the IP rights in that item in Country I. In this case, once the IP owner has made or consented to the “first sale” of an item anywhere in the world it cannot use its IP to prevent its re-sale or distribution in Country I, including the parallel import of such items into Country I from elsewhere.
  • Finally, some important exhaustion regimes are regional, such as the one operated by the member states of the European Economic Area (EEA2) for whom the relevant “market” is the whole of the EEA region.  So once an IP owner sells one of its protected items within the EEA (or consents to such marketing), its IP rights in that particular item are exhausted for the whole of the EEA: the owner cannot prevent re-sale or distribution anywhere else in the EEA (whether relying upon its EU IP rights or national IP rights in the relevant states).  But this exhaustion regime is limited to the EEA market, so the IP owner can still use its EU or national rights to prevent parallel imports of IP-protected items into the EEA, i.e. it can prevent the import and re-sale of IP-protected items first put on the market outside the EEA (even if it was the IP owner who did so).

What about the United Kingdom?  Our “UK+” exhaustion regime (made permanent in 2025)

During the UK’s membership of the EU, and until the end of the Brexit transition period, the UK operated under the EEA regional exhaustion system described in the previous paragraph. So IP rights-owners in the UK (just like rights-owners in any other EEA member country) could prevent parallel imports from outside the EEA, but not from other countries within the EEA.

But at the end of transition period, i.e. from the beginning of 2021, the UK now became a country lying outside the EEA region, and so IP-protected items first put on the market within the UK were no longer treated as “exhausted” for the purpose of the remaining EEA countries. A trader hoping to re-sell (parallel import) items from the UK into the EEA will infringe the rights of IP owners in the EEA countries unless it has sought permission from those EEA rights-owners.

For goods coming from the EEA and being imported into the UK, however, the UK Government has decided to continue to recognise EEA-wide exhaustion of IP rights. This means that once the rights-owner has sold a particular item (or consented to the sale) anywhere in the EEA, it will not infringe its UK rights for a parallel importer to re-sell them in the UK.

Described as the “UK+” exhaustion regime, we therefore have an asymmetrical arrangement: UK rights-owners have to accept exhaustion of UK rights in their products when marketed anywhere in the EEA; but EEA rights-owners do not have to accept exhaustion of EU or national rights in their products when marketed in the UK.  It is therefore possible to parallel import products from the EEA into the UK, but not from the UK into EEA.

The UK+ regime was initially adopted by the Government of Boris Johnson on a temporary basis post-Brexit, but a subsequent consultation on alternative regimes was deemed “inconclusive”, and in 2025 the Labour Government decided to make the UK+ approach permanent.  Despite the disadvantage to UK-based rights owners of not being able to prevent parallel imports from the EEA, the regime has perceived advantages in terms of lower consumer prices within the UK and offers businesses certainty compared to untried alternatives.

To give a couple of simple examples of the UK+ regime in practice:

  • A car first put on the market in the UK by the rights owner or with its consent can be freely resold within the UK because the UK rights are exhausted; but someone wishing to “parallel import” that car from the UK into the EEA for resale there would potentially infringe any EU-wide or European national rights that the manufacturer has in the car’s marks, designs, etc, as those haven’t been exhausted.
  • A car first put on the market in an EEA country by the rights owner or with its consent can be freely resold not only within the EEA itself but also in the UK. So a parallel importer can buy cars that have already been sold in an EEA member state by the IP owner or with its consent with a view to re-selling them in the UK, without fear of infringing UK rights.

IP Exhaustion in the UK courts: Dealing with altered goods or packaging

There are some circumstances in which the law has acknowledged that an IP rights-holder might have legitimate reasons to oppose the re-sale of its products, even though the IP rights would normally be deemed to have been exhausted. This can arise where the re-seller is making changes to the product or its packaging, which the IP rights owner fears may adversely affect the reputation of its business or goods, or mislead customers about their origins.

A UK Court of Appeal judgment from December 2025 helps to illustrate how this kind of argument can arise in practice.  Here, UK Innovations Group (UKIG) was taking cookers originally made and sold by AGA that ran on fossil fuels, refurbishing and converting them using their own e-Control system to run on electricity instead, and then re-selling them (still bearing their “AGA” badges but with an additional “e-Control” badge also).  AGA brought claims of trade mark infringement against UKIG, to which UKIG replied that they had a defence of exhaustion: as the cookers had previously been put on the market by AGA, when UKIG came to resell them in refurbished and electrified form, AGA could not claim infringement of its trade mark rights in the AGA name as they had been exhausted for these particular cookers.

Broadly speaking the Intellectual Property & Enterprise Court at first instance had accepted UKIG’s exhaustion defence in respect of most of what UKIG was doing (and the Court of Appeal confirmed that analysis). But section 12(2) Trade Marks Act 1994 gives the IP owner (here AGA) a chance to defeat the exhaustion defence if it can show “legitimate reasons… to oppose further dealings in the goods (in particular, where the condition of the goods have been changed or impaired after they have been put on the market).”  AGA argued that this provision was applicable, as UKIG was not just re-selling used AGA cookers, it was making changes to them by converting them to run on electricity and marketing them as “eControl AGAs”.  The use of the AGA trade mark by UKIG in these circumstances might damage AGA’s reputation or cause people to think that there was a commercial connection between UKIG (or its refurbished cookers) and AGA.

The courts did not think that damage to AGA’s reputation was likely, but they did find that the way the AGA mark was used on the UKIG’s website and invoices (e.g. describing the refurbished cookers as “eControl AGAs”) might have led customers to think that the UKIG services and refurbished products were actually being offered by AGA itself.  The Court of Appeal concluded that the exhaustion defence was defeated in these circumstances because UKIG hadn’t done enough in its materials to make clear statements to the effect that the eControl system was not an AGA product and the conversion of the cookers to electric was not a service being provided by AGA itself.

So the AGA case confirms the availability of the exhaustion defence for aftermarket (second-hand) businesses. But it also provides a cautionary reminder for re-sellers to be clear about who is making the sale, particularly if the goods are being changed or provided with an additional service, to ensure that the customers do not think that the service or altered goods come from the original IP rights holder.

IP Exhaustion in the European courts: Burdens of proof for establishing exhaustion

Much of the key case-law on exhaustion of IP rights has been developed by the EU Court of Justice, and this case-law remains applicable also in the UK unless/until the Court of Appeal or Supreme Court choose to “depart” from it. The EU rulings have established that the “burden of proof” usually rests upon the defendant in infringement proceedings to show that exhaustion applies and thus that its resale of the goods (in which the claimant asserts IP rights) was not in fact infringing.

But the Court of Justice has also developed an exception, applicable when the claimant is operating a selective distribution network, which reverses the burden (so it is then for the claimant to demonstrate that its rights have not been exhausted). This exception was introduced because the Court felt that rights owners might otherwise be tempted to use their distribution networks to partition national markets within the EEA to maintain price differentials, contrary to the EU rules on free movement of goods.  And if the defendant were forced to demonstrate the source of its goods within the EEA, potentially tracing a chain of transactions back to a member of the distribution network, the rights owner would be able to ensure that the “unofficial” source of supply would dry up immediately (thus protecting any potential market partitioning).

A decision of the Dutch courts from April 2025 provides a nice example of these EU principles being put into practice. Coty the cosmetics and perfumes business had licensed the HUGO BOSS trade mark for use on perfumes and was selling a perfume called HUGO BOSS Bottled Night via a selective distribution network across the EU. It brought trade mark infringement proceedings against Easycosmetic Benelux, a wholesaler of perfumes, which it said had supplied the HUGO BOSS Bottled Night perfume to a Dutch retailer without its permission.  Easycosmetic ran a defence of “exhaustion”, claiming that the trade-marked perfume had been put onto the EEA market by Coty or with its consent, but Coty replied that in fact the perfume had been part of a shipment to South Africa (not the EEA) and so there was no exhaustion.

The Dutch court applied the EU Court of Justice case-law on burden of proof in exhaustion cases – as Coty was here running a selective distribution network for its EU sales, the burden was initially on Coty to demonstrate that there was no exhaustion of its IP. As it turned out, Coty was able to point the court to information from its internal tracking systems which adequately demonstrated that the perfume resold by Easycosmetic had indeed come from a shipment of “Bottled Night” to South Africa. The defendant was unable to provide any evidence of Coty having subsequently put the perfume on the EEA market, and so that Dutch court was satisfied that Coty’s IP rights in the perfumes in question were not exhausted. An injunction and damages were awarded against Easycosmetic for infringement of Coty’s rights in the perfume by reselling it within the EEA.

Keeping alert to IP Exhaustion and Parallel Imports in Day-to-Day Business

Rights owners can take practical steps to defend themselves against unwanted parallel imports, and to prepare themselves for the potential need to demonstrate whether the IP in their products is exhausted or not:

  • Familiarising themselves with the exhaustion regimes applicable in key territories;
  • Effective supply chain record keeping allowing proof of territory of first sale for any particular product item;
  • Effective use of packaging or identifying features of products themselves to confirm genuineness of products and their target territories;
  • Use of distribution systems/networks and customer incentives to encourage purchase from authorised outlets;
  • Monitoring and potentially using customs watching services to assess the scale of parallel imports and be alerted to new activity;
  • Picking enforcement battles accordingly, i.e. where the IP in the product is clearly not “exhausted” and thus the seller or parallel importer can clearly be shown to be infringing;
  • And remember that there may be other legitimate reasons for a brand owner to oppose further dealings in its products, for example if packaging or branding has been altered in a way that may do damage to the reputation of a trade mark or its owner.

For businesses involved in reselling or parallel importing genuine products, similar considerations apply in reverse.  In particular:

  • A familiarity with the principles of exhaustion and an ability to identify the applicable exhaustion regimes will be crucial;
  • If any repackaging, rebranding or additional services are involved in the reselling, particular care is needed if the reputation of the IP owner’s brand, product or business could be affected (see the IP Exhaustion in the UK courts case discussion above);
  • When parallel imports are being considered, bear in mind that – as well as IP rights and exhaustion issues – there will often be tax, customs and product-specific regulatory rules to be complied with before goods can be legitimately imported into a new market.

1The EU Court of Justice ruling generally applies to all digital products, but it has made an exception for simple long-term software licences, which can be resold provided that the seller does not retain a copy.  It should be noted that these EU rulings currently form part of UK law as “assimilated case-law”, but that it would be open to the higher UK courts to choose to diverge from them.

2The EEA “single market” is made up of all of the 27 EU member states plus Iceland, Liechtenstein and Norway.

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