Plain packaging for tobacco products: some legal issues

Sooty didn't mind endorsing the
product, but he did object to being
paid in cigarettes ...

This Kat was wondering what has been happening in Australia, where plain packaging for tobacco products has been mooted as a means of discouraging smoking.  He is indebted to his friend John Nobel (British Brands Group) for letting him have this helpful update on a topic which this blog has covered on two earlier occasions, here and here:

"On 6 July two Bills were tabled in Australia’s House of Representatives: the Tobacco Plain Packaging Bill and the Trade Marks Amendment Bill. Coincidentally on the same day the UCL Law Faculty circulated a paper, “Implications of WTO law for plain packaging of tobacco products” (by Tania Voon and Andrew Mitchell) to those who hoped to attend the aborted event “'Tobacco or trademarks: Australia's plain packaging of cigarette products and the WTO”.  

Closer to home ['home' is a relative term, but in this context it's Britain], the Department of Health is to launch a consultation by the end of this year on plain packaging, while the European Commission (DG Sanco), having already consulted on this subject last year, is due to publish its response early in 2012. The consultation is understood to have generated a substantial number of submissions covering IP. All this suggests the topic may be worth re-visiting for IPKat readers.  

Whatever one’s view of tobacco products, these developments are of keen interest to those involved in brands and trade marks, raising questions on the lengths to which countries may go to regulate legal products but more particularly on the extent to which they can disrupt long-established, legitimate and immensely valuable trade marks.  

The paper by Tania Voon and Andrew Mitchell addresses both the international trade and IP aspects of plain packaging, arguing that the proposal is consistent with TRIPS, the Technical Barriers to Trade (TBT) Agreement and GATT 1994, calling any challenge by tobacco companies under such agreements “a desperate last gasp” (having said that, Australia has notified its draft Bill to the WTO under the TBT agreement and a number of states have raised concerns over both the legality and the proportionality of the measure).  

Leaving aside the trade arguments – which Voon and Mitchell dismiss and which are now the subject of a legal challenge by Philip Morris International (on the basis of Australia’s Bilateral Investment Treaty with Hong Kong) – it is the IP aspects which will be of particular interest and relevance to brand owners and IP practitioners. The Voon Mitchell paper sets out some of the IP areas where debate is likely to rage and it is worth looking in particular at two key ones: 

(1)     Would plain packaging deny the registration of trade marks or invalidate existing trade marks contrary to international agreements? This is addressed by TRIPS (Article 2 and 15.4) and the Paris Convention (Article 6 quinquies). Voon and Mitchell argue that these provisions are not relevant as trade mark rights are negative rights, in that they prevent others from doing something (this reflects TRIPS Article 16). Plain packaging proposals would prevent use, not deny registration or invalidate rights. Neither TRIPS nor the Paris Convention provides a right to trade mark owners to use their rights. Where a Member State requires proof of use in order to validate a trade mark (like the UK), a trade mark owner can prevent invalidation by demonstrating a valid obstacle to use, which a plain packaging regulation would be.  

The counter arguments are that trade mark rights are a bundle of rights (not just a negative right to exclude others) and that registration and use are inherently linked. In addition, the right of the trade mark owner to exclude others from using the mark implies that the use of the mark is reserved to its owner. The right to a trade mark that cannot be used is not a right in any legal sense. In countries where an application for registration depends on existing use or an intention to use, registration would be effectively impossible. Further, in such countries that require evidence of use, there is a positive obligation to use. It is also worth noting that the Paris Convention and TRIPS provide protection against invalidation and plain packaging amounts to an invalidation.  

(2)     Would plain packaging represent an unjustifiable encumbrance on a trade mark and therefore contrary to TRIPS (Article 20 requires that “The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements….”)? Voon and Mitchell acknowledge that plain packaging is a special requirement that may be considered an encumbrance but claim this is justifiable on health grounds. Article 20 should be read in conjunction with Article 7 (protection and enforcement of IPRs being conducive to social and economic welfare), Article 8 (Members may adopt measures necessary to protect public health) and the Doha Declaration which re-affirmed Members’ rights to protect public health. Further, were a Member State to claim that Australia was in violation of Article 20, it would be down to that Member State to prove it.    

Controversy is likely to focus on whether plain packaging is justifiable. It is likely to be argued that an encumbrance can only be justified if it is necessary to protect public health. There is no convincing evidence that plain packaging will lead to a reduction in smoking, there are other less restrictive measures available and countries have reduced smoking without recourse to plain packaging. All this suggests that plain packaging is open to challenge whether the measure is justifiable, necessary and proportionate. 

There must be some relief in UK and European government circles that it is Australia experimenting with such regulation. There seems plenty to argue that plain packaging would amount to a denial of registration, effective invalidation and an unjustifiable encumbrance on trade marks. Bearing in mind the value of the trade marks at stake, we can expect these arguments to be made formally and forcefully".

The IPKat thinks this is a very useful summary of the lines of argument which we are most likely to be hearing when the debate in Europe takes place. Merpel wonders whether the legal arguments will indeed be weighed and balanced or whether, this being the real world, the result will be based on the fact that people who oppose smoking lobby harder to wipe it out than people who support it fight to preserve it.

Aussies to drive logos, imagery from ciggie boxes?

Writing from Sydney, Australia, for The Independent, Kathy Marks ("Australia to ban logos on cigarette packets") explains that Australia is poised to introduce the world's harshest anti-smoking laws, with tobacco companies forced to sell cigarettes in plain packets resembling prescription drug packs. She goes on:

"The move, expected to be announced today by the Health Minister, Nicola Roxon, will strip packets of all logos, colourful imagery and promotional text, which have been shown to reduce the effectiveness of health warnings. Only the brand name will appear, in a generic font, along with the government health warning.

The legislation, due to take effect from 2012, is intended to make cigarettes less appealing, particularly to young people, and to cut the number of smoking-related deaths. However, it is bitterly opposed by the tobacco industry, which has vowed to challenge it in the courts.

British American Tobacco, which controls 42 per cent of the A$8.3bn (£5bn) Australian market, told The Sydney Morning Herald it would "take every action necessary to protect ... its right to compete as a legitimate commercial business selling a legal product".

The World Health Organisation (WHO) has recommended a move to plain packaging, a call echoed last year by the Australian government's Preventative Health Taskforce. The idea has also been seriously mooted in Britain, Canada and New Zealand. But until now governments have hesitated to act, fearing they might contravene international laws on free trade and intellectual property rights.

In Australia, a free-market think-tank, the Institute of Public Affairs, warned this week that forcing companies to remove their trademarks from products was equivalent to compulsorily acquiring property. It said that, under the Australian constitution, the government would be obliged to pay the industry A$3.4bn in compensation. ...

Clearly rattled, the tobacco giant Philip Morris has set up a website outlining alleged problems associated with plain packaging [the IPKat thinks it's this one] and claiming that the move will not reduce smoking.

George Williams, one of Australia's leading constitutional law experts, said he doubted that the tobacco companies would succeed in a legal challenge. "Prior High Court authority suggests they would see this as regulating the use of intellectual property ... [not] acquiring that intellectual property," he said ...".

The IPKat recalls Chris Morcom QC writing a piece on this subject, which he hosted here. This piece attracted quite a few comments: the Kat wonders how thought has developed since Chris was writing back in June 2008.

Thank you, Lee Curtis (again!) for the link!

Proposal to remove branding from cigarettes

The IPKat was interested to read in the Daily Telegraph that the governing is considering calls from the cancer charity, Cancer Research UK, for cigarettes to only be sold in plain black and white packaging, without branding. This follows research which has found that the likelihood of a child taking up smoking increases by 35% for each cigarette brand that he knows.

According to Professor Gerard Hastings, director of social marketing at the University of Stirling, who led the research:

'We know that the younger you are when you start smoking the harder it is to quit...Our research shows that the point of sale displays allow tobacco companies to package and market cigarettes with powerful brand imagery to entice new smokers. This turns the pack, or 'silent salesman', into a small advertisement and the wall of cigarettes into a big one'.

The IPKat is no fan of smoking, and would back any move which prevents young people from takng up the habit. As a trade mark lawyer, he finds the proposal intriguing. This would be as close to an undifferentiated market for goods provided by multiple suppliers as we're likely to get - will the market collapse, as economists seem to predict in such situations, or which it remain vibrant thanks to the images built up by previous advertising and mythology surrounding the different brands?

Cigarette brands and human rights

This is a guest blog from Christopher Morcom QC (Hogarth Chambers, contributor to The Modern Law of Trade Marks (LexisNexis Butterworths), the 3rd edition of which has recently been published). Christopher writes:

"Recently announced Government proposals regarding the advertising and sale of cigarettes include the suggestion that the use of “colourful branding and fancy logos” would make tobacco products less appealing, particularly to young people. One possibility suggested is that cigarettes will only be permitted to be sold in plain white packs, bearing health warnings, and the brand name in small letters.

Right: how strange the old cigarette packets look, without the now-traditional health warnings

These proposals seem to raise serious issues from the point of view of brand owners. Brand names for cigarettes are registered as trade marks an a variety of forms: the brand names, sometimes in distinctive type faces; logos or designs incorporating the brand names; and representations of the packs themselves, or their front panels. Companies spend money registering and protecting these trade marks. The significant costs include application fees, registration fees and renewal fees, paid to the state or (in the case of Community trade marks) OHIM.

A question that immediately arises is whether the state can take away something, for which it has taken money from brand owners in the form of these fees, by saying (in effect) “we have taken your money for registration of your trade marks, but you may not now use them”. But there are further questions. The Trade Marks Act 1994, s.2 , enshrines the principle (if it was ever otherwise) that a registered trade mark is a right of property. Section 22 confirms that a registered trade mark is personal property (in Scotland, incorporeal moveable property) and s. 27 confirms that an application for registration is an object of property. The CTM Regulation (Part 4) likewise treats a CTM as an object of property. The European Court of Human Rights in Anheuser-Busch v Portugal [2007] ETMR 24 has held that Art 1 of Protocol 1 to the European Convention on Human Rights applies to intellectual property, including trade marks, and that an application for registration of a trade mark is a substantive interest protected by Art 1, as giving rise to rights of a proprietary nature. In that case the claimant had complained of an infringement of its right to the “peaceful enjoyment of its possessions”, as expressly protected by Art 1.

No doubt the Government (if it proceeds with its proposal, rather than changing its mind) would seek to argue that the proposal is in the “public interest”. But even public interest is subject, under Art 1, to “the conditions provided for by law and by the general principles of international law”. So whether the Government could justify the proposal as being in the “public interest”, without regard in particular to international treaties such as the Paris Convention and TRIPs, is a very serious issue which should be addressed. After all, it should not be forgotten that cigarettes and other tobacco goods are lawful products and that no government could afford to make them otherwise".

The IPKat -- a confirmed non-smoker -- has little sympathy for the habit. But he is concerned that the provisions of the law should be respected. Merpel wonders whether, within the context of a single European market, this is an issue that it is wise to leave to individual EU member states anyway. What do you think? Do let the Kats know.