Author: Sucharitha Rao, Student at Damodaram Sanjivayya National Law University, Vizag.
Governments all over the world have in some form or the other attempted to curb tobacco consumption since time immemorial. More often than not these measures have revolved around pricing. Additionally, it has been universally accepted that advertisements of tobacco products must be banned. Any form of consumption seen on media is also accompanied with a cautionary note. However, the rates of consumption have not reached a satisfactory low owing to the multitude of elements that contribute towards tobacco consumption; such as social/peer pressure, nicotine addiction, psychological reliance on substance abuse.
A new mechanism that became a matter of charged discourse took the centre stage in 2011. The introduction of plain packaging in tobacco control policies dates back to 2003, however it was in 2011 that Australia materialised this in the form of Tobacco Plain Packaging Act. This mechanism was challenged by the big players of the tobacco industry as it was believed that trade will be heavily affected due to its restrictive nature. The WTO Ruling on this case was in favour of the Australian legislation, however, it received a fair amount of criticism from those in the intellectual property industry. In this article, the challenges against the legislation, intersection of Intellectual Property Rights (IPR) with respect to trade and position of the legislation in such intersection will be analysed. The article aims at justifying the validity of the plain packaging act, giving specific attention to the reasonability of the enactment with respect to various conventions and agreements.
TOBACCO PLAIN PACKAGING ACT, 2011
The Australian Government mandated plain packaging of tobacco products as a means to reduce smoking rates in Australia. Through the Tobacco Plain Packaging Act of 2011, the government required all tobacco products sold in Australia to have a standard dark brown packaging in matte finish. A threshold of December 2012 was assigned after which packaging that does not comply with the act is deemed illegal. The Act bans use of brand images, symbols, logos and promotional text. In order to distinguish brands, the Act provides for the brand and product to be printed in standard colour, in compliance with the format prescribed by the statute. The format includes coverage of 75% and 90% of the packaging with health warnings at the front and the back respectively.
As a party of FCTC, Australia felt obliged to give effect to the obligation under the same. Under this premise, the enactment holds the following as its objectives:
- Discouraging people from taking up smoking or using tobacco products
- Encouraging people to give up smoking and to stop using tobacco products
- Discouraging people who have given up smoking or use of tobacco products from relapsing
- Reduce people’s exposure to smoke from tobacco products.
These objectives are executed through regulation of tobacco products’ appearance in order to reduce the appeal of tobacco products among common folk. Such regulation is believed to have an increased effect on the health warnings on the use of tobacco products. Additionally, this move is to counter the misleading packaging that declares some tobacco products to be “healthier”, “smoother” or “lighter” than the others. This is based on the undisputed premise that tobacco indiscriminately harms an individuals’ health. Therefore, basing its legislation on guidelines and recommendations on Article 11 and 13 of the FCTC, Australia rolled out this legislation as tool in the shed for tobacco control.
This enactment was challenged in 3 instances:
- Constitutionality of the Act, in the High Court of Australia, initiated by British American Tobacco, Imperial Tobacco, Japan Tobacco and Philip Morris
- An investment challenge, initiated by Philip Morris Asia based on the Hong Kong-Australia bilateral investment treaty.
- Disputes brought to WTO by Ukraine (DS434), Honduras (DS435), Indonesia (DS467), the Dominican Republic (DS441) and Cuba (DS458).
The first two challenges were dismissed without much discussion. The WTO case, however, discussed the merits of the case and provided a multi-layer rationale for its judgement favouring Australia; which is relevant to this paper and shall be examined further.
WTO RULING AND RATIONALE
The panel’s decision in the challenges brought by the 5 nations was that the legislation was consistent with the WTO law. Based off the report, Honduras placed an appeal before the Appellate Body; clubbed with Dominican Republic’s appeal. The basic premise of the challenge was that the balance of scales disproportionately tilted against free trade. It was claimed that use of trademarks was integral to trade and banning the same was an unjustifiable interference in the name of public health.
It was recognised, as a result of this decision, that 182 parties of the FCTC can undertake a comprehensive scheme to regulate packaging of tobacco products as per Articles 11 and 13 of the Convention, without breaching WTO law.
Through this ruling, the Appellate Body clarified on the following points:
- Whether plain packaging contributes towards the objective of improvement of public health through reduction in tobacco consumption and exposure to smoke
- Whether the move is restrictive to trade in a manner that it fails to justify the imposition of the said restriction
- Whether plain packaging is justifiable and in line with trade law
The following provisions were referred to by the parties in this case. Along with the basic understanding of the provisions referred, the Appellate Body’s take on the same will be briefly discussed; therefore, answering the aforementioned questions.
The provision has two broad elements; “legitimate objective” and “more trade restrictive than necessary to fulfil a legitimate objective”. The legitimate objective of the measure must be identified. It must be noted that the objective itself and the means of manifesting it are distinct in nature and must be looked into separately. Legitimacy of the objective is ascertained by its lawful, justifiable nature. The provision does not suggest a list of “legitimate objectives” but does include public health as one of them. While determining the second aspect, four things must be analysed: (a) contribution of the measure towards the fulfilment of the objective, (b) trade restrictiveness, (c) effect of proposed alternatives, and (d) risk incurred otherwise.
Taking the aforementioned metrics into account, the Appellate Body stated that the measures taken by Australia had a justifiable effect on the improvement of public health by way of implementing the objectives stated in the statue. Secondly, the complainants failed to demonstrate that the restriction on trade had an overwhelming effect in comparison to the necessity of fulfilling the legitimate objective. Plain packaging had no direct impact on international trade, it simply changed the way competitors could engage in trade. There has to be a limitation on international trade for trade restrictiveness to be considered true in this case. Lastly, the risk incurred due to non-fulfilment of objective was not matched with an equally effective alternative. Therefore, no violation of Article 2.2 was observed.
- Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS), Article 15, 16, 20, 22 and 24
The complainants challenged the enactment as an obstacle to the registration of trademark. Since the ban was specifically on “tobacco products”, Article 15.4 was referred to by the complainants. It reads, “the nature of the goods or services to which a trademark is to be applied shall in no case form an obstacle to registration of the trademark”. However, there is a difference between the use of a trademark and registration. Usage is not a pre-requisite for registration and therefore a ban on the same does not amount to an obstacle.
Article 16 provides for the rights conferred on the registered trademark owners. The complainants challenged the enactment based on the inability to prevent unauthorised use of trademark as well as the breach of Australia’s obligation to protect well-known trademarks. It must be noted that rights conferred under TRIPS Agreement are negative rights i.e., prevention of use is a right and not use in and of itself. The agreement does not require use of trademark for protection of registration in certain circumstances. Such framing exists in order to allow governments to make public policy without impacting IPR. Therefore, for this contention to be proven, the complainants had to show that usage of trademark is necessary to protect registration, maintain distinctiveness and prevent unauthorised use.
For the violation of Article 20 to take place, there must exist a restriction that leads to loss of the ability to distinguish goods and services. However, a justifiable restriction may exist to restrict the usage of trademark. For the complainants to prove this contention, they had to show “unjustifiable” restriction on the use of trademarks. Since it has already been proven that the measure is justifiable as per TBT, the restriction can be deemed as a “special requirement” under Article 20.
The next claim has to do with the enactment not preventing, and in fact aiding, means of unfair competition. This claim was made keeping the ease of making misleading indications/allegations about product in mind. This was substantiated using Article 22.2(b) of the TRIPS agreement which further refers to Article 10bis of the Paris Convention. For this claim to stand, the complainants had to prove that the act forces market players to engage in unfair competition. The mandate that pushes for uniform plain packaging finds little to no place in such a discussion. Additionally, the objective does not go against “honest practices” as mentioned in Article 10bis.
Article 24 provides a saving clause in the third clause; that a member nation shall not diminish the protection of existing geographical indications while providing the exceptions in international negotiations as stated in the first two clauses. However, the complainants failed to show direct impact of the enactment on the protection of geographical indications.
The aforementioned discussion on GIs took place due to the presence of signs that indicated the originality of the product on the packaging. The complainants wished to protect their right to claim authenticity.
This article requires the nations to recognize the trademark “as is” in its country of origin and protect the same against misuse. However, this provision has to do with the registration of trademark and use of the same is not a prerequisite. Therefore, the complainants failed to prove that the enactment prevented the Australian government from recognizing, registering and protecting the trademarks.
This article requires protection of the marking of imported products. Article IX:4 requires the laws to maintain the value of such marks and not “seriously damage” them. However, the complainant (Cuba) had to show that the enactment had an impact on the value of the mark of originality in terms of “material reduction” i.e., the enactment simply bans the use of the mark on packaging, and does not prevent recognition of the same among other tobacco products.
It is on the basis of this analysis that the Australian law was upheld. While it was observed that the enactment has no detrimental impact on the competitive nature of the tobacco market, it is still an act that takes away the IP rights of the tobacco industry. In order to further justify this move in light of IPR and its principles, the following chapters shall discuss the way plain packaging is understood in the IPR regime.
IPR REJECTS PLAIN PACKAGING OF TOBACCO PRODUCTS?
It is difficult to answer this question in “yes or no” in the context of tobacco consumption and trade. It is fairly obvious that brands rely on their intellectual property to trade domestically as well as internationally, therefore, it can be said that prima facilely IPR rejects the idea of packaging. Packaging is one such tool that enables brands to stand out on a supermarket shelf. Companies fund their marketing units generously for the very purpose of executing their IP rights. Due to its integral presence in the process of trade, it is nearly impossible for laws to deprive entities of this right. However, through the aforementioned ruling, an exception has been set in stone for now; the objective of public health trumps the right to display trademarks.
Sufficient lobbying from the Tobacco Industry has enabled an equally compelling discussion on the necessity of protection of trademark laws. It is definite that a move like this will not trickle down to other sections of trade; due to the inherent right to differentiate. Therefore, it is necessary to differentiate between the tobacco sector and the remaining area of trade, in order to justify this inherent right being taken away.
Due to this ruling, international organisations that champion trademark rights worry that this trend might expand to other “undesirable” products such as alcohol, candy and processed foods. In the researcher’s opinion, however, this is less likely to happen because regulatory bodies already exist to ensure the standardization of such products. The tobacco industry, on the other hand, does not have a regulatory body; it instead has bodies that seek to counter the consumption. The difference here is that governments can assess the amount of suitable intake for the aforementioned undesirable products and can mitigate the harms. Whereas, the consumption of tobacco exists in isolation without a suitable intake rate or a metric to set standards of production. Tobacco products are harmful indiscriminately and therefore the likelihood of such restrictions extending to other products is extremely low. With WHO rolling out FCTC as collective fight against the tobacco industry, it is safe to assume that the use of tobacco products has unique harms that need to be specifically lobbied against.
The contentions that the tobacco industry relies on is the chain of events that may take place due to plain packaging i.e., increase in counterfeit goods is a high likelihood that may make tobacco products more accessible. They say that it is imperative for brands to establish specific recognition to maintain authenticity and therefore provide the consumers with quality products. Additionally, increase in accessibility may mean increase in the number of new smokers. Plain packaging makes a huge contribution towards increasing accessibility through the fact that products will now be cheaper due to the costs saved on packaging. Lastly, it is claimed that the capital spent on establishing a brand image and publicity would have a diminishing effect due to plain packaging.
A response to these claims can be found in the challenge to the Standardised Packaging of Tobacco Products Regulations, 2015 rolled out by the United Kingdom. It was argued that since trademark is a negative right, restriction on the use of the trademark does not harm the trademark owners. Additionally, recognition of brand among consumers is still likely to exist due to the fact that brands can print their names on the packages. Lastly, plain packaging does not have an overwhelming impact on the increase in consumption due to the fact that anti-counterfeit provisions and awareness around harms of smoking already exist to counter the problems mentioned above.
While plain packaging in general goes against the IPR rules, it is a niche tool that must be judiciously used to execute objectives with greater importance. It can be concluded that the metric for allowing plain packaging within the IPR regime is that there must be a legitimate objective that can justify the restriction on these rights, without absolutely taking them away. It must be noted that this metric is accompanied with a protective backing that allows IPR owners to provide alternatives to plain packaging as a means to achieve the said objective; regulating tobacco use as seen in the instant case.
PRINCIPLE ANALYSIS OF TRIPS TO JUSTIFY PLAIN PACKAGING
In this section, the essence of IPR law will be examined in an objective manner i.e., outside the context of tobacco products, to justify plain packaging’s place in the IPR regime. It has already been established that for plain packaging to be mandated for products, the rule of necessity must be satisfied. The consistency of such metric with the fundamentals of IPR law is yet to be proven.
Article 17 of the TRIPS Agreement provides:
“Members may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties.”
“Legitimate interests” can be characterised as the right to protect the owner against misuse of trademark, owing to the objective of the agreement. This means that Article 17 does not necessitate use of trademark for protection. TRIPS Agreement at no point mentions “right to use” but holds “right to protect” close to its fundamentals. An exception, however, finds place in Article 19.1 which provides:
If use is required to maintain a registration, the registration may be cancelled only after an uninterrupted period of at least three years of non-use, unless valid reasons based on the existence of obstacles to such use are shown by the trademark owner. Circumstances arising independently of the will of the owner of the trademark which constitute an obstacle to the use of the trademark, such as import restrictions on or other government requirements for goods or services protected by the trademark, shall be recognized as valid reasons for non-use.
But also, this exception accounts for valid restrictions or circumstances outside the will of the owner. This indicates that trademark owners have a negative right, not a positive one. However, it is believed by many scholars that the spirit of the agreement is to enable use. Except, the wording does not reflect such ideas. Plain packaging finds itself in alignment with TRIPS because of the provisions stated above; which do not require a trademark to be used in order to be valued.
Plain Packaging is restriction to the use of trademark and primarily goes against Article 20 of the Agreement, which reads:
“The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings.”
To understand the extent to which Article 20 opposed plain packaging, the following observation stands relevant.
Article 8.1 of TRIPS reads:
“Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.”
Member states must therefore have the freedom to establish legitimate policies along with the freedom to decide what measures must be taken to fulfil the objective of the policies. While policy making stands outside the purview of IPR, there still is an exception that grants governments the right to prioritise public policy; in a justifiable manner of course. It is not necessary for the lawmakers to prove that the measure will ensure fulfilment of objective but it must contribute towards the purpose of the policy. This arises out of the basic principle of burden of proof established in WTO cases; the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence. But at the same time, Article 20 requires members to not unjustifiably create special requirements, limiting the use of trademark. This amounts to an obligation that states must account for while rolling out laws that require plain packaging.
The test of necessity, therefore, extends to avoid unjustifiable special requirements. To justify the enactment, it must be proven that:
- There is a causal link between the requirement and the objective
- It must be the least restrictive method of achieving the objective
Therefore, the objective metric to allow plain packaging, keeping trademark rights in mind is:
- There must be an objective backing the rule
- The objective must be necessary and plain packaging must have some contribution towards achieving the same
- Equally effective alternatives must be accepted against plain packaging if proposed
- There must be a balance between enforcement of plain packaging and fundamentals of trademark law i.e., basic recognition of brand
Failing to accommodate the aforementioned would contribute towards trade restrictive behaviour.
ROLE OF PLAIN PACKAGING IN TOBACCO CONTROL
The final string of analysis that makes the case for plain packaging is the impact of plain packaging on tobacco control. The FCTC being the first regulatory function against tobacco consumption, lays down an all-rounded strategy. The tobacco industry has flushed a great deal of supply into the market, increasing access to products. Additionally, the international movement of contraband through cross-border trade and supply of counterfeit cigarettes have contributed heavily towards the tobacco epidemic.
To fight the tobacco epidemic, the WHO had launched a tested policy package, MPOWER, containing the following key points:
- Offer help
- Warn about dangers
- Enforce bans
- Raise taxes
The governments followed suit and adopted pricing techniques, taxation hikes and bans on promotion. With the FCTC, a more comprehensive set of policies were made available to the governments. The requirements are mentioned in Article 6 to 14 of the FCTC; one of which includes packaging and labelling. Supply reduction mechanisms also find mention in Article 15 to 17; which includes illicit trade. This provides an authoritative backing to governments in terms of efficacy. However, it is important to consider research and statistics as well. Note that most discussion around impact of pricing, taxation and packaging is inconclusive. Statistics on impact of plain packaging show that smoking prevalence among youth declined from 15% to 12%. At the same time it is argued that pricing and taxation has a better impact as a 10% reduction in volume of consumption was noted. These numbers are used to argue that plain packaging has no impact on consumption control and therefore does not pass the requirements of Article 20 as other non-restrictive methods exist. While pricing techniques are the most effective mechanisms, the consumers still seem to absorb small hikes in prices due factors attributable to a smoker’s psyche. Pricing also has a spill over effect on how smuggling takes place. Higher prices in the market, give rise to counterfeit and illegal procurement of tobacco products; specially by youth. It therefore cannot be said that any of the policies can be adopted in isolation. This means that any sort of contribution that plain packaging is making towards curbing tobacco consumption can be accounted for while running the enactment through the necessity test; specially since most data is inconclusive on policies on tobacco control.
In an analysis by Alemanno & Bonadio it was concluded that the industry will indefinitely argue against the trade restrictiveness of plain packaging and push for pricing tactics, while the authorities are most likely to continue defending the enactment for reasons pertaining to public health. They added that the struggle to reach a definite answer shall be long lasting, and to this date the industry continues to lobby against plain packaging
The ruling on Australia’s Tobacco Plain Packaging Act of 2011 kickstarted the movement against the tobacco industry. While, sanctioned moral condemnation of use of tobacco products can be found across the globe through policies such as ban on public smoking, the legal battle against tobacco production is a restriction on trade, if not anything more. This act finds a balance between morality and freedom to trade. Contentions against this act majorly had to do with the idea that competitive nature of the market will take a hit and some players will do better than the other. However, it is to be primarily understood that this enactment had a uniform application and neither party (domestic or foreign) benefited over the other. Secondly, the objection to restriction on use of trademark could not legally hold ground. However, it must be conceded that while competition is affected by the act, it has been affected in a unique sense i.e., the means to compete has changed. This move will push all players to find alternative ways other than trademark and brand image to compete on. In the researcher’s opinion, this makes trade more competitive than before, ensuring more focus on the product than packaging. Lastly, it has been fairly made clear that the right to use trademark is not absolute however the ownership and value attached to the trademark in terms of goodwill and brand image cannot change with a rule like plain packaging. Loyal customers of Philip Morris shall continue buying a pack of cigarettes despite the fact that they are no more sold in the iconic red and white package; simply because the package reads “Marlboro” and smoking is a harmful addiction. However, at least those who were lured into the belief that smoking is a lifestyle worth adopting would now not be deceived by fancy words like “mild”, “light” or “gold”; assuming they are making better choices among a bunch of bad ones.
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