Trademark Rights to Extinguish Plain Packaging Bill?

The content of the government’s release on the draft plain packaging Bill offers few surprises. The government thinks stripping tobacco products of any branding will cut smoking rates as part of a basket of anti-tobacco measures, they’ve picked the colour (an allegedly offensive olive green), and the already garish health warnings are going to extend from just the lip to most of the front packet.

But amongst the consultation paper is also an admission of something the government has long denied – plain packaging could acquire the value of trademarks and expose taxpayers to a compensation bill from big tobacco.

At the time of the government’s initial announcement both Health Minister Nicola Roxon and then Prime Minister Kevin Rudd dismissed these concerns arguing they have still-to-be-publicly released “robust” legal advice supporting no IP violations.

The IPA raised concerns that stripping trademarks from packaging could lead to the acquisition of property rights under the Constitution and lead to compensation on “just terms”. But the government’s consultation paper now acknowledges property rights risks exist. Under the banner of “Constitutional provisions” the paper on the “abundance of caution ...

provides that if preventing the use of trade marks on packaging of products is contrary to section 51 (xxxi) of the Constitution, the trade marks can be used, but only in accordance with restrictions (for example, on size and placement) that would be imposed by the regulations”. So far we don’t know what the regulations say.

But the clear intent of the provision is if the High Court recognises plain packaging is the acquisition of a value of a trademark logo they can be used in a restrictive fashion without annulling the rest of the Act.

It's the government's long-winded way of saying "oops".

But despite this admission concerns that plain packaging may violate Australia’s obligations under the World Trade Organisation remain. WTO intellectual property rules require trademarks not be “unjustifiably encumbered [such as] use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings”.

The rules also afford a public health exception “provided that such measures are consistent with the provisions of this agreement”. But by limiting the use of trademark logos the government may not be “consistent”. Especially since justifiability may require strong evidence of the plan's efficacy. If you judge them on their words the government claims they are convinced. But if you judge them on their actions reportedly they last year commissioned a two-year $600K+ plus study to look at the impact of plain packaging on smoking rates.

Documents released under Freedom of Information show that Australia’s intellectual property agency, IP Australia, has found there are around 3,000 trademarks for tobacco and tobacco products of which “a short study shows approximately 1/3 include logos”. Publicly IP Australia has been wary of opposing the government's plain packaging plan but their internal discussions are telling.

One version of a briefing note states “IP Australia considers that plain packaging may not be consistent with Australia’s intellectual property obligations ... [and whether it] would constitute an acquisition of property is debateable”.

Emails between IP Australia trademark officials show that arguing Australia’s international IP obligations would not be violated by plain packaging “is a long bow”. Interestingly IP Australia continues to highlight that “requiring plain packaging would make it easier for counterfeit products to be produced".

Since Australia is the first country to actually legislate for plain packaging the legal risks are significant. And tobacco companies have already made clear their fighting intentions. To date Australia, the United Kingdom, New Zealand, Canada and Lithuania have previously considered plain packaging and rejected it predominantly on intellectual property grounds. Many countries are now watching what happens in Australia before they decide how they will progress.

There are mixed legal views about whether it violates IP rights and only the High Court and a WTO dispute settlement panel will ultimately decide who’s right. But treading with caution is wise. The same FOI documents show IP Australia was only advised of the government’s announcement days before it was public.

At the time the rushed announcement appeared to be a smokescreen to distract the public from the political hammering the government was taking from dropping its emissions trading scheme. In light of recent polls perhaps not much has changed. The only difference is this time the government appears to have acknowledged the very real risks that plain packaging poses to property rights and our international obligations. This honesty is welcome.

Australia's Cigarette War Over Shocking Pack Rules

Australia has unveiled the world's toughest tobacco advertising legislation, which – if it survives a legal challenge by the industry – will force all cigarettes to be sold in plain, olive-green packs covered in health warnings.

Under the new law, which is about to go before parliament, cigarette packets will be stripped of all logos, colours, brand imagery and promotional text. Their only distinguishing feature will be the brand name, printed in a small, uniform font.

The aim is to deprive tobacco companies of the last remaining means of advertising their products, and to make cigarettes less appealing, particularly to young people. Drab olive-green was chosen because research suggested it was the least attractive colour to smokers. "We want to make sure that the glamour that might have been attached to smoking in the past is dead and gone," the Health Minister, Nicola Roxon, said yesterday. "Cigarette packs will now only show the death and disease that can come from smoking. The new packs have been designed to have the lowest appeal to smokers and to make clear the terrible effects that smoking can have on your health."

Plain packaging is also being contemplated by Britain, New Zealand, Canada and the European Union, which are closely watching Australia, particularly how it deals with the legal ramifications. British American Tobacco Australia (Bata), whose brands include Winfield, Dunhill and Benson & Hedges, claimed that the plan would infringe international trademark and intellectual property laws.

A Bata spokesman, Scott McIntyre, said: "The government could end up wasting millions of taxpayer dollars in legal fees trying to defend their decision, let alone the potential to pay billions to the tobacco industry for taking away our intellectual property."

But Ms Roxon said the government believed it was on very strong legal ground. Although smoking rates have almost halved over the past two decades, tobacco-related diseases still claim 15,000 lives in Australia every year, and cost the country about A$31.5bn (£20.3bn).The pared-down cigarette packs will feature lurid images showing the potential health impacts of smoking, with close-ups of rotting gums, blind eyes and sickly children.

Ian Olver, chief executive of Cancer Council Australia, said the move had "the potential to be one of the most significant public health measures in recent history". A spokesman for the Australian Council on Smoking and Health said: "This is a historic day for tobacco control globally. The tobacco industry's ferocious opposition to plain packaging shows that they know how effective it will be. They also know that once Australia has shown the way, other countries will follow."

But the industry claims there is "no credible evidence" that plain packaging reduced smoking. Imperial Tobacco denounced the legislation, and Philip Morris said it would fuel the trade in counterfeit cigarettes. "What company would stand for having its brands, which are worth billions, taken away from them?" asked Bata's Mr McIntyre. "A large brewing company or fast-food chain certainly wouldn't, and we're no different."

Depending on legal challenges, the law will be phased in over six months, beginning in January 2012. The government wants to cut the smoking rate to 10 per cent by 2018.