Plain Packaging and the WTO: IP Issues

Plain-packsFrance is considering joining the ranks of countries that impose plain packaging requirements on tobacco products sold in their country. Plain packaging is the practice of packaging cigarettes and other tobacco products with a plain and non-distinctive wrapping without any visual or graphic material to suggest which company produces them. The companies can only imprint their names onto the packets in a small standardised font. The objective behind the measure was to counteract the promotional effect that the packaging of the tobacco products has, which would consequently reduce the buying of these products by classes of consumers like new, teenage, smokers or experimental smokers. (Long post follows)

The tobacco producers obviously have vehemently opposed plain packaging. In fact, as many as five different disputes were filed against Australia for their plain packaging legislation at the WTO by exporting countries (interestingly this is Cuba’s first WTO dispute). The primary claims raised by Tobacco producers are that the protection accorded to their marks under Arts. 15.4, 16.1 and 20 of the TRIPS Agreement are being violated by the Australian legislation. In this post I shall attempt to analyse each of these claims individually and end with some other ramifications that plain packaging legislation could have.

Article 15.4 states that, “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.” I’ve added the emphasis to indicate the primary point of contention between the two sides. Proponents of plain packaging argue that the Article merely refers to the registration of the mark and not to its use in connection with a particular product or service. They caution against the conflation of use and registration under trademark law and therefore go on to argue that plain packaging merely imposes a restriction on the use of the mark as opposed to its registration, therefore taking it out of the ambit of Art 15.4. Opponents argue that there is an effective link between use and registration and that registered mark whose use is not allowed is ineffective. I’m inclined to agree with the opponents on this count. There are a large number of countries (India for instance) across the world where use is a requirement to sustain registration of the mark. In my opinion it would be fairly absurd to interpret TRIPS commitments in such a manner so as to merely allow for a protection of the initial process of registration and then to allow the mark to subsequently fade away due to non-use. Additionally, since trademark registration is class specific (and therefore also product specific), if these marks were never intended to be exposed to the public, then there seems to be no ostensible purpose to allowing their registration in the first place. Even the negative rights that can be exercised as a result of registration can be exercised only for a maximum period which will pertain to the period for which non-use is permitted as per the relevant domestic legislation.

Art. 16.1 deals with the rights of the registered trademark holder to prevent other people from using identical or similar marks in identical or similar goods or services. Opponents argue that plain packaging legislation would limit their ability to exercise these rights. Proponents however point out that under Art. 16.1 there is no right to use a particular mark, there is merely a right to exclude others. I believe that the language of Art. 16.1 does not grant a positive right to use a mark but merely the right to exclude the use of a mark. A WTO DSB panel had clarified as such in EC-Geographical Indications (see para 7.610 and 7.611). However, the argument can probably be better framed by the opponents in that, plain packaging would limit the time period for which these rights can be claimed (non-use invalidating registration).

Art. 20 however is going to be a fiercely debated provision. Art 20 states that, “The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements….” There is pretty much no authoritative interpretation as to what constitutes an encumbrance under this provision. However the article goes on to list “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” as examples for encumbrances prohibited under the Act. Plain packaging appears to not be an encumbrance on a mark but is rather its suppression in entirety. While the argument around this is that plain packaging is the ultimate form an encumbrance, in its complete suppression, and the Article, mentioning a non-exhaustive list, could perhaps include plain packaging as an encumbrance under it. Even assuming that plain packaging were an “encumbrance” under Art.20, the complainants would still have to demonstrate that this was unjustified. This is where the proponents of plain packaging hold a trump card – public health. The most common argument in this regard is one that raises Arts. 7 and 8 as providing a guiding scope to the “justifiability” requirements under Art. 20. Arts. 7 and 8 allow member States to provide for exceptions that allow the meeting of public health objectives. There seems to be a large amount of evidence to suggest that plain packaging is indeed extremely beneficial to reducing tobacco consumption and consequently instances of cancer. In fact, the link between the advertisement of tobacco products (or the prevention of such) and tobacco control has been captured in Art. 13 of the WHO Framework Convention on Tobacco Control. However, where the opponents can play spoilsport with this argument is to require (as some have argued) that Australia demonstrate that these measures were “necessary”, and merely not aiding, the attainment of public health objectives. This comes from other WTO jurisprudence regarding Art. XX of the GATT and Art. XIV of the GATS. An analysis under these Articles also offers a way out for the proponents.

At the end of this analysis I realise that it is not possible to conclude one way or the other as to whether plain packaging is indeed legal, although I would think that the last Art. 7 and 8 analysis along with the general exceptions under Art. XX of the GATT and Art. XIV of the XIV would lend legality. It appears that only the WTO panel can settle the debate.

Crazy-knock-off-brands1Plain packaging has some other ramifications. In my opinion, it will be easier to make and sell counterfeit cigarette packets under plain packaging requirements. The visual elements that companies use don’t just merely serve to identify the source of the products but also to ensure that counterfeiters have a hard time copying these elements (refer to the picture to see one attempt that went awry). Now with plain packaging merely requiring the display of the name in a standardised font, counterfeiters will probably have an easier time. This leads to quality concerns as poorly manufactured and unsafe products could flood the market.

One area where plain packaging could however be used positively is in drug packaging. The advantages of generic medicine are commonly known and accepted. If governments required that medicines be plain packaged with emphasis being placed on the active ingredient present in the drug as opposed to the individual brands, it would go a long way in increasing trust in generics as well as in promoting their use among consumers. Obviously, quality concerns subsist even in drug packaging, but often countries deploy a sizeable amount of infrastructure to regulate quality in the drug markets and therefore will perhaps counteract these concerns.

P.S. For an interesting policy analysis on the disputes, read here.

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