Where there’s smoke, there’s fire… or at least a heated debate. On October 8th, 2013, the European Parliament voted on the proposed revisions to the Tobacco Products Directive (TPD). One of the highly contested issues concerned intellectual property rights and the labeling and packaging of tobacco products.
The purpose of the present revisions are to bring the TPD in line with current market, scientific and policy developments and with the World Health Organization Framework Convention on Tobacco Control (FTCT). On December 12, 2012, the EU Commision published a proposal for the revision of the TPD requiring that health warnings cover 75 % of the package area (Article 9) and providing an option for Member States to “maintain or introduce provisions providing standardization of packaging of tobacco products”. Standardized or plain packaging would require the removal of all branding from the packaging including, colours, imagery, corporate logos and trade-marks. The appearance of packages, including the health warnings, colour and size, and font and placement of the brand name, would be standardized. Although it is generally accepted that pictorial health warnings and standardized packaging offer some health benefits by deterring people from smoking, introducing such measures poses a problem from an intellectual property point of view. Is it an invasion of a company’s intellectual property rights to prevent the use of a trade-mark to promote and identify their products if such a ban could provide some health benefit to the public?
The Committee on Legal Affairs suggested the aforementioned provisions in the Commission’s proposal did not conform with fundamental rights outlined in the Charter of Fundamental Rights of the European Union (CFREU) concerning intellectual property (Article 17). An increase in the size of health warnings would severely limit the space available for companies to display trade-marks, leaving less than 25 % of the package available as national law requires additional features such as tax stamps and security features. Similarly, the committee says that these proposals are contrary to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) which states that “The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements such as 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”. However, both the CFREU (Article 52) and TRIPs (Article 8) impose limits on intellectual property rights if they “meet objectives of general interst” or “protect public health and nutrition”, respectively.
The amendments adopted by the European Parliament for the revision of the TPD have not introduced mandatory plain packaging stating that the regulation of other aspects of the packet, besides the size and content of the health warnings, fall outside the scope of the TPD. Article 9(c) imposes that the combined health warnings shall cover only 65 % of the external areas of both the front and back surface of the unit packet and any outside packaging. While these consessions may seem like a victory for intellectual property rights, the TPD has left room for member states to maintain or introduce provisions providing standardization of packaging of tobacco products (Recital 41).
As Australia is currently the only jurisdiction to have introduced plain packaging requirements through the Tobacco Plain Packaging Act 2011 (TPP), many European countries are monitoring the legal implications of such an initiative. Both Japan Tobacco International SA and British American Tobacco Austalasia Limited challenged the validity of the TPP saying it was against s 51(xxxi) of the Commonwealth of Australia Constitution Act which allows the parliament to make laws with respect to “the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”. The High Court of Australia held there was no violation (for more on this decision see IPilogue post here). Even though the companies were deprived of their property, there was no “accrual of a benefit of a proprietary character to the Commonwealth which would constitute an acquisition”. The TPP is currently subject to challenge before the World Trade Organization.
Although the ruling in Australia would not guarantee or even speak favourably for the introduction of plain packaging under EU law (Article 17 of the CFREU has no “acquisition” requirement), the Scottish government is pressing ahead with plans to introduce plain packaging and become the second country in the world to adopt such measures. As there are already heavy restrictions on how tobacco products can be advertised, tobacco packaging is one of the last bastions towards this end. Tobacco companies appear to be slowly losing ground in this area as well, as considerations for intellectual property rights appear to be taking a backseat to increased health concerns.
Corey McClary is an IPilogue Editor and a JD candidate at Osgoode Hall Law School.