The International Legality of Plain Packaging Eric LeGresley

Plain Packs Include ‘wordmark’ of TM‘wordmark’ of TM std. pack colour, dimensions std. pack colour, dimensions std. font style, size, colour, placement std. font style, size, colour, placement national treatment national treatment

Does Not Include expropriation of TM ownership expropriation of TM ownership blanket denial of use of TM elements off pack blanket denial of use of TM elements off pack

Tobacco Co. Arguments 1discrim. foreign/new entrants 2inadequate protection of TM 3unjustif. encumbrance on TM use 4unfair competition 5unnecessary obstacle to int’l trade

Tobacco Co. Arguments 6creation of confusion 7disguised restriction 8encouragement of counterfeiting 9expropriation of investment 10inequitable treatment of investment

Argument No. 1 Even if national treatment results in no de jure discrimination, plain packaging amounts to de facto discrimination against new entrants in violation of the WTO Agreement.

Rebuttal if de facto discrim., saved by the WTO Art. XX(b) health exception if de facto discrim., saved by the WTO Art. XX(b) health exception Art. XX(b) has 3 requirements: manner of application is Art. XX(b) has 3 requirements: manner of application is not arbitrary or unjust discrim. not arbitrary or unjust discrim. not a disguised restriction not a disguised restriction and the policy is necessary to protect human health necessary to protect human health

WTO Agmt., General Exceptions WTO Agmt, Art. XX “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustif. discrim… or a disguised restriction on int’l trade, nothing in this Agmt shall be construed to prevent… measures:… (b)necessary to protect human, animal or plant life or health” (b)necessary to protect human, animal or plant life or health”

Manner of Application Reformulated Gasoline: “disguised restriction” includes both arbritrary and unjustifiable discrimination Reformulated Gasoline: “disguised restriction” includes both arbritrary and unjustifiable discrimination Auto Spring Assemblies: if the implementation does not overreach the identified purpose, not a disguised restriction Auto Spring Assemblies: if the implementation does not overreach the identified purpose, not a disguised restriction

Disguised Restriction? PP is not prima facie disguised: PP is not prima facie disguised: no intention to deceive no intention to deceive no advantage for domestic no advantage for domestic PP would not exceed public health purpose if removes only elements of pack design usable to segment and expand the market PP would not exceed public health purpose if removes only elements of pack design usable to segment and expand the market

Necessary? is PP least trade restr. measure that would achieve the health purpose? is PP least trade restr. measure that would achieve the health purpose? WTO (trade not health experts) should defer to chosen health purpose provided it isn’t disguised WTO (trade not health experts) should defer to chosen health purpose provided it isn’t disguised defining a legisl. purpose that is closely linked to the cig pack thus is critical for Art. XX(b) acceptance defining a legisl. purpose that is closely linked to the cig pack thus is critical for Art. XX(b) acceptance

Purpose of Plain Packs to prevent retail tobacco packaging being used as a visual enticement for sale or consumption, whether: to prevent retail tobacco packaging being used as a visual enticement for sale or consumption, whether: at the store counter, or at the store counter, or as a ‘badge product’ in public as a ‘badge product’ in public

Argument No. 2 Plain packaging provides inadequate protection of tobacco TM rights as required under the Paris Convention, TRIPS, and regional trade agreements such as NAFTA.

Registration of TM Paris, Art. 6quinquies “A. (1) Every TM duly registered in the country of origin shall be accepted for filing and protected… “B. TM covered by this Article may be neither denied registration nor invalidated except in the following cases… [none of which are applicable]” TRIPS, Art. 15(1) “Any sign… capable of distinguishing the goods or services of one undertaking from those of other undertakings… shall be eligible for registr. as TM.” Similar right under NAFTA Arts. 1708(3)&(4) Similar right under NAFTA Arts. 1708(3)&(4)

Exclusivity of Use TRIPS, Art. 16(1) “The owner of a registered TM shall have the exclusive right to prevent all 3rd parties not having the owner's consent from using in the course of trade identical or similar signs…” Almost identical protection is also provided under NAFTA Art. 1708(2). Almost identical protection is also provided under NAFTA Art. 1708(2).

Rebuttal these treaty rights pertain to TM registration & exclusivity of use these treaty rights pertain to TM registration & exclusivity of use PP permits/grants: PP permits/grants: TM registration TM registration use of ‘word mark’ on pkg. use of ‘word mark’ on pkg. sufficient use to maintain registr. sufficient use to maintain registr. right to prevent others using TM right to prevent others using TM

Rebuttal if PP creates non-use of TM this is independent of the will of the TM owner, thus is not justification for termination of registr., under NAFTA if PP creates non-use of TM this is independent of the will of the TM owner, thus is not justification for termination of registr., under NAFTA

Argument No. 3 The limits imposed by plain packaging unjustifiably encumber TM use in breach of TRIPS and NAFTA.

TRIPS: Encumber TM Art. 20 “The use of a TM… shall not be unjustifiably encumbered… in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings…

TRIPS: Encumber TM But also note Art. 17 “Members may provide ltd. exceptions to the rights conferred by a TM… provided that such exceptions take account of the legitimate interests of the owner of the TM & of 3rd parties.”

NAFTA: Encumber TM Art. 1708(10) “No Party may encumber the use of a TM in commerce by special require- ments, such as a use that reduces the TM’s function as an indication of source...”

NAFTA: Encumber TM But note Art. 1708(12) “A Party may provide ltd. exceptions to the rights conferred by a TM… provided that such exceptions take into account the legitimate interests of the TM owner and of other persons.”

Rebuttal ‘justifiability’ scales with the importance of the policy ‘justifiability’ scales with the importance of the policy limits on TM use are justifiable: limits on TM use are justifiable: objective is significant & pressing objective is significant & pressing rationally connected to objectiverationally connected to objective

Rebuttal limits on TM permitted provided they take into account the legitimate interests of TM owner and 3 rd parties limits on TM permitted provided they take into account the legitimate interests of TM owner and 3 rd parties public is a 3 rd party and protection of health is a legitimate interest public is a 3 rd party and protection of health is a legitimate interest

Existing ‘Plain Packs’ comparable TM use limits exist comparable TM use limits exist zoning by-laws restricting signs zoning by-laws restricting signs prescription drugs in plain bottles prescription drugs in plain bottles

Argument No. 4 Mandated plain packaging of tobacco creates unfair competition in violation of the Paris Convention.

Paris, Unfair Competition Art. 10bis “(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.”

Rebuttal policy adherence is not the act of a competitor policy adherence is not the act of a competitor implementation is not unfair if there is national treatment – foreign & domestic treated alike implementation is not unfair if there is national treatment – foreign & domestic treated alike separate print runs required for most markets so no added printing cost separate print runs required for most markets so no added printing cost

Argument No. 5 Plain packaging is an unnecessary obstacle to international trade contrary to the TBT Agreement and NAFTA.

TBT: Unnecessary Obstacle Art. 2.2 “Members shall ensure that technical regs. are not… applied with a view to or with the effect of creating unnecessary obstacles to int’l trade. “For this purpose, technical regs. shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are… protection of human health or safety...”

TBT: Unnecessary Obstacle Note the preamble of the TBT which states: “Recognizing that no country should be prevented from taking measures necessary to ensure the… protection of human, animal, and plant life or health… at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination… or a disguised restriction on int’l trade...”

NAFTA: Unnecessary Obstacle Art. 904(4) “No Party may… apply any standards- related measure… with the effect of creating an unnecessary obstacle to trade... “An unnecessary obstacle to trade shall not be deemed to be created where: (a) the demonstrable purpose of the measure is to achieve a legitimate objective; and (b) the measure does not operate to exclude goods of another Party that meet that legitimate objective.”

Rebuttal - TBT health measures are OK when “no more trade restr. than necessary,” but also weigh downside risk health measures are OK when “no more trade restr. than necessary,” but also weigh downside risk preamble: health protection at the level country deems appropriate if application not arbitrary, unjustif. discrim. or a disguised restriction preamble: health protection at the level country deems appropriate if application not arbitrary, unjustif. discrim. or a disguised restriction

Rebuttal - NAFTA not an “unnecessary obstacle” if not an “unnecessary obstacle” if objective is legitimate, and objective is legitimate, and measure does not exclude foreign measure does not exclude foreign goods that meet the objective

Argument No. 6 Plain packaging of tobacco products creates confusion in the minds of the consumer in violation of the Paris Convention and TRIPS.

Paris: Create Confusion Art. 10bis (3) “The following in particular shall be prohibited… all acts of such a nature as to create confusion… with the establishment, the goods, or the industrial or commercial activities, of a competitor…” Art. 6bis(1) “[Parties] undertake… to refuse or to cancel the registration, and to prohibit the use, of a TM which… [is] liable to create confusion…”

TRIPS : Creation of Confusion Art. 16 (1) “The owner of a registered trademark shall have … [the right to prevent others from using identical or similar signs] where such use would result in a likelihood of confusion…”

Rebuttal: PP is an act of legisl. obeyance not the choice of competitor, thus the Paris prohib. on competitive acts that would create confusion is inapplicable, as is the obligation to cancel a confusing TM PP is an act of legisl. obeyance not the choice of competitor, thus the Paris prohib. on competitive acts that would create confusion is inapplicable, as is the obligation to cancel a confusing TM new PP will look less like the old TM than the prior branding of competitors’ cigs, thus TRIPS prohibition on use of signs identical or similar to a TM is inapplicable new PP will look less like the old TM than the prior branding of competitors’ cigs, thus TRIPS prohibition on use of signs identical or similar to a TM is inapplicable

Confusing Trademarks?

Argument No. 7 Plain packaging of tobacco is a disguised restriction to trade in violation of TRIPS.

TRIPS: Disguised Restriction Art. 3(1) Art. 3(1) “Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property…” Art. 3(2) Art. 3(2) “Members may avail themselves of the exceptions… only where such exceptions are necessary to secure compliance… and where such practices are not applied in a manner which would constitute a disguised restriction on trade.”

Rebuttal Both domestic and foreign cigarettes woul Both domestic and foreign cigarettes woul no benefit conferred on domestic producers, the hallmark of a disguised restriction no benefit conferred on domestic producers, the hallmark of a disguised restriction

Argument No. 8 Mandated plain packaging of tobacco encourages counterfeiting in violation of TRIPS.

TRIPS : Counterfeiting TRIPS incl. numerous provisions regarding protection against counterfeiting, including Arts. 41, 46, 51, 59, and 61 TRIPS incl. numerous provisions regarding protection against counterfeiting, including Arts. 41, 46, 51, 59, and 61

Rebuttal TM increase product identification, they do not make counterfeiting more difficult TM increase product identification, they do not make counterfeiting more difficult many counterfeit branded items currently sold, including tobacco products many counterfeit branded items currently sold, including tobacco products copying TM image is not an impediment to counterfeiters copying TM image is not an impediment to counterfeiters PP are entirely compatible with anti- counterfeit markings such as holograms PP are entirely compatible with anti- counterfeit markings such as holograms

Argument No. 9 Plain packaging is tantamount to an expropriation of investment in violation of NAFTA.

NAFTA: Expropriation & Compensation Arts. 1110(1) and (2): only expropriate investment if: done for a public purpose, done for a public purpose, on non-discriminatory basis, on non-discriminatory basis, with due process of law, and with due process of law, and payment of fair mkt value comp. payment of fair mkt value comp. Art. 1110(7): no compensation if limitations of IP rights are consistent with NAFTA Chpt. 17

Rebuttal does not strip ownership, so not exprop., ntlzn. or tantamount to ntlzn. does not strip ownership, so not exprop., ntlzn. or tantamount to ntlzn. not tantamount to exprop. because owner may still sufficiently use the TM not tantamount to exprop. because owner may still sufficiently use the TM assuming PP is tantamount to exprop.: is consistent with Chpt. 17, rendering comp. requirement inapplicable assuming PP is tantamount to exprop.: is consistent with Chpt. 17, rendering comp. requirement inapplicable assuming above points fail, NAFTA would not preclude PP simply require fair mkt. value comp. assuming above points fail, NAFTA would not preclude PP simply require fair mkt. value comp.

Argument No. 10 Mandated plain packaging is an unfair and inequitable treatment of investment in violation of NAFTA.

NAFTA: Unfair Treatment Art (1) “Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.”

Rebuttal ‘fair and equitable’ obligation sums Arts. 1102, 1103 and 1104 which require providing treating which is the better of ntl. treatment or MFN (if that exceeds ntl. treatment) ‘fair and equitable’ obligation sums Arts. 1102, 1103 and 1104 which require providing treating which is the better of ntl. treatment or MFN (if that exceeds ntl. treatment) PP, applying to all domestic and all foreign producers, constitutes both ntl. treatment and MFN PP, applying to all domestic and all foreign producers, constitutes both ntl. treatment and MFN

The Final Word “In summary, the… international trade argument by itself will not however be sufficient to ward off the threat of plain packs.” Internal industry memo “International Trade Aspects of Labelling” J.F. Clutterbuck, 11 April (almost certainly John F. Clutterbuck, solicitor, Rothmans International)