Trade law and tobacco: plain sailing? Part II
Some time ago, we posted a commentary on TradeLinks about the recent WTO panel report in the dispute over Australia’s Tobacco Plain Packaging Act 2011 (the “TPPA”) and accompanying regulations. That post discussed the role played by the WHO Framework Convention on Tobacco Control (the “FCTC”) in the context of WTO law. The Panel report, however, also addressed many other important issues relevant to international trade. One which was central to the dispute relates to the extent of trademark protections provided by the WTO TRIPS Agreement.
The complainants argued that the TPPA and related regulations were incompatible with various TRIPS provisions.
For example, they claimed that the Australian measures violated Art. 15.4 as they de facto prevented the registration of any new and not inherently distinctive non-word signs as trademarks: since such signs cannot be used on tobacco products, they will never have the opportunity to acquire distinctiveness through their use.
In addition, they claimed that they infringed Art. 16.1 TRIPS because “the prohibition on the use of certain [i.e. non-word] tobacco-related trademarks reduce[d] the distinctiveness of these trademarks, thus reducing the ability to demonstrate ‘a likelihood of confusion’ with other marks, and impacting the ability of the right owner to exercise its right to prevent unauthorized use.” They also contended that the Australian measures violated Art. 20 – the only TRIPS provision that explicitly refers to use – as they imposed an unjustifiable encumbrance on the use of trademarks in the course of trade.
The Panel disagreed with all the above claims. It found that the protection granted by the TRIPS did not extend to signs that only have the potential to develop their capacity to distinguish a product from other goods in the future.
It is merely an option for WTO Members to provide for such protection. At the same time, according to the Panel, even if a Member decides to exercise that option (as was the case for Australia), this did not modify “the scope of the definition of ‘trademark’ and thus extend the scope of the prohibition in Article 15.4” to signs that were not inherently distinctive but which could have acquired distinctness in the course of their use.
The Panel also construed Art. 16.1 narrowly, finding that it only provided a limited negative right for trademark owners to prevent others from unauthorized use of identical or similar signs and did not encompass any additional related rights, for example to protect against a reduction in the distinctiveness of a trademark or against lesser awareness of a trademark among consumers.
As far as Art. 20 is concerned, the Panel agreed with the complainants that the TPPA provided special requirements that encumbered the use of trademarks in the course of trade, but it also held that these restrictions were justifiable in analysis resembling the necessity test used in the context of Art. XX GATT (it is important to remember that Art. 20 TRIPS only prohibits unjustifiable forms of encumbrance).
The Panel found – after extensively reviewing the available scientific evidence – that these requirements indeed contributed to the achievement of the Australian regulatory objective (i.e. protection of public health, which needs to be regarded as legitimate policy that can be pursued by each government). The fact that they reflected the emerging global consensus in the area of tobacco control, as embodied in the FCTC and its more detailed technical guidelines, was also an important consideration for the Panel.
At the same time, the Panel was of the opinion that the other alternatives identified by the complainants were not able to guarantee the same level of protection as provided by the TPPA.
Although the plain packaging dispute has generated considerable controversy among intellectual property experts, its final outcome is not surprising. The approach taken by the panel clearly remains within the limits set out by the text of the agreement, promoting at the same time the reading of the TRIPS which is sympathetic to health considerations but which does not deprive the relevant provisions of their legal strength.
It is also worth adding that, at the more general level, the panel followed the practice of other international and domestic courts and tribunals in disputes about tobacco control measures (e.g. Philip Morris v. Uruguay, C-358/14 Republic of Poland v. European Parliament and Council of the European Union or British American Tobacco Australasia Limited and Others v. The Commonwealth of Australia).
The Panel’s interpretation of Art. 20 TRIPS may serve here as a good example of the balanced approach indicated above. The Panel refused to endorse the broad interpretation advanced by Australia, under which the mere fact that a measure is rationally related to an objective is sufficient to find a justification for restrictions on the use of a trademark. Instead, it introduced a necessity-like test that relies on the process of weighing and balancing various factors.
This is a more demanding approach, which does not allow WTO Members to easily escape the obligations of Art. 20. At the same time, it leaves ample room for regulatory activity by states and improves the overall consistency of the WTO case law by applying in context of Art. 20 legal standards elaborated under GATT. The interpretation of Art. 16.1 is another example.
Considering the lack of any general exception clause in the TRIPS (similar to Art. XX of GATT), the narrow conceptualization of trademark rights by the Panel under this provision is understandable. The broad reading of Art. 16.1 proposed by the complainants would have resulted in finding a violation (without the possibility of justification), despite the fact that the very same restrictions over the use of the trademark would otherwise have been found lawful under the justification mechanism of Art. 20 TRIPS .
Overall, the interpretation proposed by the Panel helps to preserve the regulatory space enjoyed by WTO Members in the field of tobacco control.
The clarifications of the TRIPS provisions offered by the Panel also reduce the regulatory chilling effect resulting from WTO trade rules that are inherently complex and uncertain, thus making it difficult for Members to assess the legality of their measures vis-à-vis international obligations. Following Australian litigation successes, a number of countries have decided to introduce plain packaging laws (i.e. France, United Kingdom, New Zealand and Norway, with Hungary and Israel soon joining the club). One may expect that the plain packaging report will only accelerate this process.
Written by Lukasz Gruszczynski, Associate Professor at the Polish Academy of Sciences.