Plain Packaging of Tobacco Products under TRIPS

In the comments to another post, two readers suggested a discussion of this memo by the law firm Lalive, written to Philip Morris, entitled "Why Plain Packaging is in Violation of WTO Members’ International Obligations under TRIPS and the Paris Convention."

The memo defines "plain packaging" as follows:

Plain packaging refers to regulations requiring tobacco companies to sell cigarettes in generic packages.    Except for  the  brand  name of  the  tobacco  product,  which would be  written  in  a standard font, colour and size, all other trademarks, logos, colour schemes and graphics would be prohibited and the package  itself would be in  a neutral colour.  Only the product content information and health warnings required by law would be displayed. The stated objective of plain packaging is to strip cigarettes of their perceived attractive image in order to reduce the incidence of smoking.

It sees a number of TRIPS violations:

Plain packaging would be inconsistent with a Member State’s obligations under TRIPS and the Paris Convention.  Indeed, such a requirement would breach a number of key provisions as  a  result  of  its  undue  impact  on  the  trademark  owner’s  intellectual  property  rights.    In particular, it would constitute a breach of Article 15(4) of TRIPS (which reproduces Article 7 of the Paris Convention), Article 6 quinquies (B) of the Paris Convention, as well as Articles 17  and  20  of  TRIPS.    In  addition,  contrary  to  what  is  argued  by proponents  of  plain packaging,  Article  8(1)  of  TRIPS  does  not  allow  States  to  circumvent  the  minimum protections provided by TRIPS.

Also in the comments to the other post, Benn McGrady starts off the discussion of these issues as follows:

As for me, I'm just going to make some brief points about Article 17 and Article 8(1).  Any TRIPS experts out there should feel free to add their thoughts in the comments.

First up, Article 8(1), which states:

Members  may,  in  formulating  or  amending  their  laws  and  regulations,  adopt  measures necessary to protect public health and nutrition, and to promote the public interest in sectors of  vital  importance  to  their  socio-economic  and  technological  development,  provided  that such measures are consistent with the provisions of this Agreement.

Here, I just have a quick question:  Does this provision have any impact?  It says you can pursue certain policy goals, but only to the extent the measures you take are consistent with the TRIPS Agreement.  So doesn't it really just say you have to follow the TRIPS Agreement with regard to any policies you are pursuing?

Turning to Article 17, the memo has this to say:

26. Article  17  of  TRIPS  sets  out  that Member  States  may  only  impose  limited exceptions  on trademark  rights,  and  even  then  they  must  take  into  account  the  legitimate  interests  of  the trademark’s owners.  Article 17 reads as follows:

Members  may  provide  limited  exceptions  to  the  rights  conferred  by  a  trademark,  such  as fair  use  of  descriptive  terms,  provided  that  such  exceptions  take  account  of  the  legitimate interests of the owner of the trademark and of third parties.

27. Plain  packaging,  unlike  exceptions  such  as  fair  use,  would  not  fall  under  the  scope  of  the exceptions  permitted  by  Article  17  because  it  in  no  way  takes  into  account  the  legitimate interests of the owners of tobacco trademarks or of tobacco consumers and is an overly broad encroachment on the owners’ rights.

28. First,  plain  packaging cannot  be  said  to  constitute  a  “limited”  exception.    Indeed,  plain packaging annihilates the rights conferred by trademarks.

29. Second, plain packaging fails to take account of the legitimate interests of trademark holders, which have been defined by a WTO dispute settlement Panel as follows:

Every  trademark  owner  has  a  legitimate  interest  in  preserving  the  distinctiveness,  or capacity to distinguish, of its trademark so that it can perform that function.  This includes its interest in using its own trademark in connection with the relevant goods and services of its own and authorized undertakings.  Taking account of that interest will also take account of  the  trademark  owner’s  interest  in  the  economic  value  of  its  mark  arising  from  the reputation that it enjoys and the quality that it denotes.

30. The  Panel  clearly  set  out  that  the  trademark  owner’s  legitimate  interests,  including  “its interest  in using its own trademark in connection with the relevant  goods and services of its own and authorized undertakings.”  Plain packaging, unlike more benign exceptions such as fair use, entirely prohibits the use of tobacco trademarks, and therefore entirely deprives the owner of the trademark’s basic function, which is its “capacity to distinguish”.  In addition, a plain packaging measure does not in any way attempt to accommodate the owners’ interest in the economic value of the trademark as it effectively wipes out that value.  The value of the trademark, according to the WTO Panel, arises from the reputation it enjoys and the quality it denotes.    If  the  trademark  owner  is  precluded  from  using  the  trademark,  such  goodwill becomes meaningless.  Trademark owners’ legitimate interests in the use of their trademarks would  therefore  not be taken  into  account  at  all  by a  plain packaging  requirement.    Rather, they  would  be  entirely  disregarded  and  denied. Indeed,  as  noted  above,  plain  packaging effectively amounts to an indirect invalidation of the trademarks subject to such regulation.

31. More  generally,  a  plain  packaging  measure  completely  ignores  the  balance  that  TRIPS, according to its preamble, seeks to establish between the private rights of intellectual property owners and the public interest.16 A TRIPS provision cannot be interpreted in a way that shifts that  balance.    As  a  result  of  its  complete  disregard  for  the  intellectual  property  rights  of obacco trademark owners, a plain packaging measure would be in clear breach of Article 17 of TRIPS.

There's a lot going on here, and I'm just going to make a brief point.  I wonder whether the plain packaging situation could be considered "limited" because it does not let someone else use the trademarks.  In the various TRIPS cases where these kinds of exceptions have come up, the issue has been someone other than the copyright/patent/trademark holder using the copyright/patent/trademark.  Here, that is not the case.  No one else is going to use the cigarette trademark, so that aspect of the trademark right remains intact.  It's just that the trademark holder cannot use it.  As a result, it could be argued that the diminution of rights is "limited."  (The McGrady comment makes a similar point, I think.)  For more on the "limited exception" issue under Article 17, see the EC - Trademarks/GIs reports:  Australia case, paras. 7.650-661 and U.S. case, paras. 7.650-661.