Plain packaging of tobacco products: landmark ruling

December 2018

By Matthew Rimmer*, Professor of Intellectual Property and Innovation Law, Faculty of Law, Queensland University of Technology (QUT), Brisbane, Australia

In 2011, Australia passed landmark legislation to introduce the plain packaging of tobacco products. At that time, Australia’s Minister of Health and Ageing, Honorable Nicola Roxon, explained that the Government of Australia was “absolutely committed” to reducing smoking-related disease and death. “We want to help protect Australians. That is why we are prepared to lead the world on tackling smoking. Once enacted, these plain packaging laws will be the world's toughest laws on tobacco promotion,” she said.

The legislation requires that tobacco products be sold logo-free in “plain, drab, dark brown packets.” The adoption of the Tobacco Plain Packaging Act 2011 (Commonwealth) (‘the Act”) marked implementation by Australia of the WHO Framework Convention on Tobacco Control. Plain packaging of tobacco products is an optional measure featured in the guidelines of that Convention.

Minister Roxon explained that when used for its intended purpose, tobacco is lethal, and that while progress had been made in reducing smoking, tobacco remains a leading cause of preventable death and disease, claiming more than 15,000 lives every year in Australia.

Validity of legislation questioned

The Australian Government successfully defended plain packaging of tobacco products in the High Court of Australia (JT International SA v Commonwealth of Australia [2012] HCA 43 (5 October 2012). In that case, the plaintiffs argued that the Act amounted to an appropriation of the goodwill embodied in their brands and that by enacting it the Commonwealth of Australia had “acquired their intellectual property rights and goodwill other than on just terms.” However, by a majority of six to one, the High Court found that “although the Act regulated the plaintiff’s intellectual property (IP) rights and imposed controls on the packaging and presentation of tobacco products, it did not confer a proprietary benefit or interest on the Commonwealth or any other person.”

The Australian Government then prevailed in a challenge by Philip Morris (Philip Morris Asia Ltd v Australia, PCA Case No. 2012-12) in an arbitration claim under the investor-state dispute settlement regime of the Australia-Hong Kong Agreement on the Promotion and Protection of Investments 1993. The Tribunal found that Philip Morris Asia’s claim was an abuse of process.

Having prevailed in these disputes, the Government of Australia was confident that it would also succeed in the disputes over plain packaging of tobacco products brought before the Dispute Resolution Panel of the World Trade Organization (WTO) by the Dominican Republic, Honduras, Cuba, Indonesia and Ukraine. These countries – each large tobacco producers – claimed that plain packaging of tobacco products would have serious economic consequences for them and that such measures were counter to WTO rules governing IP rights (in particular, in relation to trademarks, which serve to allow consumers to distinguish products from different companies) and technical barriers to trade.

In 2012, Australian Trade Minister Craig Emerson said, “Australia will strongly defend its right to regulate to protect public health through the plain packaging of tobacco products,” noting that the Government was “confident that its plain packaging legislation is consistent with Australia’s WTO obligations.”

His remarks proved true. In July 2018, Australia won what has been hailed as a resounding victory when the WTO dispute panel released its decision.  The complex and voluminous judgment and its appendix and addendum, no doubt, will attract a great deal of legal analysis. This article offers a summary of the ruling and immediate reactions to it. After first outlining the public health arguments for plain packaging of tobacco products, the summary examines the various claims that the Australian Act was inconsistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the Agreement on Technical Barriers to Trade (TBT), and the General Agreement on Tariffs and Trade (GATT). It concludes with a discussion of reactions to the decision and the prospects of an appeal by the Dominican Republic and Honduras against the ruling.

1. Plain packaging of tobacco products: a public health measure

Following the enactment of landmark legislation in 2011 to introduce
the plain packaging of tobacco products, the Australian Government
has fended off a range of legal challenges. In July 2018, the Dispute
Resolution Panel of the World Trade Organization ruled that Australia
had not breached its international obligations in passing that
law (Photo: © Commonwealth of Australia).

Australia justified its legislation on the plain packaging of tobacco products as a legitimate public health measure to address Australia’s tobacco problems. The WTO panel agreed, asserting that that it would help reduce the use of tobacco products in Australia.

The panel pointed to evidence that “overall smoking prevalence in Australia continued to decrease following the introduction of the [plain packaging] measures,” and had even experienced a rapid decline. It also identified a similar overall rapid decline in cigarette sales following the introduction of the measures.

2. The Agreement on Technical Barriers to Trade

The TBT seeks to ensure that technical regulations, standards and procedures do not create unnecessary barriers to trade. The panel found that the complainants had not demonstrated that Australia's tobacco plain packaging measures are more trade-restrictive than necessary to achieve a legitimate objective, namely, that of “improv[ing] public health by reducing the use of, and exposure to, tobacco products.” The panel found that the measures were trade-restrictive, only insofar as they resulted in a reduced volume of imports. As such, the measures were not inconsistent with the TBT (Article 2.2).

In reaching its decision, the panel considered whether less trade-restrictive alternatives, such as increasing the minimum legal purchasing age, increased taxation of tobacco products, improved social marketing campaigns, or a combination of such measures, were reasonably available in Australia. The panel concluded, however, that “the nature of the risks that would arise from the non-fulfilment of Australia's objective is that public health would not be improved, as the use of, or exposure to, tobacco products, would not be reduced, and the consequences of such use, and exposure, are particularly grave.”

3. The TRIPS Agreement

TRIPS establishes minimum standards for the protection of IP rights, including trademarks, patents and copyright. The panel’s ruling on the plain packaging of tobacco products in relation to this Agreement is significant and influential considering the inter-relationship and synergies that exist among IP, public health and trade.

The panel considered and dismissed a number of claims that the plain packaging of tobacco products was inconsistent with various articles of TRIPS (see Summary of Key Findings). With respect to Article 6quinquies of the Paris Convention for the Protection of Industrial Property as incorporated into TRIPS (Article 2.1), the complainants had not demonstrated that, as alleged, Australia does not accept for filing and protect as is every trademark duly registered in the country of origin; therefore, the tobacco plain packaging measures were not inconsistent with that provision. The panel also rejected a claim that the nature of the goods to which the measures apply, namely tobacco products, formed an obstacle to the registration of trademarks, and thereby violated Article 15.4 of TRIPS.

Furthermore, the Panel rejected claims that plain packaging measures were inconsistent with Article 16 of TRIPS. The complainants claimed the measures stopped the owner of registered tobacco trademarks from preventing unauthorized use of identical or similar trademarks on identical or similar products where such use would cause confusion among consumers. The panel found that this was not demonstrated by the complainants, and further found that the complainants had not demonstrated that the measures prevent tobacco trademarks from acquiring “well-known” status or prevent established “well-known” trademarks from maintaining that status. As such, they were not inconsistent with Article 16.3 of TRIPS.

With respect to Article 20 of TRIPS, the panel found that the complainants had not demonstrated that the measures unjustifiably encumber the use of tobacco trademarks in the course of trade. Recognizing the importance of public health and the need for “effective tobacco control measures” to reduce the tobacco-related health burden, the panel noted that Article 8.1 of the TRIPS Agreement “sheds light on the types of societal interests that may provide a basis for the justification of measures under the specific terms of Article 20, and expressly recognizes public health as such a societal interest.”

The panel further noted that “paragraph 5 of the Doha Declaration invites us to read ‘each provision of the TRIPS Agreement’ in the light of the object and purpose of the Agreement, as expressed in particular in its objectives and principles, which include Article 8.” It added that “WTO Members have further emphasized the importance of public health as a legitimate policy concern in paragraph 4 of the Doha Declaration (7.2587-7.2588).”

These deliberations draw a striking resemblance to international debates on access to essential medicines. Professor Tania Voon of the Melbourne Law School suggests that the “the way the panel reached its conclusion has major implications for the nature of IP as understood in the WTO and for the future application of the TRIPS Agreement.” She also predicts that the panel’s analysis leaves “significant scope” for it to “to take a different approach at any point” in the future.

With respect to Article 10bis of the Paris Convention (1967), as incorporated into TRIPS by Article 2.1, the panel rejected claims that the measures compelled market actors to engage in prohibited acts of unfair competition, or that Australia had failed to provide effective protection against acts of unfair competition.

The panel also dismissed arguments about the potential impact of plain packaging of tobacco products on geographical indications – such as Cuba’s Habanos. The panel held that the complainants had not demonstrated that “the protection that GIs [geographical indications] enjoyed under the Australian law, including under general consumer protection measures addressing misleading representations or the common law tort of passing off, immediately before 1 January 1995 had been diminished as a result of the measures.”

4. General Agreement on Tariffs and Trade

The panel found that Cuba, a major producer of cigars, had not demonstrated that the restrictions imposed by the plain packaging measures would lead to a material reduction in the value of the Habanos sign and the Cuban Government Warranty Seal within the meaning of Article IX:4 of the GATT (1984).

Reactions

In a press release following the panel’s ruling, Australia’s Minister of Trade, Tourism and Investment, Steven Ciobo, and Australia’s Minister for Rural Health, Bridget McKenzie, hailed the decision as “a resounding victory.”

The Ministers reaffirmed the Australian Government’s conviction that “tobacco plain packaging is a legitimate measure designed to achieve the protection of public health that fully respects Australia’s international trade and investment obligations.” They further reiterated the Government’s readiness to defend any appeal that might emerge in response to the WTO panel ruling.

The World Health Organization (WHO) welcomed the decision, noting that it promised “to accelerate implementation of plain packaging around the globe.”

Dr. Kelly Henning, head of Bloomberg Philanthropies’ Public Health Programs, said the ruling was “an important victory for public health,” and “helps create a roadmap for other countries to implement plain packaging laws, a strategy that is proven to decrease use of tobacco products.”

For its part, the tobacco industry and the International Trademark Association (INTA) were “extremely disappointed” with the ruling.  

In terms of the implications of the ruling on the work of the WTO panel, Ukraine suspended its action against Australia during oral proceedings. Honduras and, subsequently, the Dominican Republic, are appealing the ruling, while Indonesia and Cuba have decided not to do so. As noted by the International Centre for Trade and Sustainable Development (ICTSD), “a final ruling from the WTO’s Appellate Body could take years, given both the complexity of the case, as well as resource constraints and the various vacancies on the highest global trade court.” Against this backdrop, the appeal process is likely to continue for some time.

A changing international landscape

Since Australia passed its landmark legislation, various other countries have legislated and implemented similar measures. These include France, Ireland, New Zealand, Norway and the United Kingdom. Half-a-dozen other nations have legislated for plain packaging – and will implement the regime in the future. Canada, Georgia, Hungary, Mauritius, Slovenia and Uruguay are in this position. In the wake of the WTO panel ruling, others are likely to follow. Belgium, Colombia, Finland, Singapore, South Africa, Sri Lanka and Sweden are formally considering plain packaging.

As governments around the world strive to tackle public health challenges relating to tobacco-related disease and mortality, and as more guidance emerges on how to effectively manage the relationship among IP, public health and international trade, it seems likely that plain packaging of tobacco products will become a global standard.   

*Matthew Rimmer is a leader of the QUT Intellectual Property and Innovation Law research program and a member of the QUT Digital Media Research Centre (QUT DMRC), the QUT Australian Centre for Health Law Research (QUT ACHLR), and the QUT International Law and Global Governance Research Program (QUT IL GG).

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