Canada: Smoke Screen: Is Tobacco Plain Packaging Legislation A Control Of Use Or A Deprivation Of The Right To Use A Mark? What Is The Nature Of A Trademark?

Last Updated: January 24 2017
Article by John McKeown

A recent decision of the Court of Appeal for the United Kingdom deals with these issues and dismissed an action brought by a number of large tobacco companies attacking the introduction of plain packaging legislation in the United Kingdom.

The U.K Regulations

The Regulations relating to plain packaging were brought into force in the U.K. on May 20, 2016. The regulations standardized the material, shape, opening and content of the packaging for readymade cigarettes, among other things. The regulations also include specific prohibitions in relation to the labelling of tobacco products.

The objective was to introduce plain or standardised packaging to restrict the use of branding permitted on tobacco packaging. The only permitted colour for the packaging for such products is a drab brown with a matt finish. The regulations prescribe the text that may be lawfully printed on the packaging. Other than standardized text as to the number of cigarettes and the name of the producer only the brand name and the variant of the cigarette is permitted. This must be done using a uniform presentation with a specified Helvetica font, case, colour, type face, orientation and size (font size 14 for brand name and 10 for variant name).

The regulations also deal with the trademark rights of the tobacco companies subject to the legislation. The regulations provide that they do not prevent the registration of the trademark by such companies or give rise to an attack of any registrations for such marks based on invalidity. In particular the regulations do not prevent an applicant from applying for a mark on the basis of proposed use. It is also provided that the existence of the regulations constitutes a valid excuse for the non-use of the registered mark.

The regulations implemented the Tobacco Products Directive of the European Union. The tobacco companies challenged the Directive but it was previously decided by the Court of Justice of the European Union that the Directive was validly enacted.

The Trial Decision

The judge characterized the purpose of the regulation as to improve public health by suppressing the use of tobacco and more specifically said that the regulation was intended to eradicate the attractive force of the design of cigarette packaging. In this regard, the judge found that the Government had presented clear evidence establishing a causal relationship between packaging, advertising, and smoking initiation, especially as the brand imagery in issue appeals to the psychological and social needs of consumers.

It was noted by the trial Judge that the regulations were in large measure designed to implement a policy established by the World Health Organization in the 2004 Framework Convention on Tobacco Control to which the EU and its individual member states were parties.

The judgment is very detailed and lengthy consisting of more than a thousand paragraphs. All of the attacks on the regulations were dismissed.

The Appeal

The tobacco companies appealed to the U.K. Court of Appeal. It was not in dispute that a registered trademark was a species of property, even though no one can "possess" a trademark in the sense that one possesses a piece of land or goods. However, before it could be said that proprietary rights had been affected, it was necessary to identify what the rights were.

The Court said that one of the key features of intellectual property, unlike corporeal property, is that an infringement of intellectual property rights does not exhaust the property itself. For example, if someone borrows a car the owner is deprived of the use of the car at least temporarily. However, if someone uses a mark that is confusing with a registered trademark that action does not prevent the registered owner from continuing to use the mark. When the Court considered the wording of the relevant legislation, they said that it was clear that the grant of a trademark was not a positive right to use the mark, but rather the grant of a negative right to prevent prescribed actions by others.

The Court said that this was clearly established in the context of copyright and patents and that the rights associated with these types of intellectual property are negative in nature.

The Court said that the right or freedom to affix a distinguishing trademark to goods or to designate services by a distinctive trademark exists at common law independently of the registration of any trademark. When a trader registers that mark as a trademark the registration does not confer on him any right to use the mark that the trader did not have before. What the registration gives the trader is the right to stop other people from using a confusingly similar mark (and the other things that the proprietor of a trademark is entitled to prevent).

The Court concluded that the question of whether the interference with the marks and designs required the payment of compensation in order to avoid a breach of the European Convention on Human Rights fell to be determined on the basis that the Regulations amount to a control of use, not a deprivation. It was accepted that even if an interference amounts to a control of use rather than a deprivation, it is possible in principle for compensation to be required if the control is sufficiently severe. In practice, however, a requirement for compensation is rare in a case of control of use. The question in each case is one of proportionality: is compensation required in order to achieve a "fair balance" between the public interest pursued and the private property interests affected?

The Court agreed with the trial judge's finding that the Regulations struck a fair balance in the absence of compensation. The Court considered a number of other arguments advanced by the tobacco applicants attacking the regulations. However, on all issues the Court agreed with the trial judge and dismissed the appeal.

Canadian Approach

It seems likely that a Canadian court would characterize the rights available to a registered trademark as statutory in nature and not a property interest. Section 19 of the Act provides that subject to some exceptions the registration of a trademark in respect to goods or services, unless shown to be invalid, gives the owner of the trademark the exclusive right to its use throughout Canada in respect of those goods and services. However, actions for infringement are negative in the sense that the plaintiff must show that the defendant's activities infringe its rights under the Act.

The Supreme Court of Canada has categorized similar types of rights under the Copyright Act as creating statutory rights and obligations on the terms and in the circumstances set out in the Act. A similar position may well be taken concerning the Trademarks Act which essential codifies the rights available to a common law trademark owner and provides for additional rights on the basis set out in the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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