UK: Plain Packaging: The Negative Nature Of Trade Mark Rights

Recent developments in the UK regarding plain-packaging requirements for cigarettes have again shone the spotlight on this contentious issue.

A while back, we reported on developments in Australia, where the country's Tobacco Plain Packaging Act, 2011 requires tobacco companies to sell their products in identical olive green packs, with graphic images reflecting the possible health consequences of smoking, and the brand name (sans logo) in very small script. The tobacco industry went to court on the issue and the Australian court ruled that the legislation was lawful. What was particularly interesting was that the court found that the legislation did not involve an acquisition of property – the argument had been raised that plain-packaging requirements essentially amount to an expropriation of IP.

Plain packaging has now played out in the UK. The emotive nature of the issue became very clear when tobacco company Philip Morris said this early on: "Standardized packaging is a euphemism for government-mandated destruction of property. It is unlawful, disproportionate, and at odds with the most basic requirements of the rule of law." But the UK High Court found that the UK plain-packaging regulations are lawful. This decision was taken on appeal and, on 30 November 2016, the Court of Appeal handed down its judgment in which it upheld the High Court's judgment.

The Court of Appeal's judgment dealt with various issues. Most interesting from an IP perspective was the finding that the essence of the trade mark right is the negative right to exclude others from using it, rather than a positive right to use it. The court said that there is no positive right to use a trade mark under either UK or international law. The negative right to stop others using the trade mark is not affected by the plain-packaging regulations.

The court also ruled that the plain-packaging regulations are not inconsistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS"), which should be interpreted in conjunction with the Doha Declaration on TRIPS and Public Health. The Doha Declaration says that TRIPS should be interpreted in a way that is supportive of the right of World Health Organization members to protect public health. The court acknowledged that the Doha Declaration was adopted in the context of medicines, but said that it is not limited in any way.

The Court of Appeal went on to hold that the UK plain-packaging regulations do not violate protections for private property under either common law or European law, noting that the tobacco companies retain legal title to their registrations. It also said that the owners can still use their trade marks in wholesale and trade publications, and against parallel imports or counterfeits. So, there was absolutely no case for compensation for lost property.

The Court of Appeal went on to decide that the plain-packaging regulations are proportionate, considering the need to protect public health. In this regard, it rejected the claim that the government could have increased duties (thereby raising cigarette prices) rather than impose plain-packaging requirements. Finally, the court held that the plain-packaging regulations are consistent with the UK's obligations under EU law, particularly the 2014 Tobacco Products Directive.

On 12 April 2017, the UK's highest court, the Supreme Court, refused leave to appeal. This means that the Court of Appeal's judgment is the last word on the subject in the UK. This, in turn, means that we now have judgments in two countries with legal systems similar to South Africa's that say that plain-packaging requirements are lawful.

In South Africa, there are strong feelings on the issue. The Department of Health is keen on plain-packaging legislation, the tobacco industry is not. The industry argues that plain-packaging requirements are tantamount to expropriation of property, something that the Constitution says cannot be done without compensation. The argument regarding expropriation is quite a convoluted one and it goes something like this: as plain-packaging requirements mean that the companies cannot use their registered trade marks, those registered trade marks will eventually become vulnerable to attack for non-use, and once they've been cancelled, they've effectively been confiscated.

If the issue of plain-packaging legislation does ever end up in a South African court, it's likely that the famous Black Label case will be raised. In this case, the Constitutional Court held that the constitutional right of freedom of expression of a satirist who was using a famous trade mark to make a political statement trumped the property right of the company that owned the trade mark to control the use of the trade mark. The government will no doubt argue that if the right of free speech can trump property rights, so can health rights.

It's also highly likely that court decisions that dealt with the legislation that prohibits tobacco advertising in South Africa will be discussed. In these cases, the courts held that any constitutional right can be limited to the extent that the limitation is reasonable and justifiable taking into account relevant factors, including the nature of the right and the nature and extent of the limitation. In one of the decisions, the court spoke of "powerful public health considerations", "international law obligations", and the fact that other countries have "accepted the link between advertising and consumption as incontrovertible and have imposed restrictions on the advertising and promotion of tobacco products".

We await the next development with interest.

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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