By Danielle Daquino and Matt Burgess, Director.
Taking on the big guns….
Attorney – General of Australia, Nicola Roxon, sought for tobacco giants to be ‘taken on and beaten’. Roxon seems to have reached that goal in light of the recent case of British American Tobacco Australia Ltd v The Commonwealth of Australia that was handed down this August. A 6:1 majority of the High Court granted that plain packaging on all tobacco packages sold in Australia would be enforced from December 1st 2012.
Fast forward two months later, and debate on the issue is on the rise as cigarette giants evaluate the ramifications of this decision. One widely contested issue is what this measure will mean for intellectual property rights.
Roxon’s motivation for the plain – packaging initiative is to reduce smoking levels, particularly amongst young people. The Government’s decision to take on the deep pockets of companies such as British American Tobacco was nothing short of a bold move. Packaging is a significant part of a company’s marketing strategy. Evidence from internal tobacco company’s documents has revealed it is one of the most crucial factors driving their marketing plans.
But some like the Plain Jane…
The Tobacco Plain Packaging Act 2011 will enforce the requirement that all tobacco products are marketed and sold in plain packaging. Justice Crennan of the High Court has stated that, ‘The objects of the Packaging Act are to improve public health”. The amendment in the Act will prohibit the use of logos, brand imagery, colours or promotional text on any tobacco packages. The plain packaging initiative will require all packages to follow the same standard format. This will also be coupled by more stringent controls. Some noteworthy controls are that the packages are to be made of cardboard, rectangular, feature no embossment, and be of an olive colour. The graphic warning on all packages will also be enlarged.
These controls are highlighting the ramifications on intellectual property rights. There are two sides to evaluate this; one from the consumer’s side of the fence, and the other from the tobacco company.
Let’s give this some thought from a consumer’s perspective. When there are thirty different packages (with more or less a similar product inside), the selling point can often be colour, size or images. The tobacco company would then respond, and assert that all these deciding factors fall under the umbrella that we like to call ‘IP rights’. These companies are then turning to the Australian Government, and asking them to have a think about the agreements they have signed. They claim contradictions in these agreements.
Australia is a member of the Agreement on Trade – Related Aspects of International Property Rights 1994 (TRIPS). Article 20 of TRIPS states that ‘…use of a trademark should not be restricted in a manner that will limit its ability to differentiate a given good or service from other goods or services’. This then poses the question, ‘Doesn’t taking away intellectual property rights on packaging do precisely that?’ Perhaps that is some food for thought.
On the other hand, there are other articles that make an allowance for members of the agreement to enforce measures that will protect both public interest and health. Articles 8(1) and 17 of TRIPS outline that it is necessary to adopt measures to protect public health and interest. Will this then open the floodgates for other companies to be stripped of their intellectual property rights? Would alcoholic and fast food companies also be a threat to public health?
Five Australian tobacco giants are standing by the assertion that intellectual property rights are some of their most valuable assets. Stripping them of this valuable property has led to the argument that they will be requiring compensation. This compensation requirement may result in a $3 billion dollar headache for taxpayers. The dissenting judge in the High Court judgment relied heavily on section 51(xxxi) of the Australian Constitution. This section provides that the government must pay for any property it acquires. The majority’s interpretation was that this legislative measure is not a means of ‘acquiring property’. They argued that the Government was not acquiring property for their own advantage, rather to restrict the use of tobacco companies.
Governments and tobacco companies worldwide now wait for the moment that the full reasons for the decision are released. Stripping a brand of their considerably large bundle intellectual property rights means that tobacco companies will be challenged as to how they maintain their competitive edge. It will be of interest to observe if this may be a matter of price reduction. Would price reduction then mean that cigarettes are more accessible for individuals? It is only a matter of time before these questions are answered.
One thing we do know is that the Australian Government has set a precedent for governments worldwide. New Zealand and the U.K are already gearing up to follow suit. The Attorney – General’s motivation for instigating this case was that cigarettes are a health risk for people. There are lots of things that pose a health risk in society. This landmark decision may be just the beginning of other industries that stand to be threatened by this precedent.
This blog is for discussion purposes only. This must not be considered legal advice.
For legal advice on this topic and references to any information in this article, please contact
Matt Burgess, Director:
Phone: +61 405 722 739
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Image Credit: Grant Cochrane
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