Focus: Can government force plain packaging on cigarettes?

It’s just a matter of time before Canada follows a landmark decision at the Australian High Court to strip intellectual property off cigarette packages, says a Toronto lawyer.

It’s something many in the tobacco industry fear and are trying to stop.
“It is interesting and I think it is a matter of time,” says John Simpson, an intellectual property and trademark lawyer with his firm, Shift Law.

“I think Canada was among the first, if not the first, to have warnings cover more than 50 per cent of packing. Anti-smoking people are very powerful and I can certainly see this coming to Canada.”

Tobacco companies fought to overturn an Australian law requiring them to sell cigarettes in plain packaging, but the High Court rejected the challenge last month.

Starting in December, cigarette packages in Australia will be available in plain packaging with no logos and the brand names will have to appear in a standard font and position.

British American Tobacco, Imperial Tobacco, Philip Morris International Inc., and Japan Tobacco International all participated in trying to overturn a December 2011 law made by the Australian Parliament.

They argued that the world’s first plain-packaging law was unconstitutional because it amounted to an acquisition of intellectual property without adequate compensation, according to a Washington Post story.

“The plaintiffs argued that some or all of the provisions of the act were invalid because they were an acquisition of property otherwise than on just terms,” the court said in a summary of the decision.

“At least a majority of the court is of the opinion that the act is not contrary to s. 51 of the constitution.”

British American Tobacco said it was disappointed with the ruling in a release posted on its web site.

“We . . . remain convinced that the Tobacco Plain Packaging Act is not only a bad piece of law, but that it is one that will have many unintended consequences for years to come,” said the company.

Plain packaging would only “exacerbate an already significant illicit tobacco trafficking problem and would have other significant adverse unintended consequences including driving down prices which would lead to increased smoking while reducing government tax revenue,” the company claimed.

It said it would continue to take every action necessary to protect its brands and right to compete in global markets “based on the full legal use of our intellectual property rights.”
Simpson says the case would involve different arguments in Canada.

“That’s interesting because what that means is technically the right to exclude others from using your trademarks, not from using it yourself,” he says of the intellectual property argument.
But he suggests it’s not clear that trademarks are property in Canada.

“I guess another point I would have, too, is that trademark rights in Canada are not affirmative rights to do or say something as much as they are rights to exclude other people from doing or saying something,” says Simpson.

“For example, the right to prevent a competitor from using a confusing trademark. The right to display a trademark, as the argument would go in Canada, comes from s. 2 of the Charter, not from the Trademarks act.”

Simpson notes it was consumer protection concerns that led to the creation of trademarks in the first place in order to make it easier for customers to know the source of what they were buying and avoid confusion.

The idea of plain packaging isn’t new. The British government has held public consultations on the matter and the European Union is considering plain packaging.

The Australian High Court didn’t publish its reasons for the ruling but is expected to release them later this year.
It’s not the end of the legal challenges in Australia, however.

Philip Morris Asia is challenging the plain packaging legislation under the 1993 bilateral investment treaty between Australia and Hong Kong.
“We will have to wait to read the court’s opinion to fully assess [the] decision,” said spokesperson Chris Argent in a release following the decision.

“Regardless, the legality of plain packaging, including whether Australia will have to pay substantial compensation to Philip Morris Asia, remains at issue and will be considered in other ongoing legal challenges.”

Several other countries have challenged the plain packaging law at the World Trade Organization as well.
“We believe that Philip Morris Asia’s investment treaty case and the WTO challenges are strong,” said Argent.

“As such, there is still a long way to go before all the legal questions about plain packaging are fully explored and answered.”

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