We are saddened by the sudden demise
of our long-time colleague and friend
Jürgen Schneider
who passed away after
a short and serious illness.
In deep mourning and with
the greatest respect we say goodbye
to a wonderful person.
From an IP lawyer’s point of view, the WTO’s opinion on several articles of the Paris Conven-tion for the Protection of Industrial Property (“Paris Convention”) and of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPs [Agreement]”) is of particular interest. Inter alia, the complainants have argued that Australia’s plain packaging laws result in a devaluation of their trademarks, prevent the registration of certain kinds of trademarks and lead to a confusion of the public about the origin of tobacco products.
The complainants’ first argument was based on Article 6quinquies Paris Convention as incorporated by Article 2.1 TRIPs. According to Article 6quinquies Paris Convention, there was an obligation of the member states to afford trademark protection. According to the complainants this involves ensuring that trademark owners are put in a position to use their trademarks. This ability to use a trademark was an integral part of the availability, acquisition, scope, maintenance and enforcement of trademark rights..
The WTO disagreed. According to the WTO’s interpretation of Article 6quinquies Paris Convention, the law does not provide any guidance as to what the protection flowing from the registration under the domestic law should consist of. There was no support in the language of the Paris Convention for a substantive minimum standard of rights that WTO members would be obliged to make available to the owner of a registered trademark. The WTO did not share Honduras’s opinion that footnote 3 of the TRIPs Agreement serves an additional function of expanding the meaning of the term “protected” to include substantive minimum rights to be conferred by the members or that such minimum rights should include a minimal ability to use a trademark. Consequently, the WTO held that the requirement of Article 6quinquies Paris Convention to afford “protection as is” concerns a trademark protection that flows from the registration under the member’s domestic law. Accordingly, the WTO did not find that Australia violated its obligations under Article 2.1 TRIPs in conjunction with Article 6quinquies Paris Convention..
Secondly, the complainants argued that Australia’s plain packaging laws violated Article 15.4 TRIPs. The plain packaging laws were inconsistent with Article 15.4 TRIPs in that they oper-ate to prevent the registration of signs that are capable of acquiring distinctiveness through use.
The WTO rejected this argument, too. According to the WTO, the obligation for members in Article 15.1 to consider distinctive signs as being capable of constituting a trademark does not require members to make eligible for registration as trademarks signs that are not inherently distinctive and that have not yet acquired distinctiveness through use. According to the WTO, the term “trademark” as used in Article 15.4 TRIPs does not encompass signs that do not meet the distinctiveness requirement.
The complainants further raised the argument that the plain packaging laws were inconsistent with Article 15.4 TRIPs in that they prevent certain signs from acquiring distinctiveness through use.
The WTO dismissed this argument. According to the WTO, the fact that Australia’s domestic law allows the registration of signs that have acquired distinctiveness through use cannot imply that the use of such sign needs to be permitted on all goods and services, irrespective of the nature of the goods and services at issue. A contrary reading would imply that, whenever a member exercises the option of enabling registration of non-inherently distinctive signs on the basis of distinctiveness acquired through use. it would deprive itself of the possibility of determining the conditions under which signs or combinations of signs may or may not be used in relation to specific categories of goods or services.
The complainants also asserted that the plain packaging laws were inconsistent with Article 15.4 TRIPs in that they reduce the protection flowing from registration for tobacco-related trademarks because of the nature of the product.
The WTO did not accept this argument either. According to the WTO, Article 15.4 TRIPs does not stipulate an obligation that the scope and content of trademark protection flowing from such registration has to be the same notwithstanding the nature of the goods or services to which trademarks are or may be applied. The WTO therefore concluded that any conse-quences of the restrictions on the use of such trademarks does not constitute a violation of Article 15.4 TRIPs. Article 15.4 TRIPs only relates to the availability of protection through the act of registration, which remains available for tobacco-related trademarks under the disputed measures.
Additionally, the complainants invoked Article 16.1 and 16.3 TRIPs. They argued that the plain packaging laws resulted in a loss of distinctiveness of their trademarks, which would eventually diminish the scope of protection and turn the original trademarks into mere paper rights without any commercial value. The complainants argued this for registered trademarks as well as for well-known trademarks under Article 16. TRIPs.
The WTO rejected these arguments. In the WTO’s opinion, the situation described by the complainants as the basis for their claim was a reduction of the instances in which a “likelihood of confusion” would arise in the market with respect to tobacco-related trademarks whose use is affected by the plain packaging laws. According to the WTO, reducing the in-stances in which “likelihood of confusion” may arise does not constitute a violation of Article 16.1 TRIPs. There is nothing in the text of Article 16.1 TRIPs to suggest an obligation by members not only to provide protection where “likelihood of confusion” does arise but also to maintain market conditions that enable a “likelihood of confusion”, to actually occur in a particular situation. To conclude otherwise would broaden the scope of Article 16.1 TRIPs to en-compass an additional right to protect against reduction of distinctiveness of a trademark or even a right to protect against lesser awareness of a trademark among consumers.
The WTO clarified that Article 16.1 TRIPs is merely a right to prevent infringing uses but does not serve to maintain or extend the distinctiveness of an individual trademark, which inevitable fluctuates according to market conditions and the impact of regulatory measures on those market conditions.
The WTO also considered whether Article 16.1 TRIPs obligates members to provide a mini-mum opportunity to use trademarks. The WTO concluded that Article 16.1 TRIPs does not require members to refrain from regulatory measures that may affect the ability to maintain distinctiveness of individual trademarks or to provide a “minimum opportunity” to use a trademark to protect such distinctiveness.
Finally, the WTO analysed whether the plain packaging laws erode a trademark owner’s right to prevent a use that is likely to result in confusion by requiring the use of deceptively similar marks on identical products. According to the WTO, while the plain packaging laws introduced mandatory design features with respect to the appearance of tobacco products and packaging, the right to prevent trademark infringements remains available to owners of registered tobacco trademarks in Australia. The plain packaging laws did not impede the trade-mark owners’ right to prevent the use of a brand or a variant of words that are identical or similar to an existing registered trademark in a manner that creates a likelihood of confusion. The mandatory nature of the plain packaging laws has not left trademark owners without ad-equate remedy.
Similar arguments were made with regards to Article 16.3 TRIPs, which relates to well-known trademarks.
According to the WTO, the members do not have an obligation to prevent a reduction in the factual occurrence in the market place of situations that would trigger well-known trademark protection. The reduction of such occurrence does not constitute a reduction in the availability of protection mandated by Article 16.3 TRIPs. In other words, while Article 16.3 TRIPs obli-gates members to protect currently well-known trademarks, they do not require members to provide such protection for trademarks that do not, or do no longer, fulfil these criteria – and not doing so is therefore not a violation of Article 16.3 TRIPs.
The complainants argued that the plain packing laws constituted a violation of Article 20 TRIPs according to which the use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings.
The WTO held that a limitation of the use of the trademark as such, as any other measure, cannot be held unjustifiable exclusively due to its “extreme nature”. According to the WTO, measures that involve a high degree of encumbrance, such as those in the plain packaging laws are not per se unjustifiable. Rather, they must be measured against the same standard of review as other special requirements contained in other measures. Furthermore, the WTO held that a member’s compliance with its own domestic regulatory procedures does not, in itself, determine whether a member has complied with its obligations under Article 20 TRIPs. Domestic procedures do not need to be taken into consideration for determining whether a limitation of the use of a trademark is justifiable or not. Moreover, the WTO clarified that the examples given in Article 20 TRIPs may be justifiable according to the circumstances of the case.
In the view of the WTO the term “unjustifiably” in Article 20 TRIPs provides a degree of latitude to a member to choose an intervention to address a policy objective. This intervention may impact the use of trademarks in the course of trade, as long as the reasons sufficiently support any resulting encumbrance. This does not oblige the member to refrain from a certain intervention if an alternative measure involving a lesser or no encumbrance on the use of trademarks is available. However, in the circumstances of a particular case the availability of an alternative measure could call into question the reasons for the adaption of a measure challenged under Article 20 TRIPs. This might be the case in particular if a readily available alternative would lead to at least equivalent outcomes in terms of the policy objective of the challenged measure.
Overall, the WTO was not persuaded that the complainants have demonstrated that Australia has acted beyond the bounds of the latitude available to it under Article 20 TRIPs. The WTO recognized that trademarks have substantial economic value and that the special requirements are far-reaching in terms of the trademark owners’ possibilities to extract economic value from the use of figurative or stylized features of trademarks. However, the WTO also noted that the plain packaging laws, including their trademark restrictions, are an integral part of Australia’s comprehensive tobacco control policies. The WTO further noted that Australia, while having been the first country to implement tobacco plain packaging, has pursued its relevant domestic public health objective in line with the emerging multilateral public health policies in the area of tobacco control as reflected in the FCTC and the work under its auspices, including Article 11 and Article 13 FCTC guidelines.
The WTO decision will give impetus to the political plans of many European governments to impose plain packaging rules for tobacco products. Corresponding laws have been in force in France, the UK and Norway since 2017. Ireland, Hungary and Slovenia will follow shortly.
However, this is countered by the immense costs to which states are exposed through com-plaints by the tobacco industry against corresponding laws and a highly controversial, actual use of plain packaging against the consumption of tobacco products. According to the Aus-tralian Senator Rex Patrick, Australia’s costs for defending the controversial law amount until today to approximately € 25 million.
At EU level, the Tobacco Directive 2014/40/EU already sets binding requirements for Member States on the presentation and sale of tobacco products. For example, a warning notice is required which accounts for 65% of the total package of the tobacco product. In Germany, the Tobacco Products Act in force since May 2016 has implemented the EU Tobacco Directive into national law. Although the EU Tobacco Directive does not prescribe plain packaging for tobacco products, its introduction is expressly at the discretion of the member states if this is justified by the protection of public health.
The ECJ has ruled that the EU Tobacco Directive is legally permissible following the submission of a UK court. The national courts in France and the UK have also consistently consid-ered the laws of their countries, which go beyond the measures prescribed by the EU Tobacco Directive, to be legally permissible and took the view that the restrictions of the tobacco industry were justified both in constitutional and trademark law terms by the high weight of public health.
From the point of view of an IP lawyer, the requirement of plain packaging on which word marks may at best be printed in a standardized font and size raises the question of the right-preserving use of figurative trademarks – in part with a high reputation – after the 5-year grace period. Even if “proper reasons for non-use” (Art. 16 (1) EU Trademark Directive) can be seen in corresponding legal provisions, as adopted by the French Conseil d’État, it cannot be ruled out that this may be viewed differently by courts in other jurisdictions. However, this does not take into account the economic value of a trade mark which can decrease considerably by prohibiting its use in the form actually registered and can turn a trademark with a reputation into an ordinary registered trademark. Whether owners need to accept such a devaluation of existing trademarks without compensation is unclear.
Representatives of Honduras have already announced to appeal the decision. In this case, the WTO Appellate Body will have the last word.
We are saddened by the sudden demise
of our long-time colleague and friend
Jürgen Schneider
who passed away after
a short and serious illness.
In deep mourning and with
the greatest respect we say goodbye
to a wonderful person.
