Plain Packaging - Plainly unfair?

Editor's Notes

• #2: Good evening Ladies and Gentlemen, My interest in ‘standardised’ packaging stems from my current role as a Consultant and Researcher for BASCAP, which is an initiative of the International Chamber of Commerce to combat Counterfeiting and Piracy. In view of its objective, BASCAP is seriously concerned that ‘plain/standardised’ packaging will increase the prevalence of counterfeit tobacco products on the market and will only assist the growth of the black market. As you can see from the slide, I am and Irish Barrister and Registered Trade Mark Attorney and will therefore be going to speak to you about the Irish Government’s move to bring in ‘standardised’ packaging for tobacco products. I would like to stress at the outset that I am deliberately going to confine my comments to the potential conflict of the Public Health (Standardised Packaging of Tobacco Products) Bill with the Irish Constitution. Suffice to say, BASCAP and I also have serious concerns that the provisions of the Bill contravene EU law, namely the Treaty on the Functioning of the European Union and the Charter of Fundamental Rights. The Bill will also have a worrying impact on the workings of the CTM. However, I will leave discussion of EU implications to Mark and Simon.
• #3: Ireland is one of three Member States of the European Union (the UK and France being the other) moving to bring in ‘standardised’ packaging for tobacco products. This comes off the back of similar legislation that was introduced in 2012 in Australia. However, unlike the UK, which proposes to bring in ‘standardised’ packaging by means of Regulation, standardised packaging is being implemented in Ireland by means of an Act of Parliament which, in its current form, is the Public Health (Standardised Packaging of Tobacco) Bill, 2014. The Bill was introduced into the second house of the Irish parliament, the Senead, late last month and passed through this house with little difficulty. It is now currently going through its legislative stages in the Dáil, which is Ireland’s equivalent of the House of Commons. I understand that the Bill is currently at its Second Stage; this stage allows for a general debate on the provisions of the Bill. I personally anticipate that the Bill will pass through all its legislative steps in the Dáil without difficulty. However, it cannot become law until approval has been granted by the EU Commission. The approval mechanism is provided for in the EU Tobacco Products Directive and it is to ensure that any Member State measure does not contravene the Treaty on the Functioning of the European Union. I should say that BASCAP has already expressed its concerns about the Bill as part of the ‘Notification’ process which allows submissions from interested parties up to 18th September 2014.
• #4: So let’s look at what the provisions of the Bill are insofar as it affects the presentation and packaging of tobacco products. The key section here is section 7 and you will see that subsection (c) stipulates that a cigarette pack (there are also similar provisions affected other tobacco products such as rolled or piped tobacco) shall not bear a mark or a trade mark unless in accordance with the provisions of the Bill. What does this mean? Effectively, section 7 means that tobacco manufacturers will be prohibited from affixing figurative and three dimensional trade marks to their products. The only permitted concession is that tobacco companies will be allowed to have a brand name, business name or company name and a variant name printed at various points on packaging. You will an idea of what will be permitted from the accompanying visual on this slide. Significantly, the new legislation will not prevent the registration of trade marks by tobacco companies nor can the new legislation be used as a ground for non-use revocation. No mention of course what effect this provision will have on CTMs that cover Ireland. Will for example OHIM in a non-use revocation against a CTM be obliged to recognise this provision? If so, would OHIM be unwittingly recognising that a Member State can prevent the use of and thereby breach its core principal as outlined in Article 2 of the CTM Regulation that it is an ‘all or nothing’ right covering the European Union. Methinks the drafters of this Bill never even had the CTM in mind when inserting this provision. Section 5 also makes no sense when one considers that, like the United Kingdom, a trade mark applicant at the time of filing must affirm that the sign he/she is seeking to register as a trade mark is in use (won’t be if and when the new legislation comes into effect) or that there is a bona fide intention to use. If the ‘standardised’ packaging legislation prohibits the use of trade marks on packaging, it is hardly likely that tobacco companies are going to seek to register trade marks that they won’t be able to use. Hence any trade mark application filed could arguably be challenged on grounds of bad faith at the time of filing. Some might be tempted to suggest that tobacco companies could still file for, what were in the past called “ghost” or “defensive” trade marks, in order to prevent the filing of similar marks by third parties. I take the view that these type of applications are not permissible as they were effectively ruled out in the decision of Imperial Group v Philip Morris (1982), aka the MERIT/NERIT decision where a “defensive” trade mark registration for NERIT was invalidated on the basis that the defendant had no bona intention to use the NERIT trade mark. In my view the inclusion of Section 5 is indicative of a clear lack of understanding on behalf of the legislative drafters as to what precisely a trade mark registration is and what role it serves.
• #5: I mentioned earlier that I was going to talk about the implications of the Bill under the Irish Constitution. Unlike the United Kingdom, Ireland has a written constitution and this has two very important and significant provisions which protect property rights. I will come onto the specific articles in a couple of seconds, but, at this stage, it is important to highlight that under Section 7 of the Irish Trade Marks Act, a registered trade mark is deemed to be a property right. Therefore, by implication, registered trade marks fall under the protection of the Constitution. So what are the property rights provisions under the Irish Constitution? Well there are two provisions, Article 40.3.2 and Article 43. It had been argued in the past that the two articles are mutually exclusive in the sense that Article 40.3.2 is an individual personal right to property, including the right to transfer whereas Article 43 protects private property generally. Nowadays, the Irish Courts tend to adopt a more holistic approach and most cases involving infringement of property rights will involve analysis and examination of both articles.
• #6: It is also important to note that, while the Constitution explicitly refers to the “citizen”, its protection for property rights equally extends to corporate bodies and this was made clear in the case of Iarnród Éireann v Ireland (1996) . Notwithstanding the provisions of Section 7 of the Trade Marks Act, 1996, there has been uncertainty in the past as to whether Constitutional protection extents to Intellectual Property. Well the cases I have highlighted on this slide clearly shows that, as far as the Irish courts are concerned, IP rights securethe same Constitutional protection as real property. You will see from this slide that the principle has been confirmed in two Supreme Court decisions. And bearing in mind that Ireland is a signatory to the European Convention on Human Rights, Irish courts would also have to have regard to the ECHR decision in Van Marle.
• #7: The important thing to bear in mind about the protection of property under the Irish Constitution is that it is not absolute. This is stipulated by Article 43.2.1. – note the term “social justice”. There is no doubt in my mind that, in seeking to defend the standardised packaging legislation, the Irish Government will seek to argue that “social justice” is justified on the grounds that the legislation will save lives by preventing minor and young teenagers from taking up smoking. The trouble with “social justice” is that there is no firm judicial guidance on what exactly this term means. Ultimately the courts in the past have been reluctant to stray into limiting the legislative arm of the State from passing law that may accord with contemporary principles of “social justice”. However, you can get an idea of the courts approach from a case like Pigs Marketing Board v Donnelly (Dublin) Ltd (1939) where it was recognised that the State can delimit the exercise of private ownership of goods for the purposes of the common good. The Government has already argued that it sees tobacco packaging as the ‘last advertising platform’ for the tobacco industry. The courts may agree. Of course, it could be equally argued that the requirements of social justice dictate that property rights must be preserved under the Constitution, but it is an argument that might be difficult to sustain in view of strong public support in Ireland for any measure that seeks to reduce tobacco smoking. Against this background, we also have to bear in mind that legislative restrictions on property rights are usually upheld by the courts. Overall however, the courts will always seek to establish a doctrine of ‘proportionality’ when assessing the constitutionality of the Bill and here it might be possible to argue that ‘standardised’ packaging goes beyond what is necessary, especially in view of the recent implementation of the EU Tobacco Products Directive where packaging requirements are less onerous that what is proposed in the Bill.
• #8: The genesis of the doctrine of proportionality arose in the case of Cox v Ireland, a case which concerned offences against the State. The actual tests for ‘proportionality’ were laid down in the Supreme Court case of Tuohy v Courtney. For a statutory provision to survive a challenge of unconstitutionality, it must pass three tests laid down by the Supreme Court. The courts have also made clear that if a statutory measure seeks to deprive one group of citizens of their property rights for the benefit of another, especially in the absence of compensation (which I will come on to in a couple of minutes), such a measure is likely to be found unconstitutional and this was made clear in the case of Blake v Attorney General. This is an aspect that must be taken into account when assessing ‘proportionality’.
• #9: While the Government may succeed in arguing that ‘standardised’ packaging is justified under the proviso of Article 43.2.2, I feel that the real weakness of the ‘standardised packaging’ law is that it will be found constitutionally repugnant on the grounds that it does not provide for compensation. Case law is quite clear, if property is compulsorily acquired, the property owner has to be compensated. Now this begs the question: does the ‘standardised packaging’ legislation result in the acquisition of trade marks? In the Australian High Court challenge against ‘standardised packaging’, it was unsuccessfully argued that the legislation was contrary to the Australian Constitution because it attempted to unlawfully acquire property. Unlike Australia, the Irish Constitution does not mention the word “acquire”. Instead, the Constitution seeks to protect property from “unjust attack”. Therefore, it might be argued that deprivation of the use of property without compensation is under Article 40.3.1 is still an “unjust attack” on the property rights tobacco companies hold in their trade marks. This is all the more so when one looks at what rights stem from a trade mark and in particular rulings from the CJEU to the effect that the owner of a trade mark has the exclusive right to use it for the purpose of putting a product on the market. Even if there is no actual “acquisition” of property taking place, I would argue that if one takes away the right to use a trade mark, it is an ‘unjustified attack” by the State bearing in mind that a trade mark registration is next to useless without the ability to use it. We also need to be mindful of the effect that the proposed legislation will have on the value of trade marks. A trade mark that cannot be used soon looses its goodwill and potentially its value. In such a scenario a trade mark owner will need to be compensated for such a loss. Also the provision of section 5 of the new ‘standardised packaging’ does not apply in cases of unregistered trade marks where goodwill will be irrevocably damaged in the event of State restriction on use.
• #10: In the case of In re Part V of the Planning and Development Bill 1999 (2000) , the Irish Supreme Court made clear that where a person is compulsorily deprived of his or her property in the interests of the common good should normally be compensated at a level at least equivalent to the market value of the acquired property. The concept of ‘market value’ is interesting because I would suggest that the courts may well find themselves in the complex and complicated process of assessing the value of a trade mark registration that has been used for a considerable period of time in the State. By way of illustration, how would one assess the market value of the red and white get up of the MARLBORO trade mark? It is significant that the proposed ‘standardised’ packaging legislation does not contain any provisions about compensation. This, as I have suggested, is the Bill’s major flaw and where it is likely to be found unconstitutional and also in breach of the European Convention on Human Rights, a factor that it likely to be taken into account if the Bill is found to breach the Charter of Fundamental Rights. I should point out that there have been cases where the courts have held that a property owner may not be entitled to compensation at market value, but I believe that these are really only applicable to cases of restrictions on the use of land imposed under planning legislation. In these cases, compensation was refused because there was a highly speculative element involved when land was bought for development and then planning permission refused. I don’t think the same can be said for trade marks where value is determined according to formulas which take into account factors such as use over a period of time. Some commentators have suggested that use of tobacco trade marks has already been restricted through laws requiring that tobacco products sold in retail outlets be stored in panelled cabinets. Therefore the Irish government is entitled to further restrict use of trade marks on tobacco packaging. I don’t think this argument has any merit and is unlikely to stand up to judicial scrutiny. It fails to take into account the distinction between a restriction on display of branded packs, which I would argue is not a trade mark right in any case, as opposed to the actual obliteration of trade marks on tobacco products which does go to the core of what a trade mark registration is, i.e. a restriction on the use of a trade mark in respect of the goods for which it is registered.
• #11: We also have to be mindful that the ‘standardised packaging’ Bill may also breach other provisions of the Constitution. Another provision of the Constitution where the ‘standardised’ packaging law may be challenged is Article 40.3.1 which essentially protects unspecified or unenumerated rights. As the case of Ryan v AG made clear, personal rights are not confined to those mentioned in Article 40. What unspecified rights might the ‘standardised’ packaging law breach? We might think of the Constitutional right to earn a livelihood which was established in the case of Cafolla v Attorney General (1985). It could be justifiably argued that the new ‘standardised’ packaging law may affect tobacco retailers right to earn a livelihood if it results in a serious depletion of their business. Another article that may be applicable is Article 40.6.1 which covers the right of ‘freedom of expression’. I would suggest that ‘freedom of expression’ could well be invoked under Article 40 to challenge the ‘standardised’ packaging legislation. As a number of commentators have pointed out on frequent occasions, ‘freedom of expression’ has been recognised in most national constitutions and by international human rights law. An example of how ‘freedom of expression’ was invoked to overturn ‘standardised packaging’ law can be seen in the United States Court of Appeals from the District of Columbia in R.J.Reynolds Tobacco Company v Food and Drug Administration (2012) which found that the FDA’s attempt to bring in ‘standardised’ packaging breached the US Constitution’s First Amendment which guarantees ‘freedom of expression’. Judge McKinley J ruled that a full ban of graphics and colours on all advertisements and packaging infringed the First Amendment rights of the tobacco companies right to communicate with adult consumers without reasonably limiting their products’ appeal to youths. The Irish Constitution derives much of its philosophical and jurisprudential basis from the US Constitution; so I see no reason why the R.J.Reynold’s case could not be argued successfully in the Irish Superior courts. Of course, we also have to remember that ‘freedom of expression’ is guaranteed by Article 11 of the EU Charter on Fundamental Rights.
• #12: So how would a Constitutional challenge be initiated? There are effectively two ways to the constitutional validity of an Act of the Oireachtas (Parliament) can be challenged. Any citizen, including corporate bodies, has the right to challenge the constitutional validity of an Act of the Oireachtas (Parliament) where it is demonstrated that their rights have been infringed or there is a threat of infringement. Irish courts lean against drawing any distinction based on citizenship for the purpose of locus standi – therefore even non-citizens can challenge the constitutional validity of a statute. Under Article 26 of the Constitution, the President of Ireland can refer any Bill he deems to be unconstitutional to the Supreme Court to test its constitutionality. It should however be noted that once the Supreme Court issues its decision in an Article 26 reference, no further constitutional challenge can be raised. In bringing a constitutional challenge, it is important to bear in mind that Acts of the Oireachtas are deemed to have a ‘presumption of constitutionality’. The onus is therefore to establish constitutional repugnancy. It is entirely possible that, as the ‘standardised’ packaging Bill does not have provisions about compensation, the President may decide to consult with the Council of State with a view to referring the Bill to the Supreme Court. The Council of State is made up of the current Prime Minister (Taoiseach), deputy Prime Minister, former Presidents and Prime Ministers, the Attorney General and Presidential nominees. President is not bound to follow opinion of the Council of State. If no Art 26 reference is made, then it would be open to the owners of trade marks affected by the ‘standardised’ packaging legislation to bring a constitutional challenge. My view is that such a challenge may have a reasonable chance of succeeding on the grounds that Bill does not provide how the owners of trade marks affected by it are going to be compensated.
• #13: How is this all likely to pan out? Notwithstanding my belief that the ‘standardised packaging’ law is potentially unconstitutional due to its lack of compensation provisions, I also feel that it breaches EU law, particularly Article 34 of the Treaty on the Functioning of the European Union and the Charter of Fundamental Rights, but I shall leave it to Professor Lee to deal with the Human Rights implications of ‘standardised packaging’. Thank you.