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SUBMISSION OF THE INTELLECTUAL PROPERTY LAW COMMITTEE OF THE

LAW SOCIETY OF IRELAND (‘THE COMMITTEE’) ON THE GENERAL SCHEME OF THE PUBLIC HEALTH (STANDARDISED PACKAGING OF

TOBACCO) BILL (WORKING TITLE)

18 December 2013

Overview

The Law Society of Ireland (“the Society”) is concerned that the plain packaging regime, as

proposed in the Public Health (Standardised Packaging of Tobacco) Bill, 2013, (“the Bill”)

undermines the registered trade mark and design systems and amounts to an expropriation of

brand owners’ intellectual property rights. The Society has previously made a submission to

the Department of Health in the context of the Public Consultation on a Proposal for an EU

Directive on the Tobacco Products Directive (“TBD”). A copy of that submission dated 28th

February 2013 is attached marked “Annex A” (“the Original Submission”). The concerns

expressed in the Original Submission are equally applicable in the context of the Bill.

Summary of Concerns of the Society and the Committee

Ireland has promoted itself as a jurisdiction that respects and protects intellectual property

rights which has led to a significant amount of Foreign Direct Investment (“FDI”) in our

economy. With this Bill Ireland is proposing to extinguish intellectual property rights without

the benefit of any evidence from Australia (the only jurisdiction that has to date introduced

plain packaging of tobacco products) that plain packaging will, of itself, have any effect on

smoking habits. This will potentially expose Ireland to:-

• litigation from brand owners for unlawful expropriation of property rights;

• challenges before the World Trade Organisation (“WTO”) for infringement of

provisions of international treaties to which Ireland is a party;

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• a significant increase in the level of counterfeit tobacco products because of the ease

of copying the packaging;

• a perception that Ireland is no longer a country that protects intellectual property with

a consequent knock-on effect for FDI.

We explain in further detail below the reasons for our concerns.

International Obligations

As stated above, currently the only laws requiring the plain packaging of tobacco products are

those introduced in Australia in December 2012. Ukraine, Honduras, The Dominican

Republic, Cuba and Indonesia have each initiated WTO proceedings against Australia for

violation of various WTO Agreements including the Agreement on Trade-Related Aspects of

Intellectual Property Rights (“TRIPS”) and the Agreement on Technical Barriers to Trade

(“TBT Agreement”). As both the EU and Ireland are party to TRIPS and the TBT

Agreement, any attempt by Ireland to introduce plain packaging is likely to give rise to

similar proceedings. Given the difficult economic environment, Ireland should await the

outcome of these challenges before implementing legislation that could expose Ireland to

unnecessary costs. Ireland’s obligations under TRIPS were highlighted in the Original

Submission.

Constitutional Issues

The Australian High Court rejected the challenge to the Australian law on the basis that whilst

there was a deprivation of property rights, there was no acquisition of property as required by

the Australian Constitution. It is notable that no such requirements exist in Ireland. The

Original Submission outlined the constitutional issues that will arise if plain packaging is

introduced in Ireland. A registered trade mark is a property right 1 and the Irish Constitution

obliges the State to protect as best it may from unjust attack and to vindicate the property

rights of every citizen. The regulation of the exercise of the right to private property is

strictly on the basis of the principle of proportionality. Accordingly, Ireland should wait until

there is clear evidence from Australia that the plain packaging measures have substantially

improved public health and until such time as it can demonstrate that there is no less

restrictive means of achieving this objective available to the Government.

1 See Section 7 Trade Marks Act 1996

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Counterfeiting

In the Original Submission concern was expressed that plain packaging can only lead to an

increase in counterfeit activity. Our concerns in this regard remain. The lack of distinguishing

features on plain packaging will make it significantly easier to produce counterfeit tobacco

products.

Loss of Rights

The Original Submission highlighted how plain packaging goes beyond a mere restriction of

rights to amount to a loss of rights. It is noted that the Bill contains a provision to the effect

that the non-use of a trade mark as a result of the Act will constitute a proper reason for non-

use for the purpose of Section 51 of the Trade Marks Act 1996. However, this will merely

result in there being a series of redundant marks on the Irish Trade Marks Register that have

ceased to carry out any of their functions and as a consequence have lost all value. Also this

provision does not address the position where the mark in question is registered as a

Community Trade Mark. The Bill will result not only in the extinguishment of trade mark

rights but also registered and unregistered design rights and the goodwill built up through the

use of unregistered trade marks which would otherwise be protectable by the law of passing

off.

European Law Issues

As set out in the original Submission, as an effective expropriation of rights which affects the

substance of trade mark rights, the Bill goes beyond mere regulation and amounts to a breach

of the Charter of Fundamental Rights of the European Union and of European trade mark law.

In addition it is likely to restrict the free movement of goods across national Member State

boundaries, unless a proportionality justification can be sustained.

Conclusion

There is a real concern also that plain packaging in the tobacco industry is just the beginning

of a trend that will severely undermine intellectual property owners’ rights in other sectors

such as alcohol, soft drinks and fast food. Therefore, for the reasons outlined above and in

our Original Submission, the Society and the Committee would urge the Minister for Health

to reconsider the plain packaging proposals.

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For further information please contact:

Katherine Kane Secretary

Intellectual Property Law Committee Law Society of Ireland

Blackhall Place Dublin 7

Telephone: + 353 1 672 4800 Email: k.kane@lawsociety.ie

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Appendix A – The Original Submission

PUBLIC CONSULTATION ON A PROPOSAL FOR AN EU DIRECTIVE ON THE TOBACCO PRODUCTS DIRECTIVE

SUBMISSION OF THE INTELLECTUAL PROPERTY LAW COMMITTEE OF THE

LAW SOCIETY OF IRELAND (“the Committee”)

28 February 2013 Overview

The Law Society of Ireland ( “the Society”) is concerned that the plain packaging regime

as proposed in the Public Health (Tobacco) (Amendment) Bill 2012 undermines the

registered trade mark system and amounts to an expropriation of brand owners’

intellectual property rights. Legislation of this kind at best causes affected trade marks to

lose almost all their distinctiveness and at worst results in the invalidation of registered

trade marks altogether with a consequential loss of property rights and brand owner value.

In addition the proposals for plain packaging fly in the face of Ireland’s obligations under

the Paris Convention2 and the TRIPS Agreement3 and infringe property rights under the

European Union’s Charter of Fundamental Rights4 and the Irish Constitution5.

Competition law concerns arise also to the extent that the Bill impinges upon the principle

of freedom of movement of goods across Member States6. There is also a substantial risk

2. Paris Convention for the Protection of Industrial Property 1883, as amended 3. Agreement on Trade Related Aspects of Intellectual Property Rights 4. Article 17 of the Charter of Fundamental Rights of the European Union 5. Article 40.3.2 and Article 43.1 of the Irish Constitution 6. Article 34 of the Treaty on the Functioning of the European Union (“TFEU”)

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that these measures will lead to an increase in the counterfeiting of tobacco products. In

the Society’s view this legislation amounts to an unwarranted assault on trade mark rights

that may well set a precedent for other sectors and will significantly undermine brand

owners’ rights.

Loss of Trade Mark Rights

The fundamental purpose of a registered trade mark is to distinguish goods or services of one

undertaking from another. If a trade mark ceases to be used it cannot continue to operate as a

distinguisher of origin and it will also fail to fulfil its other functions, namely those of quality,

communication, investment and advertising. Essentially the functions of the trade mark are

extinguished, its quality and branding associations will dissipate and eventually the brand

owners’ investments will be rendered worthless.

After 5 years of non-use a trade mark is potentially subject to a revocation action unless there

are proper reasons for non-use7. A statutory prohibition on non-use may not constitute a

proper reason for non-use under the prevailing law. Although not anticipated by the current

draft Bill, even if ( as with the Australian legislation)8, the Bill was to include a provision

preventing the removal of the trade mark from the Register, this would merely result in there

being a series of redundant marks on the Register that have ceased to carry out any of their

functions and as a consequence would have lost all value. Quite apart from the property rights

issues which are addressed below, this would undermine the basic “use it or lose it” principle

on which Irish trade mark law operates and which helps to de-clutter the trade mark register.

Any proposal which prevents brand owners from using their registered trade marks altogether,

or that so fundamentally reduces the brand owners’ ability to use its registered trade marks,

such as by not permitting adequate space on packaging for trade marks to fulfil their function

as identifiers of origin, will render relevant brand owners’ marks useless and will be

equivalent to the invalidation of trade mark owners’ rights and will comprise a serious

interference with property rights. The plain packaging proposals in the Bill and the

standardised packaging provisions in the proposed draft Directive have this effect.

International Treaty Obligations

Any proposed legislation concerning trade mark rights must take into consideration

conformance with Ireland’s obligations under relevant international conventions, including

the Paris Convention and the TRIPS Agreement.

7. Section 51(1)(a) Trade Marks Act 1996 8. Section 28(3)(f) Tobacco Plain Packaging Act 2011

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Article 7 of the Paris Convention (and Article 15(4) of the TRIPS Agreement) provides that

the nature of goods “shall in no case form an obstacle to the registration of the mark”.

However by preventing the use of marks other than plain word marks the plain packaging

proposals as anticipated will prevent tobacco manufacturers from registering logos and other

non-word trade marks for tobacco products. This is because applicants under the Trade Marks

Act 1996 must undertake to use their trade marks9 and the system is predicated on this basis.

The effect of the Bill is therefore to prevent registration solely on the basis of the nature of the

goods in breach of both the Paris Convention and of the TRIPS Agreement.

Article 20 of the TRIPS Agreement provides that “ the use of a trade mark in the course of

trade shall not be unjustifiably encumbered by special requirements, such as (….) 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”. Obviously the Bill would

require manufacturers to cease using all but word marks on tobacco product packaging and

word marks could only be used in the prescribed manner. Both of these “special

requirements” are detrimental to the capability of the marks to distinguish goods or services,

but do they comprise “unjustifiable restrictions”?

Article 8.1 of TRIPS provides that Member States may enact their legislation in a way which

is “necessary to protect public health”. Unless therefore there is compelling evidence that

plain packaging will be an effective means of reducing the uptake of smoking, it is

questionable as to whether the plain packaging proposals in the Bill are “necessary” for this

purpose. TRIPS further provides that such legislation cannot be inconsistent with Article 20

(above) or Article 17 of TRIPS. Article 17 of TRIPS provides that limitations to rights

conferred under a trade mark provided for under national legislation may be acceptable

“provided such exceptions take account of the legitimate interests of the owner of the trade

mark”. The Bill does not take any account of the legitimate rights of the trade mark owner.

Deprivation of Rights Under the Irish Constitution

The Irish Constitution requires the State to protect property rights10 and the Irish Supreme

Court has previously struck down legislative provisions as unconstitutional where they

involved restrictions on the exercise of property rights or a deprivation of rights altogether

without compensation for such interference11. While the plain packaging proposals in the Bill

do not provide for compensation to affected rights owners, there is a more fundamental issue

9. Article 37(2) of the Trade Marks Act 1996 10. Article 40.3.2 and Article 43.1 of the Irish Constitution 11. Blake v Attorney General (1982) IR 117; Re Article 26 and the Employment Equality bill 1996 (1997) 2 IR 321; ESB v Gormley (1985) IR 129

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at stake as to whether these measures would be valid, even if provision was made for

compensation.

Under Article 43.2.2 of the Constitution, the State is entitled to regulate the exercise of the

right to private property on the basis of the principle of proportionality. This test, as

developed by the High Court and the Supreme Court, requires firstly that the restriction on

use of the trade mark must have an objective of sufficient importance to warrant interference

with the property right in the mark, secondly that the impairment of this right to use the mark

should be as minimal as possible and finally the effects on the Constitutionally-protected right

should be proportionate to the objectives sought to be attained.

Unless there is evidence that the plain packaging measures would substantially improve

public health, that the measures are justified by the exigencies of the common good and that

there is a pressing social need which justifies this encroachment on private property rights

then it is difficult to see how the test of proportionality can be met. To the extent that plain

packaging removes the consumer’s ability to distinguish competitors’ products then

companies will end up competing mainly on price which is unlikely to have the desired effect.

In addition there is the concern that as consumers will not be able to distinguish as well

between brands there is a substantial risk that these measures will have the effect of

facilitating the trade in illicit cigarettes in Ireland. This is discussed in further detail below.

We note that, even if the proposals in the Bill can be justified appropriately on public policy

grounds, the proposed plain packaging regime amounts to a deprivation of brand owners’

rights and not just to a restriction on those rights. In these circumstances and following on

from the principles applied by the Irish Supreme Court in Re Article 26 and Part V of the

Planning and Development Bill 199912 brand owners will be entitled to claim significant

compensation for the loss of very valuable brands and it is foreseeable that these claims could

end up in protracted and expensive litigation for a number of years.

European Law Issues

Registered trade marks are treated as property rights by the EU Trademark Directive13 and the

Community Trademark Regulation14, TRIPS, the Paris Convention and the Trade Marks Act

1996. The Charter of Fundamental Rights of the European Union is binding on Member

States under the Lisbon Treaty and Article 17 of the Charter guarantees rights to property,

expressly including intellectual property rights. The European Court of Human Rights

12. 2000 2 IR 321 13. Council Directive 89/104/EEC 14. Council Regulation 207/2009

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(“ECHR”) has held that property for this purpose includes intellectual property and has

distinguished between a straightforward deprivation of property and restricting the use of the

property in the general interest15.

Counterfeiting Counterfeit and illegal tobacco products are some of the most seized counterfeit product by

customs authorities in the European Union. The interim figures published by the Revenue

Commissioners for the period from January 2012 to December 2012 indicate that there were

8,105 cigarette seizures valued at €43.3 million16.

Plain packaging can only lead to an increase in counterfeit activity in that it will be

significantly easier and cheaper to produce counterfeit goods. The absence of the need to

recreate the distinguishing brand marks / features of the legitimate manufacturer (which often

involve the use of costly printing techniques) essentially opens up the counterfeiting trade by

obliterating the barriers to entry that reproducing distinctive brand features represent while at

the same time making it more difficult for customs officers to distinguish counterfeit goods

from legitimate goods.

The inevitable surge in counterfeit activity will have many economic and social consequences

to include a decrease in revenue from taxation and an increased strain on law enforcement

agencies. Overall, an increase in counterfeit trade undermines legitimate distribution channels

and results in losses to the economy and the exchequer17. Moreover the absence of regulation

and accountability means counterfeit goods represent an increased risk to the health of the

consumer.

For all the reasons outlined above, plain packaging goes beyond being a mere restriction on

the use of trade marks and effectively deprives trade mark owners of the use of their property

rights, resulting in a potential loss of rights altogether. As an effective expropriation of rights

which affects the very substance of relevant trade mark rights, the plain packaging proposals

in the Bill go beyond mere regulation and amount to a breach of the Charter and of European

law.

15. Beylear v. Italy (2001) 33 EHRR 52, paragraph 98 16 See p 4 “Revenue Commissioners Headline Results for 2012” (Appendix 1)

17 See p 14 “Tackling the Black Market and Retail Crime”, A report by EPS consulting for Retail Ireland [2012] (Appendix 2)

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European law18 prohibits measures which restrict the free movement of goods across national

boundaries unless it can be justified by a Member State on the basis of a public interest

objective. Resolution of this issue turns on a similar analysis of public health justification as

discussed above in relation to the proportionality arguments under the Irish Constitution.

Unless there are no alternative ways of achieving this public health objective using a less

intrusive approach then the Bill is likely to infringe the free movement of goods provision.

Where to Next for Plain Packaging?

There is a real concern that plain packaging legislation in the tobacco industry is just the

beginning of a trend that will severely undermine trade mark owners’ rights in other sectors.

Based on current discussions in the alcohol and fast food sectors both in Ireland19 and

internationally20 this is not a fanciful concern and has the potential to develop into a major

threat to the integrity and value of registered trade marks in a range of fast moving consumer

good sectors. The extension of plain packaging proposals to other sectors is also an issue of

concern that we understand is being followed closely by global intellectual property

organisations such as the International Trademark Association.

For further information please contact: Katherine Kane

Secretary Intellectual Property Law Committee

Law Society of Ireland Blackhall Place

Dublin 7 Telephone: + 353 1 672 4800 Email: k.kane@lawsociety.ie

18. Article 34 of the TFEU 19. See http://www.oireachtas.ie/parliament/media/SPCCReport.pdf in which a Seanead committee report makes recommendations concerning plain packaging in the tobacco industry and the labelling of alcoholic drinks with warnings concerning over consumption and cancer. 20. See https://www.oma.org/HealthPromotion/Obesity/Pages/default.aspx and http://rt.com/news/ontario-junk-food-tobacco-189/