WTO Appellate Body Dismisses Challenges to Plain Packaging

Overview

The Appellate Body of the World Trade Organization (WTO) on June 9, 2020 released its decision concerning a challenge to Australia’s tobacco plain packaging (TPP) laws, dismissing the appeals from a 2018 ruling. In its decision, the WTO held that the TPP did not violate provisions of the Agreement on Technical Barriers to Trade (TBT Agreement) or the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Arguments Relating to the TBT Agreement

The bulk of the WTO’s decision dealt with arguments related to the TBT Agreement. The appellants’ primary argument was that Australia should have used less restrictive alternatives available to it, such as raising taxes or raising the minimum legal age for tobacco products. The WTO held, however, that the appellants had failed to establish that the TPP measures were incapable of contributing to Australia’s goals of reducing the appeal of tobacco products, enhancing the effectiveness of graphic health warnings, and reducing the ability of the packaging to mislead consumers.

The appellants fared no better when it came to their arguments based on the TRIPS Agreement.

Article 16.1 of TRIPS provides that the owner of a registered trademark shall have the exclusive right to prevent third parties from using a confusingly similar mark. The appellants argued that the TPP erodes the distinctiveness of trademarks and thereby constrains the rights of trademark owners to exercise their rights under Article 16.1. The WTO held, however, that Article 16.1 does not provide a “positive” right to a trademark owner to use its mark, only a “negative” right to exclude others from using an infringing mark.

Article 20 provides that the use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements. The WTO acknowledged that in assessing whether encumbrances are unjustifiable, account must be taken of the legitimate interests of the trademark owner in using its trademark and the extent to which the trademark is prevented from performing its function in the marketplace. The WTO also held, however, that the appellants had not met their onus of showing that the TPP measures were not justifiable.

Conclusions

There is very little in the decision to suggest that the WTO’s analysis would be much different with respect to plain packaging measures affecting other products such as alcohol, sugary foods, or baby formula in Australia or other jurisdictions. If, however, a future challenger could show that it uses one or more design marks for the purpose of distinguishing its products from those of third parties, it may have a better argument under Article 20.

Additionally, unlike the situation in the TPP case, where there was scant evidence as to the actual impact of the TPP measures on tobacco consumption, in future cases there may be better evidence that trademark owners can rely upon to show that plain packaging has not achieved its desired health objectives or that less intrusive alternative measures are available.

INTA has submitted two amicus briefs in this case and has a dedicated Brand Restrictions Committee to address the issue.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest. Law & Practice updates are published without comment from INTA except where it has taken an official position.

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