Anti-smoking activists call it “plain packaging,” but it's anything but: The black boxes with strident warnings and gruesome pictures of dying smokers that Australia requires on tobacco products are eye-catching by design.
They’re also drawing the attention of legal scholars who wonder if Australia’s law stripping cigarette companies of the right to use their trademarks could open the door to similar measures against other products activists consider unhealthy.
A pending challenge before the World Trade Organization could determine whether Bloombergian anti-obesity crusaders, say, could require pictures of diabetes-ravaged feet on cans of soda or morbidly obese patients on bags of potato chips.
“There are lots of other products that can kill,” said Daniel Gervais, a professor at Vanderbilt Law School and expert on international trade. “Is tobacco different, and if so, how do you carve it out? That’s part of what's at stake in this case.”
Australia passed its gruesome-packaging law in 2011 and last August Australia’s High Court upheld the measure, rejecting arguments by
Philip Morris International “built enormous value around those trademarks in full compliance with the law and with the full blessing of the government,” said Till Olbrich, Geneva-based PMI’s counsel in charge of regulatory policy. “Now the government can take away such property without any decent explanation, without looking at the circumstances, without even paying.”
Trademark rights are covered under the treaty known as TRIPS, or the Trade-Related Aspects of Intellectual Property Rights, a 1994 agreement protecting patents, trademarks and other IP. Article 20 of TRIPS says the 159 member countries must take a variety of measures to protect each others’ IP, from allowing trademark owners to sue over unauthorized use to banning “unjustified encumbrance” of trademarks. The text seems clear:
Trademarks “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.”
Public-health advocates say the World Health Organization supports stronger warnings to discourage smoking, however, and point to other provisions of international law that allow countries to ban unhealthy products or misleading advertising. Only Indian exporters can sell Darjeeling tea, and Jamaica Blue Mountain coffee must be grown in Jamaica. The European Community banned asbestos imports as dangerous, and the U.S. tried to ban the importation of clove cigarettes because they were seen as too attractive to young smokers. The WTO overturned that one because the U.S. didn’t also ban domestically produced menthol cigarettes, but noted that “we are not saying that a Member cannot adopt measures to pursue legitimate health objectives such as curbing and preventing youth smoking.”
Gervais says he’s no fan of the tobacco companies. But he is concerned that the WTO could diminish trademark rights if it rules in favor of Australia on tobacco packaging. This is the “first TRIPS debate on the intersection between trademarks and health,” he told me. “It’s a huge precedent to set no matter how you cut it.”
Only countries can challenge a national law under the WTO’s dispute-resolution process. So far Cuba, Honduras, the Dominican Republic and the Ukraine have filed complaints against Australia to protect their cigar and cigarette businesses. The U.S. has been conspicuously silent, although it joined some 30 countries and the EU in seeking observer status.(Note: the White House recently revised its position on the Trans Pacific Partnership treaty to allow slightly tighter regulation of tobacco than other products.) The WTO has ordered a panel of experts to decide the matter, but hasn’t picked the members yet.
The burden is on Australia to show the trademark restrictions are justified, Gervais said. Research provides mixed results. A recent U.K. study predicted graphic pictures on cigarette packs might produce a small, but significant decrease in smoking. But by eliminating trademarks, it also makes it easier for smugglers to sell bootleg smokes. Perhaps a year or two of sales statistics from Australia will provide more conclusive evidence that ugly pictures cause smokers to kick the habit.
A federal appeals court in Washington last year struck down the Food and Drug Administration’s packaging requirements, strongly criticizing an FDA-commissioned study under which 18,000 people answered an Internet survey on whether they'd quit or refrain from smoking after viewing a single graphic image. The FDA didn’t produce “a shred of evidence” the warnings actually reduce smoking over the long term, the court held. Judge Janice Rogers Brown also noted that the FDA’s warnings might be misleading, since “the image of a man smoking through a tracheotomy hole might be misinterpreted as suggesting that such a procedure is a common consequence of smoking.” The picture was intended to serve a a warning about the addictiveness of nicotine.
An EU health panel in July recommended larger warning labels but rejected Australian-style pictures that obliterate all brand images, which EU officials have concluded could raise serious legal issues. The U.K. has repeatedly rejected such packaging rules, and New Zealand says it’s waiting to see how Australia’s WTO case is resolved.
The last time intellectual property rights clashed directly with health concerns, Gervais said, it was when pharmaceutical companies protested the plans of African companies to import cheap unlicensed HIV drugs to combat the spread of AIDS. The parties settled before a formal WTO decision on whether countries could use public-health concerns to trump intellectual property rights.
This time, the WTO may be forced to act. Depending upon how it decides Australia's case, it could open the door for similar controls on other products that health advocates say could use a bit of aversion therapy in their packaging. Or perhaps global-warming regulators could decide gasoline refiners are encouraging excessive driving with their ads. Or a country might even game its rules to favor domestically produced, "healthy" products over brand-name imports.
“A judge might try to avoid setting a precedent but it’s really hard to avoid that, because this is the first dispute to consider directly the interaction between public health policy, intellectual property and trade rules," Gervais told me.
"The WTO has heard very few cases over its history. So when it happens, usually an indicator of what the future might look like.”
