The trademark argument emerges in Sweden (1989–1991)

In 1989, Sweden's National Board of Health and Welfare proposed introducing pictorial HWLs that covered almost 70% of the front of cigarette packages because ‘an illustrative element substantially increases the attention value.’20 In 1990, Philip Morris International (PMI) considered the proposal a ‘HWL crisis’21 and, among other actions, filed a complaint with the Board, arguing that the proposal violated the European Community's 1989 Directive, which only required text warnings covering ‘4% to 8%’ of each large surface of the cigarette pack.22 In its complaint, PMI cited a then-recently published article by Ulf Bernitz,23 a Swedish law professor, who argued that governments could not restrict or prohibit the use of trademarks due to international obligations under the Paris Convention for the Protection of Industrial Property, a treaty that protects intellectual property. In particular, Bernitz argued that the fact that Article 7 of the Paris Convention granted trademark holders the right to register the trademark implied a right to ‘use’ the trademark.

In January 1991, the Board dismissed PMI's complaint, concluding there was no conflict between the HWL proposal and Sweden's effort to join the European Community.24 In March 1991, Bernitz provided a ‘report from Philip Morris counsel to Philip Morris counsel [sic] regarding health warnings prepared in anticipation of litigation.’25 (PMI has not released the report, claiming attorney–client privilege.) In March 1991, PMI obtained an opinion from Gunnar Karnell, another Swedish law professor, who also argued that Sweden's HWL proposal violated the Swedish Act on Trademarks by expropriating PMI's trademark, which would require the Swedish government to compensate PMI.26 In March 1991, PMI used these arguments in a second complaint to the Health Board.24 Largely out of concern regarding pending European Community membership, in December 1991, the Board dropped its proposal.27

Action in Australia (1992–1994)

In response to research concluding that effective labelling would reduce high rates of adolescent smoking,28 in April 1992, the Australian Ministerial Council on Drug Strategy (MCDS), a committee of federal and state and territory health and law enforcement ministers, proposed to implement advanced (for their time) HWLs consisting of text warnings on at least 25% of the front and 50% of the back of cigarette packages, with the possibility of introducing generic packaging the following year.29 Fearing that New Zealand would follow Australia, the New Zealand subsidiary of British American Tobacco (BAT), Wills New Zealand, characterised the Australian proposal as ‘the biggest battle to be fought by the industry.’30 BAT, Rothmans International and PMI31 ,32 jointly lobbied Australian officials, arguing that Australians were already aware of warnings against smoking and that the youth should be educated on smoking. They also began searching for legal protection of their trademarks, including under international treaties. BAT requested an opinion from its Australian law firm, Clayton Utz, and BAT and Rothmans requested one from the British Department of Trade and Industry on whether the HWLs would conflict with their right to use their trademarks, as embodied on the cigarette packages.

Rather than concluding that the Australian HWL proposal violated the Australian Trademarks Act, in May 1992, Clayton Utz told BAT that as the registered holder of the trademark, BAT only had the right to exclude others from using it; the Act did not guarantee BAT ‘use’ of the trademark: The [Australian] Trademarks Act does not purport to deal exhaustively or exclusively with the use of trademarks but only confers on the holder of a registered trademark certain rights in relation to goods or services. Accordingly, the Trademarks Act may be constructed so as to confer on the registered holder of the trademark the right to exclude others from the use of that trademark. However it does not in our opinion, intend to control the circumstances in which the holder of a registered trademark may himself use that mark. Accordingly, we do not consider any inconsistency with the Trademarks Act as an avenue of challenging the [HWL] Regulations.33 [emphasis added]

BAT also asked Clayton Utz about using the Paris Convention as authority for opposing the HWLs. In August 1992, BAT's Chief Executive reported that the Paris Convention could not be used either: ‘The Company has also considered the issue of whether the proposed restrictions would be in breach of the Paris Convention on industrial property and the Australian Trade Mark Act. We are advised that there is no basis for any legal challenge against State and Territorial Governments on these grounds.’34

In August 1992, BAT also asked Clayton Utz if GATT could be used to block the HWL. In December 1992, Clayton Utz replied, ‘In our opinion, the Industry would not be able to rely on the provisions of the Paris Convention, [and] the GATT … to challenge the proposed legislation.’33

In January 1993, Rothmans International examined the GATT as well as the then-pending Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), an international agreement established in 1994 as part of the newly-created World Trade Organisation (WTO, a new revised version of the GATT), which protected intellectual property. In May 1993, BAT's Australian subsidiary (WD & HO Wills) and Rothmans International wrote to the British Consulate in Sydney, Australia, requesting that the Consulate ask the British Department of Trade and Industry whether Australia's obligations under GATT and TRIPS would prohibit the proposed HWLs.35 In July 1993, the British Consulate responded, again stating that these treaties did not protect the ‘use’ of trademarks: I have consulted my colleagues [who are responsible for protecting intellectual property] and their joint view is that these claims do not hold water. Restricting the printed matter on the cigarette packet to 75% of the surface area, as proposed, would not affect trade mark owners [sic] rights since registration does not normally entail any specification as to size, how it is used, or what proportion of the packet it occupies … It is also true that Article 15.1 of the draft TRIPS text provides for the registration of the whole packet, and that Article 16 reiterates the Paris Convention provisions on well-known marks. However to proceed from these facts to the proposition that restrictions on the labeling are a potential breach of GATT requires, in their view ‘several very large imaginative leaps’. In the first place, registration of a trade mark does not confer the right to use it, in the words of Article 16.1 of the draft TRIPS Agreement, it confers the ‘exclusive right to prevent all third parties … from using … identical or similar signs’. It would not be a breach of the TRIPS code for a country to have a complete ban on the sale of tobacco. Secondly, the registration of a trade mark for tobacco cannot prevent the operation of other regulations, for example, laws requiring health warning on packets.35 [emphasis added]

Thus, as of 1994, presumably all the advice that BAT and Rothmans had received indicated that HWLs were legal under international law (table 1). In the meantime, the MCDS announced a final national HWL strategy that, while it weakened the original proposal by reducing the back face of HWLs from 50% to 33%,36 was still an advanced proposal for its time.

As part of its deliberations, the Australian parliament passed a motion requesting that the Industry Commission conduct an inquiry into the tobacco industry's practices in November 1993.37 In January 1994, WD & HO Wills responded to the Commission with intellectual property arguments: The Company does not oppose a review of health warnings, only pack design regulations which take no account of registration of trade marks and pack designs, intellectual properties and rights advocated by GATT. The package proposals also ignore standards adopted for other consumer product industries in their labelling and packaging … The Australian proposals would extinguish or critically diminish the Company's intellectual property.38

However, these intellectual property claims were made at the last moment and did not include threats towards the government, and as a result, in March 1994, Parliament gazetted the ‘Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations’, which required the adoption of the MCDS HWL proposal (25% front, 33% back) by January 1995.39

In May 1994, the MCDS Action Plan continued to consider generic packaging,40 which led the Australian Senate to hold hearings that included discussions of generic packaging in November 1994.41 In December 1994, the Western Australian Health Minister called for generic packaging to prevent tobacco companies from promoting ‘attractive images’.42

International coordination of the tobacco industry: the Plain Pack Group

In light of the industry's failure in Australia, in May 1993 a Rothmans International lawyer wrote to all the major multinational tobacco companies suggesting a new industry-wide coordinated international approach to HWLs with a primary focus on avoiding generic or plain packaging.43 By July 1993, BAT, Rothmans, PMI, RJ Reynolds, Imperial Tobacco, Reemtsma and Gallaher created the Plain Pack Group to develop strategies to counter plain packaging.44 At the group's second meeting in November 1993, the companies planned to continue searching for intellectual property protection under international treaties and recruit non-tobacco industry support.45

In response to Canada's increasing interest in plain packaging, including a November 1993 study by the Centre for Health Promotion and the Canadian Cancer Society,46 which examined the effects of plain packaging among youth, the Plain Pack Group examined NAFTA, a free trade agreement among the USA, Mexico and Canada that contained provisions for intellectual property rights and investment rights, which took effect 1 January 1994. (None of the legal opinions on NAFTA regarding trademark protection were accessible in the Legacy Tobacco Documents Library due to privilege claims.47–51) Based on these opinions, in April 1994, Rothmans International wrote to the Tobacco Documentation Centre (the industry's international lobbying and coordinating organisation52) reporting, ‘The possibility of challenging such provisions in international trade would largely rest on the GATT, particularly as there appears to be no direct redress available to companies under NAFTA as regards product labeling.’53

In April 1993, BAT's lawyers suggested that BAT should contact the liquor and pharmaceutical industries as potential allies, since they also ‘may be vulnerable to packaging warnings which expropriate their intellectual property.’54 The group planned to contact potential allies including pharmaceuticals, alcohol, cosmetics, Unilever, Colgate, Pepsi and Coca-Cola.55 A May 1994 Plain Pack Group slide presentation document noted that these efforts had failed: ‘Current conversations and treaties afford little protection GATT/TRIPS little joy Other industry groupings little support’56

In addition to receiving unfavourable legal advice about using intellectual property arguments to oppose HWLs and plain packaging, the Plain Pack Group was concerned that governments could invoke health exemptions in international treaties, including the GATT and TRIPS. BAT commissioned John Luik, a longstanding industry apologist57–59—who was forced out of two Canadian colleges for academic fraud6—to study this question. He confirmed the Plain Pack Group's fears: ‘While I think the GATT/TRIPS process provides a useful entre to this problem, I believe that its ultimate usefulness might well be limited. This is because the antis [public health advocates] will soon argue that where health is involved, adopting minimal regulation as a basis for trade harmonisation is not acceptable.’61

Luik recommended considering other treaties that did not contain health provisions and advised the companies to work with the World Intellectual Property Organisation (WIPO), the United Nations agency that promotes the protection of intellectual property and administers the Paris Convention (a treaty with no health exemptions), to obtain a favourable legal opinion from the treaty's administrative body. The Plain Pack Group designated David Latham, a lawyer at Lovell White Durrant (BAT's lawyers in London), to write to the Director of WIPO's Industrial Property Law Department, seeking interpretation of Article 7 of the Paris Convention. Latham told WIPO he was ‘particularly interested in the position which WIPO takes on the interpretation of Article 7 of the Paris Convention, and in particular how that differs from that adopted by Ulf Bernitz in his [Swedish23] article’.62 Receiving no response, Latham sent another letter to WIPO in May 1994.62 In July 1994, WIPO responded, ‘The countries of the Paris Union are bound to admit trademarks for registration notwithstanding the nature of the goods to which they are applied (Article 7). However, the Paris Convention does not contain any obligation to the effect that the use of a registered trademark must be permitted [emphasis added]’.63 Latham characterised WIPO's response to Rothmans International Public Affairs Manager as, ‘Certainly, his letter does not take us further’.64 Like all the legal opinions the industry had obtained, WIPO said that the Paris Convention only obligated member countries to permit the ‘registration’ of the trademark but not the actual ‘use’ of the trademark.

Perhaps in response to the industry's failures to find authoritative bodies that would state that trademark laws or international treaties provided a legal justification for using trademarks to fight HWLs and plain packaging, the Plain Pack Group decided in April 1994 to create its own body of evidence. Rothmans International's public affairs manager sent a letter from Luik to the Plain Pack Group discussing Luik's proposal to create a book, which he called the ‘plain packs Bible’, to be a credible and citable public resource for the industry to influence the academic debate and to be accessible by politicians considering plain pack proposals.65 The Plain Pack Group agreed and paid $240 000 (including $155 000 to Luik as editor66) for a book titled Plain Packaging and the Marketing of Cigarettes.67 (The Group asked Bernitz to write a chapter on freedom of expression from a European perspective; he later withdrew from the project.68) The Group assigned PMI to ask the Washington Legal Foundation, a conservative think tank that worked with the industry,69 ,70 to publish the book, but it refused.71 (The book was eventually published by Admap Publications.67) The book argued that plain packaging would not reduce adolescent smoking, would not allow manufacturers and retailers to distinguish their legal products to consumers and, despite the consistent legal advice the companies had received, would violate the intellectual property standards established under international treaties.67 Although the book was not published until 1998, many of its arguments were offered by the industry and its allies during committee reports, hearings and in the media in Canada and Australia, which were starting to consider plain packaging in 1994 and 1995.72–74

The tobacco industry's success in preventing plain packaging in Canada

In January 1994, PM and RJ Reynolds convinced Canada to roll back its tobacco tax from $1.60 to $1.10 per pack.75 In February 1994, Canada's prime minister announced plans to compensate for the adverse public health impact of lowering taxes, including the consideration of plain packaging.76 In April 1994, the House of Commons’ Standing Committee on Health began hearings on the plain packaging.77

In May 1994, RJ Reynolds and PMI sent Carla Hills, former US Trade Representative (1989–1993) and Julius Katz, former Deputy US Trade Representative (1989–1993), to Canada to testify against plain packaging during Canadian Standing Committee on Health hearings. Hills and Katz presented a legal opinion, written by Hills, arguing that the plain packaging proposal violated Canada's commitments under international treaties, including the Paris Convention, TRIPS and NAFTA, on the grounds that national governments did not have the right to restrict or prohibit the use of trademarks.73 Hills and Katz only cited language from each treaty concerning trademark ‘registration’ not ‘use’. Hills and Katz did not mention the legal advice that had been given to the tobacco companies since 1992 (table 1) that the ‘registration’ of a trademark does not confer the right to ‘use’ it. (Katz also wrote the chapter on international treaties in Plain Packaging and the Marketing of Cigarettes, citing the same arguments.67) Hills and Katz argued that plain packaging would be ‘an unlawful expropriation of trademarks and investments’, and threatened the Canadian government that ‘full compensation, in the hundreds of millions of dollars, would have to be paid’ to the tobacco companies.73 The threats based on NAFTA may have been credible to the Standing Committee, since Hills and Katz were the chief negotiators for NAFTA.

The House of Commons Standing Committee on Health presented a report to the House in June 1994, titled Toward Zero Consumption: Generic Packaging of Tobacco Products78 that concluded that the testimony offered by health groups in May 1994 did not justify introducing plain packaging and that ‘serious concerns were raised about Canada's international trade obligations, employment, counterfeiting, smuggling and marketing.’78 As a result, the report recommended (1) that the government establish a legislative framework required to proceed with plain packaging, (2) that the legislation be introduced when Health Canada concluded its study on the effects of plain packaging on tobacco consumption, and (3) that the government require that plain packages be produced in a manner that minimises the possibility of contraband products.

Meanwhile, despite WIPO's unfavourable opinion in July 1994 on the legal status of registered trademarks under the Paris Convention, the industry again requested an opinion from WIPO. In August 1994, Ralph Oman, former US Register of Copyrights (1985–1993) and legal partner with Hills and Katz at the Mudge Rose Guthrie Alexander & Ferdon law firm, wrote to WIPO asking whether Paris Convention parties are free to limit the ‘use’ of a registered trademark. He also asked WIPO to address Hills’ legal opinion from May 1994 that concluded that the Paris Convention could be used against plain packaging. In response, in August 1994, WIPO sent another letter confirming that the Paris Convention only pertained to the ‘registration’ and not the ‘use’ of the trademark and, more important, specifically rejected Hills’ legal opinion, clearly stating that the Paris Convention could not be used to block plain packaging: Countries party to the Paris Convention remain free to regulate or prohibit the sale of certain types of goods, and the fact that a mark has been registered for such goods does not give the right to the holder of the registration to be exempted from any limitation or prohibition of use of the mark decided by the competent authority of the country where the mark is registered. Moreover, the argument that in many countries of the Paris Union a registered mark must be used in order for it to remain protected, does not support the thesis that regulations restricting the use violate Article 7, because Article 7 only concerns the initial registration but not the subsequent fate of the mark. In conclusion, it does not seem that Article 7 of the Paris Convention could serve as a basis for challenging existing or planned requirements of Paris Union member States regarding the plain packaging of tobacco products.79 [underlined emphasis in original]

Tobacco companies again did not publicly disclose this unfavourable information and instead continued to threaten the Canadian government. The companies recruited the International Chamber of Commerce (ICC) to write to Foreign Affairs and International Trade Canada in September 1994 asserting the same arguments about Canada's obligation to respect the intellectual property of businesses granted under international treaties including the Paris Convention, TRIPs and NAFTA.80 The ICC was also active in the media in October 1994, stating, ‘The federal government risks getting thrown out of an international trade body if it goes ahead with its plan to insist that cigarettes be sold only in plain packs’.72 During the late 1990s and early 2000s, the industry also used the ICC to lobby the European Community against a directive to ban tobacco advertising,81 and to lobby against including an explicit provision giving health priority over trade in the FCTC.17

In November 1994, the Canadian government replied to the Standing Committee on Health. The industry's scare tactics about violations of international treaties, along with arguments that plain packaging would not decrease tobacco consumption and would increase smuggling,82 succeeded; Health Canada dropped plain packaging on the grounds that ‘the government recognises that there are trademark and other obligations under international trade agreements such as NAFTA and the World Trade Agreement which might be relevant to a generic packaging proposal,’ together with uncertainty over smuggling and the effectiveness of plain packaging.83

In March 1995, Health Canada produced a report on plain packaging titled When Packages Can't Speak: Possible Impacts of Plain and Generic Packaging of Tobacco Products, which concluded that plain packaging ‘would be important and would have perceived utility for encouraging teen and adult smokers to stop smoking, and for discouraging non-smoking teens from starting to smoke’.84 The health minister praised the study but stated that there was still a need to ‘facilitate further examination of the legal, international trade, economic and contraband implications of plain and generic packaging.’85 Public health advocates commissioned legal experts to analyse the trademark issue in May 1994,86 ,87 but the health minister and Health Canada did not pursue their own assessment about whether the industry's claims of international treaty obligations prohibited Canada from adopting plain packaging. As a result, they abandoned efforts to move forward on plain packaging, (interview with Gar Mahood, September 2012). In 1996, the health minister sealed the fate of plain packaging when he told the Standing Committee on Health he accepted the industry's position and said that trademarks would be allowed on packages, stating that, ‘We would be in violation both of trademark and of [Canada's] Charter of Rights and Freedoms because the product is not deemed to be an illegal product.’88

The tobacco industry's success in preventing generic packaging in Australia

In response to the Australian health advocates’ proposals for generic packaging offered during public hearings of the Senate Standing Committee on Community Affairs, in February 1995, WD & HO Wills submitted material on generic packaging that once again asserted that generic packaging would severely violate their intellectual property rights under the Paris Convention and TRIPS.74 As in Canada, the industry also argued that generic packaging would not reduce tobacco consumption.74 These scare tactics led the federal health minister to announce in July 1995 that, ‘Unfortunately [generic packaging] is just not feasible. We would have to buy the tobacco companies’ trademarks and that would cost us hundreds of millions of dollars.’89 In December 1995, the Australian Senate's Community Affairs References Committee accepted WD & HO Wills’ trademark and expropriation arguments along with a lack of evidence supporting a decline in tobacco consumption and concluded that ‘there is not sufficient evidence to recommend that tobacco products be sold in generic packaging.’90