Friday, 27th April, 2012

Intellectual property: a right or privilege?

The legal stoush between tobacco companies and the Australian government over plain packaging of cigarettes is being closely watched by the New Zealand IP community.

Associate Health Minister Tariana Turia has indicated our government will attempt to pass similar laws here if Australia is successful in removing all tobacco company logos from cigarette packs.

A world first in Australia

The Australian law requires all cigarettes to be sold in plain olive packs, with 80 per cent covered in graphic health warnings, and labels printed in the same simple font. Australia is not the first country to draft legislation like this, but it is the first country to pass it into law. A similar bill in Canada failed in 1995 following a Supreme Court fight and pressure from affected companies.

The four largest tobacco companies selling in Australia; Philip Morris, British American Tobacco, Imperial Tobacco and Japan Tobacco, joined forces when the Australian legislation was proposed, forming the Alliance of Australian Retailers.

The companies argue that the Australian government is acting unconstitutionally and in violation of international agreements. They argue the government is trying to take ownership of the companies' intellectual property by preventing them from using it in the country.

The Australian government has responded to tobacco companies, saying it does not intend to acquire or expropriate any of their property rights - merely curtail those rights.

Property or privilege? 

The Australian case has significant implications for intellectual property in general, if the court finds that plain packaging is not an unreasonable limitation on intellectual property rights. These implications extend not only to tobacco, but to all goods and services.  Intellectual property rights are at risk in ways we have not previously considered.

Philip Morris Asia, in bringing the court case against the Australian government, has argued that the government seeks to deprive tobacco companies of its very lucrative investments in trade marks and other intellectual property.

New Zealand is a party to a number of international intellectual property treaties that restrict rights to unjustifiably deny the use of trademarks, including the World Intellectual Property Organisation's Paris Convention for the Protection of Industrial Property and the World Trade Organisation's Agreement on Trade-Related Aspects of Intellectual Property Rights. Based on these, complaints have been made to the WTO in relation to the Australian legislation and the same complaints could be expected should New Zealand follow Australia's lead.

In New Zealand, our Trade Marks Act of 2002 incorporates our obligations under TRIPS. It is framed in terms of "rights", and section 9 identifies trade marks as personal property. Section 10(1)(a) gives the owner of a registered trade mark the exclusive right to use that mark.

The question is how far these positive rights extend, and how far the government can go in limiting an intellectual property owners' use of their own trade marks.

Philip Morris Asia has also challenged the Australian Government for hurting its investments under the Hong Kong-Australia Bilateral Investment Treaty. The matter must go to arbitration under the terms of the treaty, and some legal commentators have expressed concern that the mere fact of arbitration may have a chilling factor in other jurisdictions.

The benefit or otherwise of any international agreement is a political and economic consideration, not a legal one. That will be a trade policy decision for the government of the day to make. It is not an intellectual property issue.

The real issue for New Zealand here is the potentially fundamental shift signalled by the government. Intellectual property has long been a right not merely a privilege. Generally speaking people have been allowed and encouraged to acquire and exploit their intellectual property. The government now signalling this may no longer always be the case,  could open the flood gates into other areas.

End results

This agreement could give overseas companies the power to sue our government for devaluing their investment by changing their packaging.

TRIPS Article 20 states the use of trade marks shall not be unjustifiably encumbered by special requirements, including use that would make it less distinguishable from another trader's. Preventing companies from using their trade marks is inarguably a significant encumbrance, especially where a company's mark is substantially or wholly image-based.

Some commentators have argued the legislation is allowed by TRIPS Article 8, which says states can take measures "necessary for public health".

The question is what is "necessary". There is a high level of debate surrounding the benefits of plain packaging and, balanced against the fact that this is a serious encumbrance on companies' property rights, the legislation seems to fall short of the mark.

New Zealand's economy, being far from the main global economic centres as it is, will necessarily have to rely strongly on intellectual property protection and the exploitation of such property rights to safeguard its citizen's wellbeing. We should be worried about anything that dilutes our intellectual property rights.

We have already seen that these new laws in Australia have brought about a number of complaints both in the local Courts and to the WTO for breaches of TRIPS/Paris and other agreements prohibiting the 'unjustifiable denial' of the a person's right to use their own trade marks. It seems inevitable that if you are taking away someone's right to do something that you will face complaints.