Arecent decisionof the Court of Appeal for the United Kingdom deals with these issues and dismissedan action brought by a number of large tobacco companies attacking theintroduction of plain packaging legislation in the United Kingdom.
The U.K Regulations
TheRegulations relating to plain packaging were brought into force in the U.K. onMay 20, 2016. The regulations standardized the material, shape, opening andcontent of the packaging for readymade cigarettes, among other things. Theregulations also include specific prohibitions in relation to the labelling oftobacco products.
Theobjective was to introduce plain or standardised packaging to restrict the useof branding permitted on tobacco packaging. The only permitted colour for thepackaging for such products is a drab brown with a matt finish. The regulationsprescribe the text that may be lawfully printed on the packaging. Other thanstandardized text as to the number of cigarettes and the name of the produceronly the brand name and the variant of the cigarette is permitted. This must bedone using a uniform presentation with a specified Helvetica font, case, colour,type face, orientation and size (font size 14 for brand name and 10 for variantname).
Theregulations also deal with the trademark rights of the tobacco companiessubject to the legislation. The regulations provide that they do not preventthe registration of the trademark by such companies or give rise to an attackof any registrations for such marks based on invalidity. In particular theregulations do not prevent an applicant from applying for a mark on the basisof proposed use. It is also provided that the existence of the regulationsconstitutes a valid excuse for the non-use of the registered mark.
Theregulations implemented the Tobacco Products Directive of the European Union.The tobacco companies challenged the Directive but it was previously decided bythe Court of Justice of the European Union that the Directive was validlyenacted.
The Trial Decision
Thejudge characterized the purpose of the regulation as to improve public healthby suppressing the use of tobacco and more specifically said that theregulation was intended to eradicate the attractive force of the design ofcigarette packaging. In this regard, the judge found that the Government hadpresented clear evidence establishing a causal relationship between packaging,advertising, and smoking initiation, especially as the brand imagery in issueappeals to the psychological and social needs of consumers.
Itwas noted by the trial Judge that the regulations were in large measuredesigned to implement a policy established by the World Health Organization inthe 2004 Framework Convention on Tobacco Control to which the EU and itsindividual member states were parties.
Thejudgement is very detailed and lengthy consisting of more than a thousandparagraphs. All of the attacks on the regulations were dismissed.
The Appeal
Thetobacco companies appealed to the U.K. Court of Appeal. It was not in disputethat a registered trademark was a species of property, even though no one can“possess” a trademark in the sense that one possesses a piece of land or goods.However, before it could be said that proprietary rights had been affected, it wasnecessary to identify what the rights were.
TheCourt said that one of the key features of intellectual property, unlikecorporeal property, is that an infringement of intellectual property rightsdoes not exhaust the property itself. For example, if someone borrows a car theowner is deprived of the use of the car at least temporarily. However, ifsomeone uses a mark that is confusing with a registered trademark that actiondoes not prevent the registered owner from continuing to use the mark. When theCourt considered the wording of the relevant legislation, they said that it wasclear that the grant of a trademark was not a positive right to use the mark,but rather the grant of a negative right to prevent prescribed actions byothers.
TheCourt said that this was clearly established in the context of copyright andpatents and that the rights associated with these types of intellectualproperty are negative in nature.
The Court said that the right or freedomto affix a distinguishing trademark to goods or to designate services by adistinctive trademark exists at common law independently of the registration ofany trademark. When a trader registers that mark as a trademark theregistration does not confer on him any right to use the mark that the trader didnot have before. What the registration gives the trader is the right to stopother people from using a confusingly similar mark (and the other things thatthe proprietor of a trademark is entitled to prevent).
The Court concluded that the question ofwhether the interference with the marks and designs required the payment ofcompensation in order to avoid a breach of the European Convention on HumanRights fell to be determined on the basis that the Regulations amount to acontrol of use, not a deprivation. It was accepted that even if an interferenceamounts to a control of use rather than a deprivation, it is possible inprinciple for compensation to be required if the control is sufficiently severe. In practice, however, a requirementfor compensation is rare in a case of control of use. The question in each caseis one of proportionality: is compensation required in order to achieve a"fair balance" between the public interest pursued and the privateproperty interests affected?
TheCourt agreed with the trial judge’s finding that the Regulations struck a fairbalance in the absence of compensation. The Court considered a number of otherarguments advanced by the tobacco applicants attacking the regulations.However, on all issues the Court agreed with the trial judge and dismissed theappeal.
Canadian Approach
Itseems likely that a Canadian court would characterize the rights available to aregistered trademark as statutory in nature and not a property interest. Section19 of the Act provides that subject tosome exceptions the registration of a trademark in respect to goods orservices, unless shown to be invalid, gives the owner of the trademark theexclusive right to its use throughout Canada in respect of those goods andservices. However, actions for infringement are negative in the sense that the plaintiffmust show that the defendant’s activities infringe its rights under the Act.
TheSupreme Court of Canada has categorized similar types of rights under the Copyright Act as creating statutoryrights and obligations on the terms and in the circumstances set out in theAct. A similar position applies to the TrademarksAct which essential codifies the rights available to a common law trademarkowner and provides for additional rights on the basis set out in the Act.
John McKeown
Goldman SloanNash & Haber LLP
480University Avenue, Suite 1600
Toronto,Ontario M5G 1V2
Direct Line:(416) 597-3371
Fax: (416)597-3370
Email: mckeown@gsnh.com
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