Territoriality, Tobacco, Trademarks, and the TRIPS Agreement
– Emmanuel Kolawole Oke*
Contemporary intellectual property rights can be described as ‘glocal’ rights i.e. they have the potential to have both global and local connections. For instance, it is not unusual to find instances where a multinational company owns a patent on the same invention in several countries or a trademark on the same product in several countries. However, while ownership of an intellectual property right might be global or transnational, intellectual property rights are largely governed by territorial or national laws (even though there are a number of international agreements on intellectual property rights).
From the perspective of a multinational company, the ideal scenario would be where intellectual property standards are harmonized across the world. However, a number of countries would usually prefer to design their intellectual property laws in a manner that meets their socio-economic needs. It should however be noted that the extent to which countries can design their intellectual property laws in this regard has been curtailed by a number of international agreements such as the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (WTO TRIPS Agreement). Importantly, the TRIPS Agreement contains certain minimum standards with regard to the protection of intellectual property rights (although it equally contains a number of flexibilities that countries can use to secure their intellectual property policy space).
In this regard, one of the foundational principles of international intellectual property law that is worth considering is the principle of territoriality. Writing in relation to the application of the principle of territoriality to intellectual property rights, Hanns Ullrich points out that: “intellectual property, whether it is a patentable invention or a copyrightable work, is national by nature. Therefore, it must be acquired, maintained, and defended independently from one country to the other. In fact, the conditions governing the acquisition, existence, maintenance, validity, scope, and termination of intellectual property vary widely from one country to the other.” The principle of territoriality is connected to the concept of state sovereignty in international law and, as Peter Yu rightly observes, this principle “is the bedrock principle of the intellectual property system, whether the protection concerns copyrights, patents, trademarks, or other forms of intellectual property rights. This principle not only carefully identifies the prescriptive jurisdiction, but also helps set boundaries for protection within and outside the country.”
The principle of territoriality thus underpins the ability of states to design their national intellectual property laws in a manner that suits their socio-economic needs. For instance, patent laws can be designed with the aim of facilitating access to medicines, copyright laws can be structured to foster access to learning materials, and measures can be introduced to regulate the use of trademarks on certain products in order to reduce the consumption of unhealthy products such as tobacco. However, as noted above, the ability of states to do any of these is conditioned by the TRIPS Agreement which delineates the policy space available to states.
Intellectual Property Policy Space
Identifying the precise scope of the policy space available to states under the TRIPS Agreement is however not always an easy task and it can lead to disputes between states (which can be resolved using the WTO dispute settlement process) or disputes between corporate investors and states (which can be resolved via the investor-state dispute settlement system). The focus here will be on the WTO dispute settlement process and the disputes that have arisen between states concerning intellectual property policy space in the context of the TRIPS Agreement.
Since the entry into force of the TRIPS Agreement in January 1995, there have been a number of disputes regarding the precise contours of the intellectual property policy space available to states under the Agreement. Some notable examples in this regard include the dispute concerning the types of limitations and exceptions to patent rights that states can implement pursuant to Article 30 of the TRIPS Agreement in Canada – Patent Protection of Pharmaceutical Products (17 March 2000). In this case, a WTO Panel ruled that the regulatory review exception (also known as the Bolar exception) is compatible with the TRIPS Agreement. Another notable example is the dispute regarding Article 13 of the TRIPS Agreement in United States – Section 110(5) of the US Copyright Act (15 June 2000). Here, a WTO Panel ruled that, while the ‘homestyle exemption’ to the rights of copyright holders under Section 110 of the US Copyright Act is compatible with Article 13, the ‘business exemption’ available under the same US law is not compatible with Article 13 of the TRIPS Agreement.
A more recent notable example is the decision of the WTO dispute settlement panel in Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (28 June 2018) (hereinafter, Australia – Plain Packaging case). This dispute, which concerned the implementation of plain packaging measures in relation to tobacco products in Australia, will be the central focus of the analysis here.
The Australia – Plain Packaging Case
In the Australia – Plain Packaging case, four countries (i.e. Honduras, the Dominican Republic, Cuba, and Indonesia) challenged the Australian Tobacco Plain Packaging Act of 2011. The Act was enacted in order to discourage the consumption of tobacco products in Australia and in compliance with Australia’s obligations pursuant to the Framework Convention on Tobacco Control (FCTC) that was adopted by members of the World Health Organization in 2003. The measures introduced pursuant to the Act essentially: permits only the use of word marks in prescribed form on retail packaging of tobacco products; prohibits stylized word marks, figurative marks, and composite marks on retail packaging of tobacco products; and prohibits the use of all trademarks on cigarettes. The four countries who were the complainants in this case argued that the Plain Packaging Act, inter alia, violates Articles 15(4), 16(1), 16(3), and 20 of the TRIPS Agreement. The WTO Panel however ruled in favour of Australia in this case. Due to space constraints, the focus here will be on the Panel’s decision with regard to Article 20 of the TRIPS Agreement which was one of the most contentious aspects of this dispute.
Article 20 of the TRIPS Agreement essentially prohibits the use of special requirements to unjustifiably encumber the use of trademarks in the course of trade and it provides in part that:
The use of a trademark in the course of trade 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.
The Panel had to decide three key questions with regard to the claim that Australia’s tobacco plain packaging measures (hereinafter, TPP measures) violate Article 20 of the TRIPS Agreement i.e.: (1) Do the TPP measures involve ‘special requirements’ that ‘encumber’ the use of a trademark? (2) Do the special requirements encumber the ‘use of a trademark in the course of trade’? (3) Do the TPP measures ‘unjustifiably’ encumber the use of trademarks in the course of trade? The Panel provided an affirmative answer to the first two questions but it ruled that the measures do not unjustifiably encumber the use of trademarks in the course of trade.
In deciding whether or not the TPP measures introduced by Australia were justifiable encumbrances on the use of trademarks, the Panel had to define the scope of the policy space available to states with regard to the measures they could implement to regulate the use of trademarks in their countries. This is an issue that concerns the principle of territoriality in international intellectual property law. In other words, do states really have the right to implement measures such as the TPP measures? The Panel came up with a list of three factors that should be considered in determining whether or not the use of a trademark is being unjustifiably encumbered. According to the Panel in paragraph 7.2430 of its decision, the following factors need to be considered:
- The nature and extent of the encumbrance resulting from the special requirements, bearing in mind the legitimate interest of the trademark owner in using its trademark in the course of trade and thereby allowing the trademark to fulfil its intended function;
- The reasons for which the special requirements are applied, including any societal interests they are intended to safeguard; and
- Whether these reasons provide sufficient support for the resulting encumbrance.
These factors reflect the decision of the Panel to take into account both the legitimate interest of trademark owners and the right of states to regulate the use of trademarks in order to protect certain societal interests (paragraph 7.2429). Ultimately, however, in this case, the Panel ruled in favour of the state i.e. Australia. According to the Panel in paragraph 7.2604 of its decision:
Overall, we are not persuaded that the complainants have demonstrated that Australia has acted beyond the bounds of the latitude available to it under Article 20 to choose an appropriate policy intervention to address its public health concerns in relation to tobacco products, in imposing certain special requirements under the TPP measures that encumber the use of trademarks in the course of trade. While recognizing that trademarks have substantial economic value and that the special requirements are far-reaching in terms of the trademark owners’ possibilities to extract economic value from the use of figurative or stylized features of trademarks, we note that the TPP measures, including their trademark restrictions, are an integral part of Australia’s comprehensive tobacco control policies, and designed to complement the pre-existing measures. As noted above, the fact that the special requirements, as part of the overall TPP measures and in combination with other tobacco-control measures maintained by Australia, are capable of contributing, and do in fact contribute, to Australia’s objective of improving public health by reducing the use of, and exposure to, tobacco products, suggests that the reasons for which these special requirements are applied provide sufficient support for the application of the resulting encumbrances on the use of trademarks. We further note that Australia, while having been the first country to implement tobacco plain packaging, has pursued its relevant domestic public health objective in line with the emerging multilateral public health policies in the area of tobacco control as reflected in the FCTC and the work under its auspices, including the Article 11 and Article 13 FCTC Guidelines.
Implications for the Principle of Territoriality
What does this imply for the principle of territoriality in international intellectual property law? One could argue that, while the three factors identified by the Panel in paragraph 7.2430 of its decision seem to have the appearance of trying to achieve a balance between the interests of trademark owners and the right of states to regulate, the Panel (in its application of these three factors) appears to have attached more weight to the objective of the Australian government to improve public health. Thus, despite acknowledging the far-reaching impact of the TPP measures on the ability of trademark owners to extract economic value from the use of their trademarks, the Panel emphasised the contribution of the measures to Australia’s objective of improving public health and complying with its obligations under the FCTC. In addition, the Panel also ruled that none of the alternative measures suggested by the complainants (i.e. increasing the taxation of tobacco products, increasing the legal purchase age for tobacco products, improving anti-smoking social marketing campaigns, and creating a pre-vetting mechanism for tobacco packaging) would, alone or in combination, be manifestly better in contributing towards Australia’s public health objective (paragraphs 7.2597-7.2601). This shows a deference by the Panel to the policy decision made by Australia in this context.
Unsurprisingly, two of the complainants in this dispute, Honduras and the Dominican Republic have already lodged appeals against the Panel’s decision. In their appeal to the Appellate Body of the WTO they, among other things, question the Panel’s interpretation and application of Article 20. Specifically, Honduras is, inter alia, questioning the failure of the Panel to focus its analysis on the impact of the measures on the distinguishing function of a trademark and it is equally dissatisfied with the Panel’s examination of available alternative measures. It is not yet known when the Appellate Body will publish its decision (and one also has to bear in mind the current crisis concerning the appointment of new Appellate Body members at the WTO although it seems that this crisis may not affect the appeal in this particular case).
Nevertheless, when the Panel’s decision is viewed through the lens of the principle of territoriality and the need to respect the intellectual property policy space of states, one can appreciate why the Panel seems to have attached more weight to the right of the Australian government to implement the TPP measures. It stands to reason that, unless there is an express provision in an international agreement that specifically prohibits the adoption of certain measures, the right of states to adopt policy interventions to address challenges (including public health concerns) within their territories needs to be respected. Moreover, in the context of the current pushback against globalization, it is important for international institutions to respect the policy space of states so as not to undermine their own legitimacy.
Furthermore, the Panel’s decision has broader implications beyond the regulation of the packaging of tobacco products especially in relation to the interface between intellectual property and human rights. It is noteworthy that the Panel also considered the obligations of Australia under the FCTC in arriving at its conclusion (paragraphs 7.2595-7.2596, 7.2604). In its appeal, Honduras has already questioned the Panel’s approach in this regard by arguing that the Panel was wrong to rely on ‘non-covered agreements’ (i.e. the FCTC and the FCTC Guidelines) in justifying the TPP measures. Nevertheless, if this aspect of the Panel’s decision is upheld on appeal, it opens up the possibility that states (especially developing countries) can rely on their obligations outside the WTO system such as their obligations under the International Covenant on Economic, Social and Cultural Rights (ICESCR) as justification for some of the measures that they implement at the national level. For instance, it is possible for the Indian government to argue that some of the provisions in its Patents Act (such as Section 3(d) which is aimed at prohibiting the ever-greening of pharmaceutical patents) are in line with its obligation to protect the right to health of Indians under the ICESCR. Also, a developing country that is seeking to amend its copyright law to facilitate access to learning materials could equally contend that it is doing so in order to protect the right to education of its citizens. It will thus be interesting to see how the Appellate Body decides this aspect of the appeal.
*Lecturer in International Intellectual Property Law, Edinburgh Law School, University of Edinburgh.
The assistance of Viraj Ananth, the anonymous reviewers, and the editorial board of the National Law School of India Review is gratefully acknowledged.