In response to last week’s plans by the government to restrict cigarette packaging to plain and standardised designs, the cigarette industry has warned that it will protect its intellectual property rights and claim compensation from the government. I saw a figure of $3 billion as a possible amount for that compensation. The government has denied that compensation would be needed. So who has the better case?
In my view, the government has the stronger position. No one is disputing that the government can restrict the appearance of packaging for goods; it already does this. But the government must pay compensation if it takes control over any property, and in this case the cigarette companies are complaining that they are losing some of their intellectual property rights, primarily their trademark and copyright intellectual property of their present cigarette packaging.
The problem the companies will have with this approach is that the new plain packaging will include the trademark, albeit in small-sized black letters in a standard font and position on the packet. Otherwise the consumer will not be able to ask for their preferred cigarettes at the point of sale.
Most trademarks are registered in just this form, as plain words in upper case, and this type of registration covers the word in whatever form it is actually used — irrespective of whether it is in a fancy script or in a special colour or surrounded by graphics and attractive patterns.
For example, the word mark Winfield is Australian trademark registration No.369487 dating from December 18, 1981, and owned by British American Tobacco (BAT).
It is often overlooked that the primary right obtained from trademark registration is a negative right; it is actually the right to prevent other people from (mis)using the trademark. The proprietors may use the mark themselves subject to other laws, but they actually gain from registration the right to take legal action that will stop third parties from using the mark on the same or similar goods.
So, the change to plain packaging will not adversely affect this right. For instance, in the future if someone were to manufacture in Australia Winfield cigarettes in their present packaging for export to other countries, BAT would still be able to take action to prevent this.
The situation with copyright is broadly similar. It basically confers the right to take action against third parties who are copying and misusing the owner’s old packaging artwork and this right is hardly diminished by requiring plain packaging.
About 2900 trademarks are current registered in Australia covering cigarettes, and there are another 180 or so pending applications. But consumers do not see 3000 different brands of cigarettes when they go into a shop. What is happening is that the cigarette companies in many cases are double dipping, and obtaining multiple trademark registrations for each brand they own.
There are 17 trademark registrations and applications including the word Winfield, 22 including Pall Mall, and 11 including Horizon. These registrations include the basic plain word mark — Horizon is registration 203429 dating from 1966, Pall Mall is registration 1062086 dating from 2005. But in addition to the plain version, which protects the mark in whatever appearance it is used, the cigarette companies have also re-registered the mark in a narrower form, including the get-up of the cigarette packaging.
BAT’s TM registrations Nos.1226909, 1226913, 1226914, and 1226915 (without a colour restriction), all dating from 2008, cover different variations of the Pall Mall packaging:
It is unlikely that these registrations provide much additional protection over the broader 1062086 registration; perhaps they can help protect the logo, but possibly not, since it is really the presence of the Pall Mall words that make these distinctive, and in any case the ‘915 registration renders the first four redundant as it covers all possible colour variations of the logo.
This profligacy of trademark registrations, in many cases unnecessary from a trademark protection point of view, will inflate any claim to compensation to be made by the cigarette companies. In fact, the large number of trademark registrations of the whole appearance of the packaging in the light of prior registrations of plain word marks is fairly unusual in the trademark arena. I doubt if courts would be impressed by this approach.
An indication of why the government is now moving to enforce plain packaging can be gained from viewing BAT’s registrations Nos.1143366, 1143368, 1143369, 1143371,and 1129286:
Which provide an indication of the thinking of tobacco companies about where the packaging get-up may be trending, as well as perhaps giving the producers of the Mad Men television series pause for thought about their own intellectual property rights . These trademarks would seem to have a promotional aspect that would help negate the health warning on existing packets of cigarettes, should they be used.
The trademark register is also cluttered with many registrations of cigarette packaging and word marks that are probably no longer being used. For instance, BAT is still maintaining Strand as No.10699 dating from 1911 and Craven as registration No.2933 dating from 1906, which are seemingly no longer being used, though it is interesting imagining smokers asking for Craven brand cigarettes.
Such registrations would probably be invalid, because any registration for a mark that has not been used generally in a continuous period of three years is liable to be removed from the register, if an application to do so is made by a third party.
So for several reasons the intellectual property owned by cigarette companies will not be much affected by the restriction to plain packaging, or is based on redundant registrations directed to packaging variations of plain word marks that will still be being used. The cigarette companies could argue that the value of their goodwill in these redundant trademark registrations has been reduced and damaged, but assigning a value among the plethora of registrations will be difficult, and I believe probably will not much help the companies’ legal position.
Furthermore, the government is likely to be able to show a public benefit from restricting the packaging to a plain and standard form, by reducing the level of smoking in Australian society, as well as in improving its financial situation, because the new standard packaging should reduce smuggling of contraband cigarettes from overseas. Shops stocking traditional-looking packs of cigarettes will now be easy to spot as all Australian cigarettes will be distinctive in appearance, at least until other countries adopt similar procedures.
No doubt there will be more huffing and especially puffing from the cigarette companies about the requirement to use plain packaging, but ultimately, I believe this will prove futile.