In substance, the Appellate Body (“AB”) upheld the Panel Report completely. The details are as follows:
Measures in Question
The dispute has been about the packaging laws imposed by Australia with regard to Tobacco products. The aim of the measures has been to discourage tobacco consumption, owing to the health problems caused by it. The target has been to (i) make tobacco products more expensive; (ii) No forms of advertisement and promotion of tobacco products; and (iii) eliminating exposure to second-hand smoke in public places.
With regard to the second point, certain packaging measures were adopted, collectively referred to as ‘TPP Measures’:
(1) Tobacco Plain Packaging Act, 2011
(2) Tobacco Plain Packaging Regulations, 2011 (Amended 2012)
(3) Trade Marks Amendment (Tobacco Plain Packaging) Act 2011.
Some of the measures mandated the following packaging for Tobacco Products:
· Products required a matt finish packaging (inner and outer surface)
· Outer packaging must be a certain brown, and inside packaging must be white
· Lining of a cigarette pack must be silver-coloured foil with white paper-backing
· No trademarks are allowed to appear on the packaging, except the brand name, business name, company name, variant name and other legislative requirements
· No trademarks can appear on the tobacco product as well
· Color scheme applicable for tobacco products as well
· Brand/Company/Business names must be printed in the Lucida Sans Typeface in fonts no larger than 14-point size/10-point size
· Font must be normally weighted and no other color except Pantone Cool Gray 2C
Article 2.2 of the Agreement on Technical Barriers on Trade (“TBT”)
The AB held that the Complainants could not establish that the measures were more ‘trade restrictive than necessary to fulfil a legitimate objective’ within the meaning of of Article 2.2 of the TBT. Article 2.2. involves a relational analysis of three factors:
(i) Degree of contribution made by the measure to the legitimate objective of Australia;
(ii) Trade Restrictiveness of the measures; and
(iii) Gravity of consequences if the objective of Australia is not achieved.
Applied in combination with the range of other tobacco control measures maintained by Australia, the AB held that these measures are apt to make a meaningful contribution to discouraging the consumption of tobacco. The Panel had held previously that even if the measures are trade restrictive, there was no evidence to show that these measures would affect the overall value of tobacco imports. Since the objective of these measures was public health, the Panel had held that non-fulfilment of the objective would have ‘grave’ consequences. The claim was rejected.
Article 16.1 of The Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”)
There was also a claim made under TRIPS, with regard to the dilution of ‘distinctiveness’ of the sellers’ trademark due to the packaging requirements imposed by Australia. It was claimed that this would lead to a ‘likelihood of confusion’.
The AB Report observed that Article 16.1 of TRIPS only provides for a registered trademark owner’s right to prevent certain activities to be performed by unauthorized third parties. For Article 16.1 of TRIPS to be violated, it must be established that the trademark owner’s right to prevent unauthorized third party activity has been diluted/not granted. This claim was also rejected.
Article 20 of the TRIPS
It was claimed that there was encumbrance upon the use of trademarks in the course of trade within the meaning of Article 20 of TRIPS. The AB upheld the Panel’s finding which noted that three elements need to be fulfilled to violate Article 20:
(i) Special Requirements;
(ii) Encumbrance of the use of a trademark in the course of trade; and
(iii) Encumbrance is made ‘unjustifiably’.
The AB held that in order to show that the encumbrance is ‘unjustifiable’, the complainants must establish that the encumbrance is not necessary for the policy objective being pursued by Australia. However, the complainants have not been able to establish the same. The host countries have a certain degree of discretion in imposing encumbrances on the use of trademarks under Article 20 of the TRIPS.