The issue of a plain packaging requirement for tobacco products has been a hot topic since mid- 2012. That’s when the Australian High Court ruled that the Australian law that requires cigarette manufactures to sell their products in packages which contain little more than a prominent health warning and the brand name of the product in small and plain script – no stylizations, logos, colours, or any of the other identifying features typically associated with products. When the South African Health Minister, Aaron Motsoaledi, indicated that he would like to see similar legislation enacted in South Africa, there was an immediate reaction. This came in the form of warnings that such laws would amount to an unconstitutional expropriation of (intellectual) property, which would require the government to pay huge sums in compensation to cigarette manufacturers who had been deprived of their trade marks.
One of South Africa’s leading experts on intellectual property law, recently-retired Deputy President of the Supreme Court of Appeal, Louis Harms, has now waded into the debate. Harms delivered a paper at the University of Pretoria recently entitled ‘Plain Packaging and Its Impact on Trade Mark Law.’ Harms expressed his view regarding the proposed legislation by saying that: ‘I dislike the idea of living in a nanny state...we have to accept that the State has assumed the right or obligation to decide which desires are acceptable and that one should live one’s life according to its dictates... in that regard the doctrine of voluntary assumption of risk is dead.’ And he makes it clear that he thinks the threat extends beyond tobacco: ‘On the horizon looms a potential threat to trade mark law in the form of plain packaging legislation... it will begin with tobacco products but there is a real likelihood that it will spread to other products.’
Harms traces the history of plain packaging and points out the World Health Organisation (WHO) Framework Convention on Tobacco Control says that member states must adopt effective measures to ensure that tobacco product packaging contains health warnings. The Guidelines that have been issued say that countries should consider adopting measures to restrict or prohibit the use of anything other than the brand name in conventional font (in other words logos, colours and the like) in an attempt to increase the noticeability of the health warning. Australia has adopted the Guidelines in its legislation and the Australian court has ruled that the law is constitutional because, even though trade marks are property, there has been no acquisition of that property despite the fact that cigarette companies' rights have been denuded. It said this ‘Taking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer. Acquisition is therefore not made out by mere extinguishment of rights.’
Harms then looks at whether similar legislation in South Africa would pass constitutional muster. In the process he discusses trade mark law in general terms, saying that he believes ‘a) that trade marks, as property, are entitled to protection; b) that they are valuable and socially and commercially important; but c) that no rights are absolute.’ In fact, as we now know from the Constitutional Court’s decision in the 2005 Laugh- It-Off case, trade marks can ‘be trumped by other rights.’ Harms discusses the fact that a plain packaging requirement will affect the basic function of a trade mark, which is to serve as a badge of origin and avoid consumer confusion, as well as the related advertising function of ‘acting as silent salesmen conveying psychological messages about the merit of the product.’ A plain packaging requirement will, Harms argues, affect these functions, because if a brand owner cannot use its trade mark in the way it wants to use it the trade mark loses distinctiveness, making it more difficult to prevent confusion. A plain packaging requirement also impacts on the principle that a registered trade mark must be used to remain valid.
Notwithstanding this, Harms feels that plain packaging legislation will not contravene the expropriation provision of the Constitution, Art 25(1), because it ‘does not deprive the trade mark owner of any trade mark right, but only regulates or limits the exercise of that right.’ Harms points to the fact that the Constitutional Court refused BAT’s request for leave to appeal the recent decision of the Supreme Court of Appeal that the ban on tobacco adverting is a justifiable limitation of the right of free expression. And he points out that trade mark law excuses non-use in cases of special circumstances: ‘As for being struck off the register, the Act has an inbuilt protection: a trade mark may not be removed on the ground of non-use if that was due to special circumstances in the trade and not to any intention not to use or to abandon the trade mark.’
Harms goes for a very different approach, suggesting that the government can’t afford to go the plain packaging route. He discusses the ‘tension between health and state income’, and argues that, in the same way that the government seems loathe to ban alcohol advertising because of the economic impact that such a ban will have, so it will be very reluctant to give up the income it makes from tobacco. ‘The choice for governments appears to be between restriction and prohibition... Without being too cynical, the reason why (government does not ban tobacco) is because government does not wish to forego the resultant income. Our government, it would appear, earned R32 billion per annum on tobacco excise and related taxes before the increase announced on 27 February 2013.’
Harms points out those cigarettes are one of the most counterfeited products, and that in February 2013 the government signed a convention to contain smuggling of tobacco products. He points out that smugglers don't pay the high excise taxes that the manufacturers pay, and that the government loses some R8 billion per annum through cigarette smuggling. And he argues that any measures that will make it more difficult for trade mark owners to stop counterfeits - such as laws that dilute trade mark rights - will lead to more counterfeiting and a greater loss to the fiscus. ‘This’, says Harms, ‘is known as the law of unintended consequences.’
It will be interesting to see if Harms is proved right?