Are Hard-Earned Trademarks Going Up in Smoke? (continued)

TrademarkKen Parish, a lecturer at Charles Darwin University, in his article entitled, “Easter musings about tobacco plain packaging and its constitutionality,” provides an in-depth analysis of the submissions made to the Court by both sides. He confers that defendant Commonwealth (the Australian government) denied that the plaintiff (the tobacco companies) has any positive property rights at all to use its trademarks:


Do tobacco companies have property of the nature and amplitude they assert? No. Their statutory rights to trade marks, patents, registered designs and copyright include no positive right to use and are, in any event, inherently subject to statutory modification or extinguishment without compensation, for the purpose of preventing or reducing harm to the public or public health.


Parish comments:


According to the Commonwealth argument, the only exclusive ‘right’ a trade mark confers is the right to prevent others from using it, and therefore the fact that the Tobacco Plain Packaging Act 2011 effectively prohibits any meaningful use at all of the tobacco companies’ trade marks on or about their products and packaging is of no constitutional significance what[so]ever.


Apparently there is almost no Australian case law on exactly what proprietary rights are created by a trade mark.


Accordingly, the government relied on an old English decision which ruled that the registration of a trademark does not create the proprietor’s right to use the mark, but a right to prevent other persons from using it – seriously weakening the approach to enforce an effective IP strategy and a well-established IP management initiative through branding.


However, looking into the Australian intellectual property laws, Parish refers to the Trade Marks Act 1995, and indicates that:


a plausible argument can be mounted that the scheme of the Act itself does integrally involve the concept of use. For example, section 17 defines a trade mark as ‘a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.’ Section 20(1) confers on the holder of a registered trade mark the exclusive rights ‘to use the trade mark’ and ‘to authorise other persons to use the trade mark.’


It is not clear-cut to write off the terms of the act that openly indicate conferring of the right to use to the trademark owner. However, the Commonwealth based its argument on the proposition that section 42 of the act mandates rejection of a trademark application if “its use would be contrary to law,” and therefore claimed that since trademark rights can be reduced or taken away by other laws, a positive right to use is not conferred by the Act.


Such an argument is weak, since section 42 refers to rejection of a trademark application, not a registered mark. It provides for rejection of a mark registration if it is found to be against a law, while the application is being reviewed, and does not seem to apply to a new law that conflicts with a mark that was legally registered years prior to enactment of the new law.


If it would find that the tobacco companies owned the proprietary rights to use of their trademarks, the court then had to decide if the subject Plain Packaging Act “acquired” those rights. It has been held that “if the regulation of property goes too far it is a ‘taking.’”


In analyzing whether such regulation could be a “taking,” Parish points out:


Indeed in some respects even if one were to accept the Commonwealth’s constipated version of the extent of the property right (a mere negative monopoly), one might still argue that the law goes ‘too far’. What value, practical utility or meaningful reality does a monopoly right to exclude others from using a trade mark possess if neither you nor they have any capacity whatever to use it anyway?


Further, case law provides for the requirement of a quantifiable “corresponding benefit” to the government or another entity flowing from the taking of property before an extinguishment will be turned into an acquisition. This “corresponding benefit” prong is satisfied, since by using the package for inclusion of its own messages, the Commonwealth benefits from the taking of property, and therefore it can be argued that the extinguishing of the right has in fact turned into an acquisition.


If the tobacco companies were obligated to use a plain package without a logo, but there was no imposition of including the graphic pictures on the packages, there would be a better argument that there was no unjust benefit to the government. Nonetheless, there is room for the assertion that to reach the desired effect of reduction in smoking, this step (of including the unattractive warning pictures) was necessary, and therefore, as a required measure to protecting the public health, the government was justified in using this property without compensation.


Despite the arguments raised herein, the Australian high court has reached the decision that the Act in question is constitutional, and that no compensation is due to the plaintiff tobacco companies. The court has in addition imposed on the plaintiff to pay for the government legal fees as well. While there is no question that society will benefit from a reduction in smoking, the question remains whether the trademark rights of the plaintiff were unjustly taken away without compensation. In order to further pursue their options for compensation and prevent their hard-earned trademarks from going up in smoke, the tobacco companies would need the reasons cited by the court for its monumental decision, which will only be released later in the year.


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