The international implications of the Philip Morris branding battle in Uruguay 19 Sep 14
Long-running litigation between Uruguay, which has some of the toughest anti-smoking laws in the world, and cigarette giant Philip Morris could have direct consequences for plain packaging legislation globally and the case is being watched “with interest” by the IP community in Australia. However, could it also pave the way for legal action in Europe?
Philip Morris International first brought the lawsuit against Uruguay in 2010, saying the requirement that 80% of cigarette packaging be allocated to health warnings and 20% to branding is a violation of a bilateral investment treaty between the country and Switzerland, where the Philip Morris operating centre is based. The treaty, in short, states that Uruguay will respect IP rights - a pledge the country is breaking, according to Philip Morris, which is suing for $25 million on the basis that the size of the warnings goes beyond what is reasonable and leaves little space for its legally protected trademarks. Reflecting on the litigation, a Uruguayan reporter, speaking to NPR, noted: “The outcome of this case will set the tone for other countries. I spoke with Uruguay's former secretary of public health, who said that Philip Morris' intention was to make an example out of Uruguay.”
While Uruguay’s regime is not a ‘plain packaging’ one, the litigation is being watched closely by countries that have enacted plain packaging or are considering it. Philip Morris Asia has previously sought legal action against plain packaging in Australia and there is ongoing litigation in which the company argues that Australia is breaching a similar bilateral investment treaty with Hong Kong.
Peter Hallett, director at Watermark in Melbourne, told World Trademark Review that the wording of the Uruguay treaty with Switzerland and the Australia treaty with Hong Kong are “similar, but not identical”, noting: “Both treaties provide that neither country may ‘impair by unreasonable or discriminatory measures’ investments made by investors of the other country. That restriction is primarily intended to ensure the equal treatment of investors, but the wording does suggest that laws might be ‘unreasonable’ even if they are non-discriminatory, and that seems to be the argument that Philip Morris will run. On the other hand, Uruguay and Australia will presumably argue that this restriction should be read as only prohibiting measures that are in substance inconsistent with the principle of equal treatment”.
To make its case in Uruguay, Hallett suggests that the company may present “evidence from branding experts in relation to what size a mark needs to be on packaging in order to be recognisable to a purchaser”. Additionally: “I expect that evidence as to the effectiveness of plain packaging laws and other regulatory measures on reducing smoking rates, as well as the health and other costs of smoking, would be very important in both proceedings to the assessment of whether the measures are ‘reasonable’.”
Considering the arguments that the legislation constitutes expropriation of Philip Morris’ marks, Hallett argues: “The Australia/Hong Kong treaty refers to an investor being ‘deprived’ of their investment, which is perhaps a broader concept than expropriation. The High Court of Australia has already decided that Australia's plain packaging laws do not involve the compulsory ‘acquisition’ of property, on the basis that there is a difference between a law that restricts use of a trademark and a law that involves the compulsory acquisition of a trademark. If the same reasoning were to be applied under the bilateral investment treaties, it is unlikely that either Uruguay or Australia would be found to have expropriated Philip Morris' trademarks.”
With Philip Morris boasting an annual net revenue reportedly higher than Uruguay's GDP, the company is unlikely to back down as the litigation costs pile up and the outcome of the action will be closely watched. If it does “make an example out of Uruguay”, it is possible that this will pave the way for action elsewhere. The European Directive on Tobacco Products requires that health warnings cover 65% of the front and back of cigarette packaging – could it therefore make the argument that the size of these warnings similarly go beyond what is reasonable and leave little space for its legally protected trademarks?
Register for more free content
- Read more World Trademark Review blogs and articles
- Receive the editor's weekly review by email