Four of the world’s largest tobacco companies have been unsuccessful in their attempt to prevent the introduction of standardised cigarette packaging in the EU, in accordance with the Tobacco Products Directive (2014/40/EU) (‘the Directive’).
The claimant tobacco companies argued that the EU regulations and the parliamentary process through which the Directive was adopted were unlawful and disproportionate. The High Court has rejected the challenge on the basis that the new regulations are “valid and lawful in all respects”. Mr Justice Green considered that the distinctive branding of tobacco packaging had a “causal effect upon consumer behaviour and encouraged smoking”. In his view, the tobacco industry should not be allowed to continue to make profits through the use of their trade marks and other intellectual property (‘IP’) rights to compound the health crisis associated with smoking.
Despite the tobacco companies’ claims that the new rules would deprive them of their IP rights and business goodwill without adequate compensation, Mr Justice Green held that the companies had no right to compensation on the basis that the activities engaged in “impose vast cost on the state” through the healthcare system. The government argued in Court that the tobacco companies’ trade marks are being controlled rather than removed entirely.
The Directive came into force in the UK on Friday 20 May 2016, although tobacco companies have been allowed time to sell off existing stocks so it is expected that the new plain packaging will not be seen by consumers until July 2016. As a result, all cigarette brands will sell packs in the same size, shape and colour, with 65% of the surface area being dedicated to visual and written health warnings. The brand name will appear in a standard typeface, colour and size.
As discussed last year when the enabling legislation was introduced, there was uncertainty whether the decision to adopt standardised cigarette packaging may harm the UK’s strong reputation for IP protection. It is yet to be seen whether the UK world ranking for IP protection (according to the ‘Global Intellectual Property Center International IP Index’) will be affected by the implementation of the Directive.
It will also be interesting to see if other industries which promote ‘unhealthy’ products will be subject to suggestions of standardisation, particularly in light of the government and health organisations’ campaign against sugar through the new ‘sugar tax’ due to be introduced in 2018. This will no doubt cause significant concern for businesses in such industries using validly registered and well established trade marks, at significant expense. On the basis of Mr Justice Green’s analysis these industries may also not be entitled to compensation if their IP rights are restricted, due to the cost to the state healthcare system.
One of the tobacco companies has announced it intended to appeal on the basis that the restriction on the use of its IP rights is unlawful. We will keep you updated.
The text of the Directive is available here
For more information please contact Charlotte Bolton, associate in the Commercial Disputes & Regulatory team on charlotte.bolton@michelmores.com or 01392 687745
