Artwork to Ashes, Brands to Dust: Australia's Tobacco Plain Packaging Act Held Constitutionally Valid

Artwork to Ashes, Brands to Dust: Australia's Tobacco Plain Packaging Act Held Constitutionally Valid

Put this in your pipe and smoke it: The High Court of Australia recently ruled that the Tobacco Plain Packaging Act withstands constitutional scrutiny, in JT International SA v Commonwealth of Australia. Retailers and smokers will thus soon find themselves scrutinizing things as well, in order to distinguish between identical cigarette packages stripped of all branding and trade-marks.

Living up to its tough-on-tar reputation, the Australian government passed the Tobacco Plain Packaging Act (TPPA) in December 2011, a result of not finding pre-existing measures as effective as desired in lowering smoking rates. By December 1, 2012, all cigarette packaging in the country will be identical in unembellished, legislated size, shape, and colour (the decidedly un-olive-like Pantone 448C). An equally unsightly health warning will cover three-quarters of the front panel, while additional warnings and a quitting hotline claim 90 per cent of the sides and back. Brand, company, and associated names, the only distinguishing feature allowed, will shed their unique typographies for a Lucida Sans, no bigger than point-size 14, Pantone Cool Gray 2C makeover.

Lighting Up: The Constitutional Challenge

Needless to say, the tobacco industry got rather puffed up over the new law. JT International (JTI) and three arms of British American Tobacco (BAT), supported by brethren tobacco-purveying intervenors, submitted that the TPPA mandates amounted to “acquisition of property from [them] otherwise than on just terms”. Section 51(xxxi) of the Constitution provided grounds for the challenge: as it grants Parliament power to acquire property “on just terms”, courts interpret the provision to mean citizens may challenge any acquisition on terms less than or other than just.

More specifically, the tobacco companies accused the government of unjustly acquiring their intellectual property, in the form of trade-marks, patents, get-up, literary and artistic works, registered design, trade dress, and goodwill associated with all of the above. The High Court thus faced two issues:

  1. Does intellectual property such as trade-marks and goodwill constitute “property” under s. 51(xxxi) of the Constitution?
  2. If yes, did the Australian government, via TPPA provisions, in fact acquire said property, on other than just terms?

Where There's Smoke, There's Not Necessarily Fire: The Decision

In a decision more multihued than the products in question (comprising five shades of concurrence and one contrasting dissent), the court affirmed that (1) the plaintiffs' intellectual property as described above does constitute “property” under s. 51(xxxi), but (2) the government did not acquire said property, under s. 51(xxxi), by enacting the TPPA. The following will present the court's reasons taken all together.

I. Putting the property in intellectual property

First, the court agreed that intellectual property constitutes “property” under s. 51(xxxi), and is able to make claim to just terms of acquisition. One opinion suggested uncertainty about goodwill because it already operates under restraints from the common law, unlike statutory intellectual property rights.

II. Taking from the rich...

The court also decided that the government's enactment of TPPA amounted to “taking” of property. The provisions of the Act, for all intents and purposes, deprived the companies' trade-marks, copyrights, patents, and registered designs of all value and use. One opinion rejected the companies' argument that they were deprived of the “substance” or “reality” of their property rights, indicating that they could still use brand names, which was the essential part of trade-mark “for purposes of distinguishing”. On the way to the final decision, however, another judge noted the words of Justice Brandeis from the U.S. Supreme Court: “restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking.”

III. ...But not acquired by the poor (or government)

What Parliament takes, Parliament does not necessarily acquire; this is the key to the court's reasoning in JT International SA. The majority of judges found that that while a “taking” occurred, the TPPA, even if it “adversely affects or terminates a pre-existing [property] right”, did not amount to the Australian government's “acquisition” of a proprietary interest in a way that engaged s. 51(xxxi). The tobacco companies retained ownership of the intellectual property rights themselves.

The court went on to reason that the ability to control use of the plaintiffs' trade-marks did not constitute a proprietary interest, as the government “accrued no benefit of a proprietary nature”. Essentially, controlling is not the same as owning, nor is it the same as proprietary interest no matter how liberally interpreted. Continuing in this vein, the court deemed the TPPA regulatory rather than proprietary; it was merely an extension of what legislation already allowed Parliament to do with respect to mandating health warnings on tobacco products.

The court rejected the plaintiffs' argument that proprietary benefit resided in: saved costs of additional advertising, fulfillment of international conventions, and the potential of Quitline gaining goodwill. Even if considered advantages, they were not proprietary and would only further the purpose of the legislation.

IV. Stepping Out: The Dissent

Heydon J's dissent held that acquisition under s. 51(xxx) only required “some identifable and measurable countervailing benefit or advantage” and that the government acquired such by not compensating the tobacco companies for their restricted rights. He stated that the TPPA “deprives the proprietors of their statutory and common law intellectual property rights and their rights to use the surfaces of their own chattels. It gives new, related rights to the Commonwealth [which control the surfaces of said chattels].” The dissent also raised a floodgates concern, in that the majority decision could allow government to apply similar limits to other products or for other legislative objectives in the public interest.

One Last Puff: Analysis

Potentially problematic aspects of the court's decision include (some might argue): the emphasis on the form of intellectual property rights as opposed to the substance (i.e. the distinction between having a right in theory and being able to exercise it in practice); the ethics of allowing a business to register trade-marks and accepting fees for such, then restricting use of those trade-marks; and potential cognitive dissonance in the law of applying such measures to what is, at the end of the day, a legal activity.

The implications of this case are widespread and enormous. Debates abound over the extent of the impact on industrywhether or not plain packaging works; whether it will induce growth of the tobacco black market; whether a trade-mark right is what people think it is; whether the floodgates have opened to plain packaging of food and alcohol; and whether this violates international World Trade Organization (WTO) treaties, just to name a few.

Closer to home, Canada has addressed tobacco advertising in JTI-Macdonald and RJR-Macdonald, and the United States recently closed off such a possibility in R.J. ReynoldsHowever, all three decisions rested on freedom of expression grounds, and Canadian law does not include constitutional protection of property. Meanwhile, the United Kingdom, New Zealand, and India have been reported to consider Australia a test case for their own initiatives. Whether or not the TPPA was a single unlucky strike upon the multinational industry remains to be seen.

Cynthia Khoo is a JD Candidate at the University of Victoria.