The problem with plain cigarette packaging

This interview was first published on Lexis®PSL Commercial on 7 July 2014.

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Commercial analysis: There's no smoke without fire. Jeremy Drew, partner and head of IP & technology and Ben Mark, senior associate in the IP & technology group at Reynolds Porter Chamberlain, say the majority in the tobacco industry seem to recognise that the introduction of plain cigarette packaging will likely lead to an increase in illicit trade, particularly counterfeits.

What are the key issues that the government is seeking to address?

Ben Mark (BM): According to the most recent consultation launched by the Department of Health on 26 June 2014, the policy objectives for standardised packaging include: 

• discouraging people (particularly children/young adults) from starting to use tobacco products
• encouraging people to give up using tobacco products
• reducing the appeal or attractiveness of tobacco products

Why has it taken so long for the government to publish plans on how standardised packaging would be implemented in the UK?

Jeremy Drew (JD): The government no doubt wants to make sure that it has considered all relevant opinions, options and evidence before introducing standardised packaging legislation. This can be seen by the sheer number of consultations and reports the government has commissioned on the subject. This is likely to be due in part to the ongoing legal action against the Australian Government following the introduction of its standardised packaging legislation, namely the Tobacco Plain Packaging Act 2011.

To date, there does not appear to have been any conclusive evidence that standardised packaging will materially address the government's concerns on public health. However, the Chantler Review (an independent review carried out by Sir Cyril Chantler) concluded that if standardised packaging were introduced it would be 'very likely' to have a positive impact on public health. 

So, what is the anticipated time scale? Well, the current consultation closes on 4 August 2014. The government then needs to make a final decision. It is at least clear from the draft regulations published in the consultation that any change to the law, if introduced at all, is unlikely to happen until early 2017 at the earliest.

To what extent do you think the new regulation will deal with the public health concerns?

BM: While it's not really for us to comment on the public health aspects of the regulation, the government may want to wait until more conclusive evidence is available, for example studies conducted in Australia over a period of time, before introducing the new regulations.

What are the ramifications of this within the industry?

JD: As tobacco companies would no longer be able to distinguish their cigarette products from a competitor product, it is likely that consumers would simply stick to the product they know and trust.  This would inevitably reduce competition as new entrants would be put off entering an already difficult market given the ban on advertising. This is in stark contrast to the rapidly expanding e-cigarette market.

Could the move give rise to legal challenges from tobacco firms?

BM: In Australia, the introduction of the Tobacco Plain Packaging Act 2011 has come under attack on the basis that it is incompatible with the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

TRIPS signatories (including the EU) may adopt measures to protect public health and nutrition provided that 'the use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as...use in a manner detrimental to its capability to distinguish the goods or services from one undertaking from those of another'.

The key issue will be whether standardised packaging can be justified. This is the issue before the WTO in pending cases against the Australian Government. The outcome of those decisions will no doubt have a significant bearing on whether any similar challenges could be raised against the UK government. Much will depend on whether the government is able to identify compelling evidence that the public is likely to be better protected with standardised packaging, this is the subject of much debate.

Do you envisage any practical or technical difficulties or unintended consequences arising from standardised packaging?

JD: It seems to be recognised by the majority in the tobacco industry that the introduction of plain packaging will likely lead to an increase in illicit trade, particularly counterfeits. The reason for that is twofold: 

• counterfeit products will likely be cheaper and easier to produce given the lack of design/logos on the legitimate products, and
• tobacco companies will inevitably find it more difficult to use their IP rights to prevent counterfeit products from entering the market

What are the implications for IP practitioners?

JD: Given that any change in the law will not come into effect until 2017 at the earliest, tobacco companies have time to consider their options. Interestingly from a trade mark perspective, the draft regulations specifically state that the regulations themselves will constitute 'proper reasons for non-use' so that it will not be possible to revoke tobacco companies' trade mark registrations in respect of device marks/logos solely on the basis that they can no longer be used.

As the UK Intellectual Property Office and the Office for Harmonisation in the Internal Market operate a 'use it or lose it' policy in respect of a trade mark registration that is over five years old, this would appear to alleviate at least one of the tobacco companies' concerns. Given the substantial sums that tobacco companies have invested in their brands and the potential for harm to those brands caused by the new regulations, this will provide scant consolation.

For now, while there remains a substantial degree of uncertainty, IP practitioners will no doubt continue to advise clients to protect their brands (including sub-brands/logos etc.) with trade mark registrations in the usual way.

Interview conducted by Kate Beaumont