June 2, 2014

Introduction

The UK government has been considering the introduction of plain packaging for tobacco products for a number of years. Following a consultation in 2012 the current government decided against its introduction, but it appears to be back on the agenda. This article considers whether the introduction of plain packaging, be it for cigarettes or sweets, alcohol or fast food, would be compatible with the unitary character of the Community trade mark (“CTM”).

Recent Developments in the UK and EU

Children and Families Act 2014: On 13 March 2014, the Children and Families Act (the “Act”) received royal assent. Part 5 of the Act, entitled “Welfare of Children”, contains a provision which enables the Secretary of State for Health to make regulations “if [he] considers that [they] may contribute at any time to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18”. The Act envisages regulations being made in relation to both the retail packaging of tobacco products and the products themselves (under sub-sections 94(6) to (8)), which may impose prohibitions, requirements or limitations relating to “the use of branding, trademarks or logos” and “any other features … which could be used to distinguish between different brands of tobacco products”. Such restrictions are of course the antithesis of the primary purpose of trade marks, which is to indicate the economic source of the products.

Tobacco Products Directive: On 14 March 2014, the European Council adopted the revised EU Tobacco Products Directive (“TPD”) following its approval by the European Parliament on 26 February 2014. The TPD is expected to enter into force in May, following which member states will have two years to transpose it into national law. The TPD does not mandate the adoption of plain packaging, but Article 24 expressly permits member states to introduce further measures to standardise the packaging of tobacco products, subject to the measures being: (i) justified on public health grounds; (ii) proportionate and not a disguised means of restricting the free movement of goods; and (iii) notified to the European Commission.

Chantler Review: On 3 April 2014, Sir Cyril Chantler published the results of his independent review into the public health impact of plain packaging, commissioned by the Department of Health (“Chantler Review”). He has concluded that “there is enough evidence to say that standardised packaging is very likely to contribute to a modest but important reduction in smoking”, and the Public Health Minister has said that she is “minded to proceed”.

Unitary Nature of the CTM

Article 1(2) of Council Regulation 207/2009 on the Community trade mark (“CTMR”) states: “a Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community…” This principle is also set out in Recital (3) to the CTMR and reinforced by Article 7(2) which provides that where absolute grounds for refusal of a CTM apply in only part of the Community the application must be refused, and Article 16(1) which provides that a CTM is an object of property which shall only be dealt with for the whole of the Community.

As stated by the CJEU in Case C-149/11 Leno Merken v Hagelkruis Beheer, a key objective of the CTMR is to enable the proprietor of a CTM “to distinguish his goods and services by identical means throughout the entire Community, regardless of frontiers”. (The current Proposal for a Regulation amending the CTMR retains this objective and the unitary character provisions.)

The unitary principle has been tested in the case law in four key areas:

(1)    Genuine Use: In Case C-149/11 Leno Merken v Hagelkruis Beheer, a question arose as to whether genuine use in one member state was sufficient to demonstrate genuine use in the Community under Article 15(1) CTMR. Although the CJEU did not rule out the possibility that use in one member state could be enough, it held that the starting point for assessing use should be that territorial borders of member states are irrelevant. The Court considered that, if particular significance were afforded to the boundaries of member states, the unitary nature of the CTM would be diminished.

(2)    Acquired Distinctiveness: In Case T-91/99 Ford Motor Company v OHIM, it was held that Articles 7(2) and (3) CTMR must be read in the light of the principle of unitary character. This means that, if a sign is inherently non-distinctive in any substantial part of the Community, acquired distinctiveness must be demonstrated in that part before it can be registered as a CTM.

(3)    Reputation: In Case C-301/07 PAGO v Tirolmilch, it was held that a CTM must have a reputation in a substantial part of the territory of the Community in order to benefit from Article 9(1)(c) protection. In the circumstances of that case, the territory of Austria was considered sufficient to meet the test. In the earlier case of Whirlpool v Kenwood [2008] EWHC 1930 (Ch), it was held that reputation in a single member state was sufficient for the purposes of Article 9(1)(c), on the more general basis that a CTM should not receive less protection than a national trade mark with a reputation in the same territory (in that case, the UK).

(4)    Injunctions: In Case C-235/09 DHL Express France v Chronopost, the CJEU held that the unitary character of the CTM necessitates that any injunction to restrain infringement should as a matter of principle extend to the entire area of the Community. The Court acknowledged that it might be appropriate to restrict the scope of an injunction in certain circumstances, such as where the essential function of the CTM is not affected in parts of the Community, but the burden appears to be on the defendants to demonstrate this: in Interflora v Marks and Spencer [2013] EWHC 1484 (Ch), Mr Justice Arnold ruled thata pan-EU injunction should be granted in the absence of evidence from the defendants to show that the grounds of infringement did not exist outside the UK.

These examples all reflect the principle of unitary character and show how the EU is to be regarded as a single unit for the purposes of the acquisition, maintenance and enforcement of CTMs.

Impact of Plain Packaging

Article 1(2) CTMR expressly prohibits member states derogating from the principle of unitary character of the CTM “unless otherwise provided for in this Regulation”. The introduction of plain packaging by the UK government would be an example of exactly such a derogation by imposing a prohibition on use which is not provided for in the CTMR and which would be contrary to the overall objectives of the CTMR discussed above.

If the UK were to introduce plain packaging without resolving the conflict with the CTMR, any such measures may in theory be subject to an action for non-compliance by the European Commission pursuant to Article 258 of the Treaty on the Functioning of the European Union. The Commission may undertake such action of its own volition or as a result of a complaint from an aggrieved party. Such action might seem incompatible with the Commission’s involvement in the TPD, which permits standardised tobacco packaging to be introduced at a national level, but there are other concerns about the consequences of national plain packaging which should also be considered.

Intention to use and non-use

Section 32(3) of the Trade Marks Act 1994 (“TMA”) is a home-grown (i.e. non-harmonised) provision that requires applicants for UK trade marks to make a declaration that they intend to use the mark. It is hard to see how a tobacco company could make that declaration for any elements of branding apart from the mere name of the company or product, thus taking away the choice that most brand owners have between using the national and the Community systems for protection.

As far as CTMs are concerned, there have been a couple of cases in which it has been argued that, if use of a CTM is prohibited in part of the Community, then registration of the mark should be denied or cancelled on the basis that it was made in bad faith or was contrary to public policy and accepted principles of public morality. These approaches reflect the unitary nature of the CTM but they have not yet been successful (Case R-255/2006-1 Johnson Pump v Johnson Pump and Case T-140/02 Sportwetten v OHIM). It is nevertheless possible that CTMs affected by the restrictions on packaging could be challenged on this basis.

Existing UK trade marks would, under section 46(1) TMA, become vulnerable to revocation for non-use after a period of five years unless there are proper reasons for such non-use. The Australian government negated the non-use problem for tobacco marks by designating plain packaging as a proper reason for non-use, but the tobacco company is required to rebut any action for revocation for non-use by demonstrating that but for the restriction they would have used the mark. Although an equivalent provision could be introduced into the TMA, it is likely to become increasingly difficult to rebut a revocation action as time goes by and the tobacco products market changes (e.g. through the introduction of lower risk products such as e-cigarettes). In summary, it would no longer be possible to obtain new national UK registrations and it would become increasingly difficult to maintain existing ones.

Where tobacco companies have mainly UK rights, they may consider that the best way to maintain their protection would be to file CTMs (for which no declaration as to use is required) and claim seniority from their existing UK trade marks. The tobacco companies would, of course, have to use their CTMs outside the UK in order to maintain their registrations.

Equivalence principle

CTMs co-exist with national trade marks (which have themselves been harmonised); proprietors are able to choose the degree of protection most suitable for their business interests (Leno Merken v Hagelkruis Beheer, at para 40).

As stated above, the protection offered by CTMs and UK national trade marks is, through the process of harmonisation, meant to be broadly equivalent save in relation to the geographical extent of the monopoly granted. As can be seen from the foregoing, if plain packaging were to be introduced, it would still be possible to obtain and maintain a CTM registration, albeit subject to attack as being contrary to UK law, whereas it would no longer be possible to obtain or maintain a UK national mark.

Conclusion

The introduction of plain packaging legislation in the UK has recently been enabled at both the European and domestic level. However, both sets of enabling legislation focus on the potential health benefits of plain packaging without apparent consideration for any unintended consequences for European trade mark law in particular. The erosion of the unitary character of the CTM is potentially damaging to the development of European trade mark law, in a way that is not restricted to tobacco trade marks. It also cuts across the harmonisation agenda and, more broadly, the free movement of goods within the EU.

Published with minor amendments in ITMA Review, June 2014