1. Neither the Paris Convention nor the TRIPS Agreement confers on trademark owners a right to use their trademarks.

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1 THE LEGITIMACY OF PLAIN PACKAGING UNDER INTERNATIONAL INTELLECTUAL PROPERTY LAW: WHY THERE IS NO RIGHT TO USE A TRADEMARK UNDER EITHER THE PARIS CONVENTION OR THE TRIPS AGREEMENT MARK DAVISON The Australian government has passed legislation for plain packaging of tobacco products. The legislation will prohibit the use of logos, graphics and colour schemes on tobacco products. It will dictate the manner in which word trademarks are used and the colour of the packaging will be a drab brown. This chapter considers the arguments that there is a right to use trademarks under the Paris Convention or the TRIPS Agreement. In doing so, it also engages in a detailed analysis of Article 20 of TRIPS. It explains why no right of use exists under either Paris or TRIPS and the very limited role that Article 20 of TRIPS has in the context of the debate surrounding the legislation. This paper is forthcoming as a chapter in A. Mitchell, T Voon and J. Liberman (eds) Public Health and Plain Packaging of Cigarettes: Legal Issues (Edward Elgar, 2012). I INTRODUCTION... 1 II THE PARIS CONVENTION... 3 A Gervais and the Spirit of the Paris Convention... 4 B The Overstatement of the Right to Registration... 4 C Defining the Right to Use... 7 D Exceptions to the Right to Use... 7 E Banning Products and Prohibiting the Use of Trademarks... 8 F How the Paris Convention Works Without a Right of Use... 9 III THE RIGHT TO USE A TRADEMARK AND THE TRIPS AGREEMENT... 9 A Word v Non-Word Trademarks B Types of Distinctiveness of Trademarks C Loss of Distinctiveness via Encumbrances D Prohibition on Use of Trademarks and Impact on Distinctiveness E Partial Prohibitions on Use F Meaning of Justifiable G Relevance of Narrow Interpretation of Encumbered by Special Requirements H Use of Trademarks in the Course of Trade IV CONCLUSION I INTRODUCTION The claims made against the legality of legislation requiring plain packaging of tobacco products include that it contravenes international legal requirements concerning the protection of trademarks because of obligations under the following: 1. The Paris Convention for the Protection of Industrial Property 1 ( Paris Convention ), especially Article 6 quinquies in combination with Article 7; Professor, Faculty of Law, Monash University, Melbourne, Australia. 1 Paris Convention for the Protection of Industrial Property, Stockholm Act, 14 July Electronic copy available at:

2 2. Article 2 of the Agreement on Trade-Related Aspects of Intellectual Property Rights 2 ( TRIPS Agreement or TRIPS ), which incorporates the relevant articles of the Paris Convention into TRIPS. In that sense, the legal arguments are the same as for (1); and/or 3. Other provisions of TRIPS, such as Articles 16 and 20. The issues boil down to two relatively simple propositions. If plain packaging legislation is necessary for public health within the meaning of Article 8 of the TRIPS Agreement, it will not contravene international obligations under either Paris or TRIPS in relation to the protection of trademarks. If plain packaging legislation is not necessary for public health within the meaning of Article 8 of the TRIPS Agreement, it may contravene Article 20 of TRIPS but no other provision in Paris or TRIPS. Unfortunately, in the academic and public discourse surrounding plain packaging, other claims have been made about the relevance of the Paris Convention and about provisions of the TRIPS Agreement other than Articles 8 and 20. These claims have ranged from assertions that these other provisions, by themselves, invalidate plain packaging legislation by creating an implied right to use a trademark to more subtle claims that these other provisions provide support for an interpretation of Article 20 that results in plain packaging legislation being more likely to contravene that Article. Those more subtle arguments effectively state that Article 20 provides an implied right of use of a trademark. None of them are correct. Neither the Paris Convention nor the TRIPS Agreement confers a right to use a trademark. This chapter deals exclusively with the trademark issues under the Paris Convention and TRIPS. For example, it will not deal with other World Trade Organization ( WTO ) agreements, which are covered in Chapter 5 in this volume. Some of the basic conclusions in the present chapter are as follows: 1. Neither the Paris Convention nor the TRIPS Agreement confers on trademark owners a right to use their trademarks. 2. The meaning of encumbered by special requirements for the purposes of Article 20 of TRIPS does not include a partial or total prohibition on the use of a trademark. This interpretation is consistent with and, indeed, required by a view that there is no implied right to use a trademark conferred by Article 20. It is also consistent with and an integral part of the matrix of protection of trademarks provided by the Paris Convention and TRIPS. 3. The words use of a trademark in the course of trade in Article 20 of the TRIPS Agreement further limits its relevance to plain packaging legislation. While many of these issues have been discussed in some detail in other publications, this paper attempts to provide further insight into the interpretation of the relevant provisions by reference to the nature of trademarks and the nature of the trademark protection system that has been adopted internationally under both the Paris Convention and the TRIPS Agreement. An examination of the entire matrix of provisions in the Paris Convention and the TRIPS 2 Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995) annex 1C. 2 Electronic copy available at:

3 Agreement reveals a coherent system of trademark registration and protection that is entirely consistent with the absence of any right to use a trademark. In contrast, the interpretations advanced by tobacco advocates lead to numerous difficulties and inconsistency with the international scheme created by the relevant provisions. While a direct interpretation of the literal wording of the relevant provisions is obviously necessary, the adoption of an approach to interpretation that takes into account the general scheme of international trademark protection is also desirable. Both approaches to interpretation mesh well to lead to a rejection of the views of tobacco advocates. In particular, there are two trademark issues that have not been addressed in many quarters in relation to the interpretation of Article 20 of the TRIPS Agreement. One is the difference between inherently distinctive trademarks and those that have acquired distinctiveness as a consequence of their use. The second is the fact that Article 20 applies to all trademarks, whether registered or not. Both issues are addressed in some detail here. II THE RIGHT TO USE A TRADEMARK AND THE PARIS CONVENTION The Paris Convention clearly imposes an obligation on Member Nations to permit the registration of some trademarks in some defined circumstances. The point is made by many authors writing on behalf of or at the request of the tobacco industry, such as Professor Daniel Gervais. 3 The obligation flows from Article 6 quinquies (A), which reads: (1) Every trademark duly registered in the country of origin shall be accepted for filing and protected as is in the other countries of the Union, subject to the reservations indicated in this Article. However, there is considerable divergence in the views expressed by writers who have either prepared reports specifically for the tobacco industry or who act for the tobacco industry as to any additional effects of Article 6 quinquies. Some publications state quite explicitly that Article 6 quinquies confers an allied right to use the trademark so registered. For example, Lalive states that a view that this provision confers only a right to registration and not a right to use is simply mistaken. 4 Others, such as Stern and Draudins, have written that: As the exclusive rights that an owner acquires upon registering a trade mark for tobacco products would not be conferred if plain packaging is introduced, the registration of a trade mark itself is arguably restricted. This would, in our view, constitute a breach of Australia s obligations under the Paris Convention. 5 Other writers have taken a more nuanced approach to the question of whether there is a right under the Paris Convention to use a trademark. As writers such as Gervais concede, Article 6 quinquies does not expressly provide for a right to use a trademark. 6 Yet Gervais then proceeds to suggest, but not expressly claim, that Article 6 quinquies creates an implied right of use. After conceding that the Paris Convention is silent on any right to use a mark, 7 he 3 Report by Daniel Gervais for Japan Tobacco International, Analysis of the Compatibility of certain Tobacco Product Packaging Rules with the TRIPS Agreement and the Paris Convention (30 November 2010) ( Gervais Report ). 4 Memorandum from Lalive to Philip Morris International Management SA, Why Plain Packaging is in Violation of WTO Members International Obligations under TRIPS and the Paris Convention (23 July 2009) ( Lalive Report ) [20]. 5 Stephen Stern and Olivia Draudins, Generic packaging A Bridge (over the Bodies of IP Rights) Too Far? (2011) 23 Australian Intellectual Property Law Bulletin 146, Gervais Report, above n 3, [57] 7 Ibid [65]. 3

4 goes on to argue in a section titled The Paris Convention and a Possible Right to Use that the normative underpinning of the registrability provisions is that if a mark owner is given a right to register it is because the mark is meant to be used in commerce 8 and that the spirit of the Paris Convention is to permit use. 9 Gervais then leaves the issue hanging by stating that there may be legitimate differences of opinion as to whether a plain packaging measure accords with Article 6quinquies and Article 7 of the Paris Convention. 10 A Gervais and the Spirit of the Paris Convention Gervais bases his somewhat vague claim about a possible right to use on the spirit of the Paris Convention. The existence of this spirit is based on a number of grounds. First, Article 7 prohibits a Member Nation from refusing registration because of the nature of the goods to which a trademark is to be applied. 11 Second, the Paris Convention also limits the circumstances in which a registered trademark can be invalidated. 12 Third, Gervais relies on a proposed amendment to Article 7 put forward by the Association Internationale pour la Protection de la Propriété Intellectuelle ( AIPPI ) to the 1956 Lisbon Conference. In that year, Article 6 quinquies was adopted on the basis of a proposal of AIPPI, but AIPPI s proposed amendment to Article 7 was not adopted. The proposed amendment was that Article 7 should include the following words: The exclusive right of the owner or right holder to use a mark thus registered or renewed cannot be prohibited or limited when the sale to which it applies is legal. 13 As Gervais concedes, although this proposed amendment or a version thereof received some support, the text that was finally adopted does not contain the AIPPI language. Despite this, Gervais claims that this shows the normative underpinning of the registrability provisions, namely that if a mark owner is given a right to register it is because the mark is meant to be used in commerce. 14 It is not entirely clear what this refers to, given that the preceding sentence refers to the proposed amendment that was not adopted by the Paris Union. If by this Gervais means the non-adoption of AIPPI s suggested wording, it is hard to envisage how a rejection of a proposal constitutes an acceptance of it. Member Nations specifically rejected a proposal to include a right to use a trademark at the 1956 Lisbon Conference and, to this day, there is still no express right to use in the Paris Convention. B The Overstatement of the Right to Registration Given the absence of an express right to use a trademark in the Paris Convention, the right can only be an implied one. The argument for that implication seems to be based on the existence of strict obligations to register some trademarks in some circumstances and the alleged futility of requiring registration without also requiring use. Even that claim is overstated in the writings mentioned above. For example, each of the writers states that there are strict limits on the circumstances in which registration can be denied. 15 They refer to the exceptions set out in Article 6 quinquies (B): 8 Ibid [67]. 9 Ibid [59], [66]. 10 Ibid [68]. 11 Ibid [59]. 12 Ibid [66]. 13 Ibid [66] 14 Ibid [67]. Emphasis added. 15 Ibid [67]. LaLive Report, above note 4, at [18]. 4

5 Trademarks covered by this Article may be neither denied registration nor invalidated except in the following cases: (i) when they are of such a nature as to infringe rights acquired by third parties in the country where protection is claimed; (ii) when they are devoid of any distinctive character, or consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, place of origin, of the goods, or the time of production, or have become customary in the current language or in the bona fide and established practices of the trade of the country where protection is claimed; (iii) when they are contrary to morality or public order and, in particular, of such a nature as to deceive the public. It is understood that a mark may not be considered contrary to public order for the sole reason that it does not conform to a provision of the legislation on marks, except if such provision itself relates to public order. This provision is subject, however, to the application of Article 10bis. These same writers also point out that the nature of the goods to which a trademark is to be applied shall in no case form an obstacle to the registration of the mark. 16 Consequently, the argument is that since trademarks are being targeted because they are trademarks for tobacco products, the plain packaging legislation also contravenes Article 7 of the Paris Convention. What they do not point out is that the requirements for registration are not as prescriptive as they might appear at first blush if one focuses exclusively on Article 6 quinquies. In addition to Article 6 quinquies, Article 6 provides: (1) The conditions for the filing and registration of trademarks shall be determined in each country of the Union by its domestic legislation.... (3) A mark duly registered in a country of the Union shall be regarded as independent of marks registered in the other countries of the Union, including the country of origin. Obviously, there is a significant conflict between Article 6(1), which provides that the conditions for filing and registration of trademarks are a matter for the domestic legislation of each country of the Union, and Article 6 quinquies, which requires acceptance for filing and protection in some circumstances. These Articles are incorporated into the TRIPS Agreement via TRIPS Article 2, which requires Members of the WTO to comply with these and other relevant provisions of the Paris Convention. This conflict between the provisions in the Paris Convention has been the subject of formal adjudication at the WTO. In US Section 211 Appropriations Act, 17 the European Communities failed in an attempt to argue that the exceptions listed in Article 6 quinquies of Paris are the sole grounds upon which registration of a trademark may be refused. 18 The dispute with the United States ( US ) related to US legislation regulating ownership of trademarks of businesses that were nationalised as a consequence of the Cuban revolution. The legislation effectively denied 16 Eg Gervais, note 4 above at [59] and LaLive Report at [17]. 17 Panel Report, United States Section 211 Omnibus Appropriations Act of 1998, WTO Doc WT/DS176/R (6 August 2001) ( US Section 211 Appropriations Act ) and Report of the Appellate Body United States Section 211 Omnibus Appropriations Act of 1998 WT0 Doc WT/DS176/AB/R 18 Report of the Appellate Body United States Section 211 Omnibus Appropriations Act of 1998 WT0 Doc WT/DS176/AB/R at [ ] 5

6 registration to applicants claiming title to trademarks of businesses that had been seized by the Cuban government after the revolution. Pursuant to the legislation, the US trademarks office refused registration of the trademark the Havana Club by a European business. The applicant s title to the trademark was based on transfers from entities that had acquired the trademark as a consequence of the revolution. The refusal to register the trademark did not come within the exceptions listed in Article 6 quinquies. However, the WTO panel held that the legislation was justified by Article 6 and that WTO Members are free to legislate to refuse registration on grounds other than those relating to the form of the trademark in question. 19 Consequently, legislation about who is the rightful owner of a trademark is unaffected by Article 6 quinquies. Two implications of this approach undermine arguments that plain packaging laws would be inconsistent with the Paris Convention. First, it undermines the claims about the extent to which the Paris Convention requires the registration of trademarks. These claims have been used to support various consequential claims. One claim is that if registration is required, then use pursuant to that registration is necessarily also required. The second claim relates to the position in jurisdictions where either actual use or intention to use is required for registration. The argument in that instance proceeds on the basis that since use or an intention to use is a pre-requisite to registration and registration is required by Paris, that use must therefore be permitted. In other words, there is a right to use in order to obtain registration as well as a right to use as a consequence of registration. In fact, the Paris Convention regime, which is directed exclusively at the issue of registration and not use, is far more liberal in terms of the grounds upon which registration may be denied than has been suggested by tobacco advocates. Consequently, the oblique but constant references to either a right to use that flows from registration or a right to use in order to obtain registration lose much of their force because the obligation to register is much more limited than has been portrayed. As for the Australian legislation itself, the first point to make is that the draft legislation does not prevent registration of any trademarks for tobacco products. Section 28 of the Tobacco Plain Packaging Bill 2011 (Cth) specifically provides that the absence of an intention on the part of a trademark applicant to use the trademark because of the legislation does not disqualify that applicant from obtaining registration. Given that the registration requirements of the Paris Convention are considerably looser than has been claimed by tobacco advocates, this decoupling of use from registration is clearly permitted by and within the scope of the Convention. The second implication of the looser approach to registration under the Paris Convention is that the argument of tobacco advocates can be easily reversed. Their argument is, in part, that the strict requirements to allow registration are mirrored by a corresponding requirement to permit use. Given that there is considerable scope under the Paris Convention to refuse registration, there is necessarily an even greater scope to refuse usage. In any event, the spirit of the Paris Convention is quite clearly to be very deferential to Member Nations in relation to the grounds upon which they may refuse registration and is therefore necessarily even more deferential to the right of Member Nations to prevent the use of trademarks, whether registered or not. 19 Ibid. 6

7 C Defining the Right to Use The real difficulties of adopting a view that there is an implied right to use a trademark under the Paris Convention are revealed by assuming the correctness of the position and considering its consequences. If there is an implied right to use trademarks, what, precisely, is the nature and extent of that right? Does the right to use mean that the goods or services in relation to which the trademark is used can be offered for sale anywhere, anytime, to anyone? Would alcohol licensing provisions regulating the age of patrons who may enter the premises where branded alcohol is served and restrictions on opening hours be contrary to the right? Would adult magazines with their many trademarks such as Hustler and Penthouse be permitted for sale to anyone of any age, anywhere? Would tobacco companies be permitted to return to the days when advertisements containing their trademarks were used extensively in television, radio and newspaper advertisements? Or does it simply mean that there must be a right to some use of the trademark in some circumstances? If it is the latter, then does the Australian plain packaging legislation meet the requirement by permitting the use of trademarks in a wholesale rather than a retail context? 20 While numerous countries have a right to use a trademark incorporated into their domestic legislation, the difference between that right and a right implied into an international treaty is that the former can be varied, modified, qualified and eliminated at the legislative will of the government. For example, the Australian legislation states that a trademark owner has the right to use their trademark, but nobody seriously quibbles with the proposition that legislation banning the use of tobacco advertising and, therefore, the use of tobacco trademarks in such advertising is a permitted derogation from that right. This is because of the nature of the Australian legal system, in which later, specific legislation can clearly amend earlier legislation. No such approach can be taken if Australia has an international obligation under the Paris Convention to provide a right of use. D Exceptions to the Right to Use Even if that problem is overcome, there is then a question of defining the exceptions to the right of use. There are no express exceptions in the Paris Convention to a right to use a trademark. This is hardly a surprise. The obvious comment is that there are no exceptions in the Paris Convention to the right to use a trademark because there is no need to create exceptions to a non-existent right. Frequently, the correct interpretation of a document is the obvious one. But let us continue to assume that tobacco advocates are correct and there is an implied right to use a trademark. As there are no express exceptions to this right, they would either simply not exist or would have to be implied. The difficulty with their implication is that there is no basis for determining which exceptions would be implied. There has never been any detailed discussion within the Paris Union of the nature of the exceptions to a right to use a trademark. If there are no exceptions, the definition of the right to use becomes the critical factor and, again, the problem comes down to defining the full nature and scope of that right. Those difficulties have already been explained above. 20 See the various clauses of the Tobacco Plain Packaging Bill 2011 (Cth) relating to the control of packaging at the retail level. 7

8 There are some references to exceptions to the rights of trademark owners in Article 17 of the TRIPS Agreement and to justifiable limits on the use of trademarks in particular circumstances in Article 20. These are discussed below. However, impliedly importing provisions from the much later TRIPS Agreement is hardly a means of interpreting the Paris Convention. If the right of use and exceptions to it exist, they must have existed well prior to the TRIPS Agreement. In any event, Article 17 is an exception to a right to prevent third parties from using one s trade mark, not an exception to a right to use a trademark. For that reason alone, it is not relevant. Article 20 is a more complex provision and interacts with other provisions such as Article 8 relating to public health measures, an issue not addressed directly in any way by the Paris Convention. E Banning Products and Prohibiting the Use of Trademarks A further difficulty with the consequences of the existence of such a right of use is the relationship between that right and the obligation to register a trademark in some circumstances. For example, Gervais states that no one doubts that WTO Members can ban the sale of certain products (eg pharmaceuticals, fireworks, alcohol and tobacco). 21 This statement is no doubt true and an appropriate concession to make. However, an issue arises as to the basis of the concession. One possibility is that the concession is made because it is consistent with the argument that the Paris Convention confers a right to use a trademark. The other possibility is that the concession is made because it is inconsistent with that argument. In the latter case, the concession diverts attention from the fact that a right to use a trademark, coupled with an obligation to register some trademarks under Article 6 quinquies and an inability to refuse that registration on the basis of the nature of the goods for which registration may be sought under Article 7, may actually also prevent a ban on products. In other words, the interpretation of the Paris Convention argued for by tobacco advocates is inconsistent with the idea that Member Nations have an unfettered right to ban any product. Perhaps we could take the example of chewing gum. Many distinctive trademarks are registered in many countries for chewing gum. According to Article 6 quinquies, there are at least some circumstances in which registration of those trademarks must be permitted. In particular, Article 7 prevents the denial of registration because of the nature of the goods. If registration is required because denial of registration on the grounds that the trademarks are for chewing gum is not permitted, what now happens with regard to the right to use that trademark? The trademark is registered and there is a right to use it. How can the right to use the trademark involve anything other than the right to sell or offer the product for sale? A ban on the sale of chewing gum would not be permitted. The Lalive Report claims that there is a distinction between a prohibition on the use of a trademark and a prohibition on the sale of the product to which it is attached. 22 Such an approach would depend on a characterisation of the relevant law, but even if such laws are not intended to prohibit the use of trademarks, quite clearly they would have that effect. Where, in the Paris Convention or elsewhere, does the power exist to indirectly prohibit the use of trademarks by prohibiting goods? Or is the right to completely prohibit the sale of goods an implied exception to the implied right? If so, on what basis is that implied exception created? 21 Gervais Report, above n 3, [64]. 22 Lalive Report, above n 4, [23]. 8

9 F How the Paris Convention Works Without a Right of Use The above analysis reveals a number of insurmountable difficulties that arise if we assume that the Paris Convention confers an implied right to use a trademark. What if we assume that it does not confer such a right? Taking that assumption to its logical conclusion leads to an outcome that is far more likely to be consistent with what the Member Nations of the Paris Union intended. The first effect of such an assumption is that there is no difficulty with defining the nature and scope of any implied right of use. There is no such right and therefore it does not need to be defined. The second effect is that there is no need to engage in the impossible task of defining the exceptions to the non-existent right. There is a legitimate question as to why there is any point in registering trademarks if their use is prohibited. However, there are numerous examples of situations in which registration without a right of use would make perfect sense. The Lalive Report itself refers to a situation where a pharmaceutical product is awaiting regulatory approval before it is sold in the country of registration. 23 Other examples include those that were very likely to be relevant in the international trade environment in which Paris was formed and subsequently considered by members of the Paris Union. For example, where import prohibitions were imposed on a particular industry or tariff restrictions effectively prevented importation into a particular country, an overseas manufacturer may well have wished to preserve its trademark registration. It would do so to prevent a domestic manufacturer usurping its registration and to preserve its position so that, if the restrictions on importation were lifted, it could resume use of its trademark. The non-use provisions of Article 5 of the Paris Convention complement this position. Nonuse may be a ground for removal of a trademark, although it need not be, and a trademark owner must be given an opportunity to justify his inaction. Above all, it leaves open the possibility that members of the Union could preserve the position of trademark owners while at the same time pursuing government policy objectives that impinged on trademark use. In the context of plain packaging, for example, it is entirely possible that a democratically elected Australian government will repeal or substantially amend the legislation because it takes a more libertarian perspective in relation to tobacco products. The Paris Convention provides the perfect arrangement whereby trademark rights can be preserved while the current policy objectives prevent usage in a manner that the government clearly considers contrary to the national interest. Trademark usage is but one of multiple factors that governments consider in making policy decisions. It is difficult to accept that governments would compromise their ability to protect public health and to pursue other valid policy objectives via the oblique and imprecise means of conferring an implied right to use trademarks without so much as a suggestion as to how to limit that right or how to create exceptions to it. III THE RIGHT TO USE A TRADEMARK AND THE TRIPS AGREEMENT Most tobacco advocates, but not all, 24 concede that Article 16 of TRIPS does not provide a right to use a trademark. Article 16 reads: 23 Lalive Report at [23]. 24 See, eg, Stern and Draudins, above n 5,

10 Rights Conferred 1. The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making rights available on the basis of use. The primary right conferred by Article 16 is a right to prevent third parties from using a registered trademark. This is not a right to use the trademark. The exceptions to the right conferred by Article 16 are therefore irrelevant. However, some tobacco advocates insist that plain packaging legislation does not come within those exceptions. In doing so, they tend to obfuscate the point that it does not matter. Notably, Gervais correctly and clearly states that the exceptions in Article 17 are not directly applicable. 25 For the purpose of clarifying this point as well as other issues discussed below, Article 17 is set out here: Exceptions Members may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties. A limit on the right to use a trademark is not a limit on the right to prevent others from using that trademark. Article 17 refers to the rights conferred by a trademark and, therefore, in turn refers to the rights described in Article 16. Article 17 gives an example of an exception, fair use of descriptive terms, which clearly refers to use by a third party, thus providing confirmation, if any were needed, that Article 16 does not confer any positive right to use a trademark. The relevance of Articles 16 and 17 to the interpretation of Article 20 is addressed below. The only significant argument under TRIPS concerning plain packaging of cigarettes concerns Article 20, which provides: Other Requirements The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings. This will not preclude a requirement prescribing the use of the trademark identifying the undertaking producing the goods or services along with, but without linking it to, the trademark distinguishing the specific goods or services in question of that undertaking. A Word v Non-Word Trademarks In discussing Article 20, Gervais provides a useful taxonomy of types of trademarks and the different implications of those types for plain tobacco packaging. He differentiates between word trademarks and non-word trademarks. 26 Word trademarks are, as the description suggests, trademarks that consist purely of text, figures and words without any element of adornment or anything fancy about the script of those words. In this category are trademarks such as Marlboro. 25 Gervais Report, above n 3, [29]. 26 Ibid [12]- [14] 10

11 As Gervais correctly points out, restrictions on the manner in which word trademarks can be displayed on tobacco packaging clearly come within the meaning of Article 20. The plain packaging legislation permits word trademarks to be applied but those words must be in a specified font, colour and typeface and printed against a background of a specified colour. Thus, word trademarks can be used but the regulation of the manner in which they may be used clearly means that they are encumbered. More will be said about that aspect of Article 20 later in this chapter. The second type of trademark is a non-word trademark, which includes artistic works such as logos, figurative or stylised marks, shape marks and colour marks. The use of these non-word trademarks is prohibited by the plain packaging legislation at the retail level, as only word trademarks may be used on tobacco packaging. However, in making certain claims about the meaning of the phrase encumbered by special requirements in Article 20, tobacco advocates go much further than arguing that the restrictions on the use of word trademarks constitute an encumbrance within the meaning of Article 20. They also claim that the prohibition of the use of non-word trademarks constitutes an encumbrance for the purposes of Article 20. In doing so, they claim that the restriction on encumbrances provides an implied right to use a trademark under Article There are two basic competing views of what it means to encumber the use of a trademark for the purposes of Article 20. The first, broad view is that a total prohibition on use constitutes an encumbrance by special requirements. The alternative, narrow view is that an encumbrance can only be some form of positive requirement about how a trademark is used, not a ban on use. Much has been said about these two views by way of the application of standard principles of interpretation of international treaties, and by simply considering the nature of the word encumbered in isolation from other provisions in the TRIPS Agreement and the Paris Convention and, indeed, in isolation from the related wording in Article One difficulty with this approach is that the relevant interpretation issue is not just the meaning of the word encumbered but the meaning of the entire expression encumbered by special requirements. Tobacco advocates repeatedly focus on the meaning of encumbered and ignore the requirement to interpret the relevant provision, not just one word within it. Encumbered by special requirements is a quite specific indication of the nature of the encumbrance. Moreover, the four examples of special requirements given by Article 20 generate an ejusdem generis in which special requirements constituting the encumbrance are requirements relating to actual use, not partial or total prohibition of use. Thus, Article 20 applies only to positive requirements regulating the use of a trademark, not partial or total prohibitions of the use of a trademark. Little has been said about how a broad definition of encumbrance would constitute an implied right to use a trademark although Gervais again, correctly, indicates that such an interpretation would constitute an implied right to use a trademark. 29 The implication of a right to use a trademark under Article 20 necessarily flows from defining an encumbrance as 27 Ibid [33]. 28 See, eg, Gervais Report, above n 3; Lalive Report, above n 4; and Benn McGrady, TRIPS and Trademarks: The Case of Tobacco (2004) 3 World Trade Review Gervais Report, above n 3, [33]: The first sentence of Article 20 seems to imply a right to use a trademark because otherwise there would be no need to cabin the power of WTO members to encumber such use. 11

12 including a total prohibition on use. If a total prohibition is not permitted unless it is justified, there must necessarily be a right to use subject to a WTO Member providing a justification for total prohibition. The claim that Article 20 implies a right to use a trademark generates many of the problems already identified in relation to an implied right to use a trademark under the Paris Convention. What, precisely, is the right to use a trademark? If such a right exists, the difficulty then arises that any total prohibition on the use of a trademark has to be justifiable within the meaning of Article 20. Defining a justifiable exception to the right to use would be complicated by the limited means of interpreting that word in the context of such a broad right. Does this not mean that every prohibition on the sale of a particular category of goods constitutes an encumbrance on the trademarks for those goods? The prohibition on the sale of the goods is necessarily a prohibition on the use of the trademarks for those goods. If a total prohibition on use of trademark is an encumbrance within the meaning of Article 20, the prohibition of the sale of goods for which trademarks currently exist comes within the operation of Article 20. Consequently, the prohibition on the sale of the goods would have to be justified. This argument is only strengthened by Article 7 of the Paris Convention, which is incorporated into the TRIPS Agreement by TRIPS Articles 2 and 15(4). Both provide that: The nature of the goods... to which a trademark is to be applied shall in no case form an obstacle to registration of the trademark. If the Paris Convention and the TRIPS Agreement impose an obligation to register and retain registration of trademarks in some circumstances, if the nature of the goods cannot be a ground for denying registration, and if a total prohibition of the use of trademarks comes within the meaning of Article 20, there is no possible conclusion other than that a total prohibition on the sale of particular goods has to be justified within the meaning of Article 20. All of the arguments by tobacco advocates about the nature of the Paris Convention and the TRIPS Agreement and their interpretation in relation to plain packaging are consistent with that approach. To argue in that way and to then concede that there is an unfettered right to ban particular products is not a consistent approach to interpretation. The alternative view is that a total ban on a particular product is entirely within the power of a WTO Member and that such a ban cannot be questioned under Article 20. Intuitively, it makes sense to accept that the power to ban products is not controlled by an imprecise provision in the TRIPS Agreement concerning trademarks. B Types of Distinctiveness of Trademarks Further light is shed on the meaning of encumbered by special requirements in Article 20 by considering the totality of the provisions concerning trademarks and the place of Article 20 within that matrix of provisions. McGrady has written that there is no underlying rationale to distinguishing between a prohibition on use and a positive requirement to use under Article 20, although he concludes that, even in the absence of such a rationale, the narrower interpretation is preferable: 12

13 There also appears to be no underlying rationale that supports a distinction between the two types of actions [prohibition on use versus a positive requirement when use is permitted]. As a result, application of the rule relies upon a construction that is formalistic and not based upon principled distinctions. The correctness of this formalistic interpretation is however difficult to question in light of the State practice and the drafting history, which weigh heavily in favor of the provision being construed narrowly. Furthermore, this conclusion is consistent with the generally high level of discretion which Members maintain in relation to the registration of trademarks under Article I beg to differ with the claim that there is no underlying rationale for a narrow interpretation of Article 20. There is, in fact, a very clear rationale for an interpretation of Article 20 that favours the more limited definition of an encumbrance. The rationale for Article 20 is to prevent governments requiring trademark owners to take positive action that would diminish the distinctiveness of their own trademarks. This is an entirely separate proposition from requiring governments to confer a right to use trademarks. An understanding of that rationale first requires some preliminary explanation of the categories of trademarks. In addition to trademarks falling within the categories of word trademarks or non-word trademarks, trademarks may also be categorised according to the basis upon which they are considered to be distinctive. Distinctiveness is the key to both registrability of a trademark and to the very existence of a trademark. TRIPS provides that a sign that is not distinctive is not a trademark. In this context, distinctiveness means that the sign is capable of distinguishing the goods or services of one undertaking from the goods or services of another undertaking. Article 15 of TRIPS clearly spells this out with its definition of subject matter that is protectable: Protectable Subject Matter 1. Any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings, shall be capable of constituting a trademark. Such signs, in particular words including personal names, letters, numerals, figurative elements and combinations of colours as well as any combination of such signs, shall be eligible for registration as trademarks. Where signs are not inherently capable of distinguishing the relevant goods or services, Members may make registrability depend on distinctiveness acquired through use.... As Article 15 itself clearly indicates, there are two types of trademark distinctiveness. The first type of distinctiveness is usually described as inherent distinctiveness. This type of distinctiveness refers to the fact that the sign for the goods in question is considered distinctive even if there has, as yet, been no use of the sign. The mere choice of the sign for those goods is sufficient to determine that the sign would distinguish those goods from other goods and is, therefore, a trademark. For example, with regard to word trademarks, if the trademark is not generic or descriptive of the products in relation to which it is used, it is likely to be inherently distinctive. Marlboro for cigarettes would be an example. Other examples would be Nike for sporting goods and Pepsi for carbonated beverages. Inherently distinctive non-word trademarks would include the swoosh logo of Nike, which does not describe the products to which it is attached in any way but is a sign that another trader, actuated by proper motives, would be unlikely to want to use on products of a similar nature. The second type of distinctiveness is distinctiveness acquired through actual use of a noninherently distinctive sign in commerce. If the use of the sign has resulted in the creation of a 30 McGrady, above n 28,

14 goodwill associated with it, such that a very substantial number of consumers associate that sign with the product, distinctiveness will have been acquired through use and the sign will have become a trademark. For example, in Australia, single colours such as green and purple have acquired distinctiveness under s 41(6) of the Trade Marks Act 1995 (Cth) after extended use of them as trademarks. In order to obtain this type of distinctiveness, a user of the non-inherently distinctive sign would have to demonstrate that its use of that sign had been close to exclusive use and that a very significant majority of relevant consumers immediately identify that sign with the product being denoted by the use of the sign. For example, Cadbury has trademark registration for the colour purple for chocolate wrapping as a consequence of extended use. The evidentiary burden is on the applicant and only the applicant would have access to the necessary evidence to establish the distinctiveness of such signs. It is impossible to define with certainty the precise extent and type of use that is necessary before the non-inherently distinctive sign acquires distinctiveness. The trademark applicant will have to demonstrate that distinctiveness was achieved at some point prior to the application, but the precise point at which that distinctiveness was in fact achieved will not be definable and nor will the precise nature and quantity of usage leading to that distinctiveness. TRIPS Article 15 clearly imposes a requirement that WTO Members make inherently distinctive trademarks eligible for registration. This is demonstrated by several aspects of the wording of Article 15. First, the examples of trademarks eligible for registration are inherently distinctive trademarks. For example, Article 15 refers to combinations of colours rather than a colour. A single colour is not inherently distinctive. Second, Article 15 provides in part that: Where signs are not inherently capable of distinguishing the relevant goods or services, Members may make registrability depend on distinctiveness acquired through use. In other words, inherently distinctive signs shall be eligible for registration prior to use. 31 However, non-inherently distinctive signs may be required to be used prior to registration to such an extent that they are in fact distinctive of the goods or services in respect of which they are registered. Importantly, there is no provision in either the Paris Convention or the TRIPS Agreement that imposes an obligation to permit the use that is necessary for a non-inherently distinctive sign to acquire distinctiveness via that use. This position in relation to the Paris Convention is supported by the fact that, prior to the TRIPS Agreement, a very large number of countries, including Australia, denied registration to non-inherently distinctive signs in any circumstances, even if they had been used to such an extent as to have become distinctive. 32 Further, an implication of an obligation to permit unregistered, non-inherently distinctive signs to be used so as to permit them to become distinctive would be an absurd proposition. There are simply no words or concepts in the Paris Convention or the TRIPS Agreement that would justify such an implication, and defining the nature of such a right would be an impossible task. Acquiring registration of a non-inherently distinctive sign requires virtually 31 This proposition is further supported by Article 15(3), which reads: Members may make registrability depend on use. However, actual use of a trademark shall not be a condition for filing an application for registration. An application shall not be refused solely on the ground that intended use has not taken place before the expiry of a period of three years from the date of application. 32 Eg Oxford University Press v Reg of Trade Marks (1990) 17 IPR 509 and Clark Equipment Co v Reg of Trade Marks (1964) 111 CLR 511 are two Australian decisions that denied registration to trade marks that had no inherent distinctiveness. 14

15 exclusive use to the extent and in a manner necessary to ensure that consumers identify that sign with the products of the user of the sign. If governments were required to permit that type of use, they would have to dictate who could and who could not use the sign before it was registered and before it had been used such that it had become distinctive. If we take the Cadbury example of purple for chocolate, this argument would require the government to have decreed that Cadbury be the only user of purple for chocolate years before Cadbury s use of that colour was enough to make it distinctive of its chocolate. The list of government dictates on who could and could not use such signs would be both endless and arbitrary. It is inconceivable that such an obligation exists. Equally importantly, Article 20 is not restricted in its operation to registered trademarks or either type of distinctive trademark. It refers simply to trademarks and therefore covers all trademarks, whether registered or not. 33 This differentiation is not accidental. Other provisions, such as Article 21, differentiate between trademarks and registered trademarks. It is not possible for a government to know whether an unregistered, non-inherently distinctive sign has been used sufficiently for it to be a trademark until an application for registration with adequate supporting evidence has been made. Yet the obligations of Article 20 still apply to unregistered trademarks consisting of non-inherently distinctive signs. This point takes on even further significance in the face of the nature of trademark systems in many civil law countries, which provide no rights to unregistered trademark owners or protection to unregistered trademarks. 34 Nor are they required to do so by TRIPS. 35 Nobody disputes that proposition. C Loss of Distinctiveness via Encumbrances The meaning and rationale for the meaning of encumbered by special requirements in Article 20 is directly influenced by the distinction between inherently and non-inherently distinctive trademarks. Article 20 identifies particular types of encumbrances by special requirements. All of them relate to an encumbrance on actual use. This is consistent with the common meaning of require, which is to demand the doing of something. Article 20 does not provide any examples of a total or partial prohibition on use. The examples in Article 20 include three special requirements that would need to be justified: use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings All of the examples involve activities that may diminish the distinctiveness of the trademarks in question by positive action being required of the trademark owner in the context of the use of its trademarks. For example, requiring use with another trademark will very likely lead to some confusion in the minds of consumers as to the relationship between the two trademarks, the owners of those trademarks and the goods in question. Requiring a trademark to be used in a specific form may involve reducing its visual or other impact on consumers and, again, therefore its distinctiveness in the sense of distinguishing the goods in question from other goods. The third example of use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings is a more generic 33 See Daniel Gervais, The TRIPS Agreement: Drafting History and Analysis (Sweet & Maxwell, 2 nd ed, 2003) See eg Nuno Pires de Carvalho The TRIPS Regime of Trademarks and Designs (Kluwer Law International, the Hague, 2005) at 270 Protection of trademark rights under the TRIPS Agreement is essentially based on registration. That corresponds to the regimes in force in the majority of WTO Members. 35 Ibid. 15