Wednesday, 12 June 2013

Deprivation of Trade Marks through State Interference - plain packaging in South Africa

We are very grateful to publish a guest post from Adv Mabel Jansen (Senior Counsel) on the inaugural lecture of Dr Dean in his capacity as the Anton Mostert Chair of Intellectual Property. 

Dean tackles a controversial and topical issue  around plain packaging for tobacco products making a case that any related legislation affecting trade marks in South Africa could be unconstitutional. The lecture is neatly summarised by Mabel below:

"With effect from 2011, Dr Owen Dean, author of the well known textbook Handbook of South African Copyright Law, was appointed as a professor at the Faculty of Law at Stellenbosch University, where he is the incumbent of the Anton Mostert Chair of Intellectual Property.  Dr Dean delivered his inaugural lecture as Chair on 21 May 2013 in the Conservatory at Stellenbosch. (Afro Leo says check here for background.)

The topic of his lecture was “Deprivation of Trade Marks through State Interference”. The focus of his lecture was the global war being waged against the use of tobacco products. The formal declaration of this war was issued by the World Health Organisation (WHO) in the WHO Framework Convention on Tobacco Control which was signed by 169 countries.

He pointed out that the objective of the Convention is far removed from trade marks.  It provides in article 11 for member countries to adopt effective measures to ensure that tobacco packaging and labelling do not promote a tobacco product by any means that are false, misleading, deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards, or emissions. Furthermore, any outside packaging should carry health warnings that should carry health warnings that should cover 50% or more of the principal display area.  The Convention further makes provisions for Guidelines to be issued in terms of which:

“Parties should consider adopting measures to restrict or prohibit the use of logos, colours, brand images or promotional information on packaging other than brand names and product names displayed in the standard colour and font style (plain packaging).”

The motivation for these Guidelines is that plain packaging may increase the noticeability and effectiveness of health warnings and messages.

Dr Dean emphasized that this stipulation is not peremptory and that it is open to member countries not to implement it.  Furthermore, he contended that the Guidelines have given rise to a faulty premise that legislation should be adopted allowing only brand names or product names, depicted in a plain manner, to be displayed on the packaging of tobacco products. Australia has followed this route and has adopted the Tobacco Plain Packaging Act 2011 (the TPP Act).  Dr Dean pointed out that other countries are following suit and that Namibia and New Zealand, for example, are working on legislation to restrict the use of trade marks on the packaging of tobacco products.

Dr Dean discussed the 2011 Australian case JT International SA and British American Tobacco Australasia Services Limited and others (WHO where it was held that the TPP Act was not unconstitutional because although the plaintiff had been deprived of its property, namely its trade marks and the get-up of its tobacco products, no acquisition of property by the state had taken place as envisage by the Australian Constitution.

Dr Dean pointed out that in the South African context; Health Minister Aaron Motsoaledi has expressed his enthusiasm to adopt plain packaging legislation in South Africa.  Fortunately the South African Constitution in section 25 enshrines the right not to be deprived of property and includes, in section 25(1) thereof, an internal limitation to the effect that “... no law may permit arbitrary deprivation of property”. Section 25(2) somewhat complicates the issue in providing that property may be expropriated in terms of law of general application for a public purpose or in the public interest.

Dr Dean referred to the Constitutional case of First National Bank of SA Limitedt/a Wesbank v Commissioner for the South African Revenue Service; FirstNational Bank of SA Limited t/a Wesbank v Minister of Finance 2002 (4) SA768 (CC) which held that deprivation of property is a genus of which expropriation is a species, and that deprivation of property is arbitrary when there is insufficient reason for such deprivation or in circumstances where it is procedurally unfair.

Dr Dean stated that it was unnecessary to rely on the further general limitation on deprivation of property contained in section 36 of the Constitution, namely the proportionality test, for the simple reason that a deprivation of property, if arbitrary, by necessity is also unjustifiable and irrational – an opinion also held by the authors De Waal, Currie and Erasmus in The Bill of Rights Handbook 3rd edition (2011) note 2 at 20.

Dr Dean espoused the doctrine of “constructive expropriation” which holds that one should not have regard to whether legislation is meant to expropriate property, but rather whether it factually results in expropriation. He concluded that any plain packaging legislation along the lines of the TPP Act will amount to an infringement of sections 25(1) and 25(2) of the Constitution.

Dr Dean analysed the essential nature and character of trade marks, which is to denote source and stated that, in addition to a legal dimension, a trade mark also enjoys a commercial dimension which is termed “brand equity”, and which refers both to the trade mark and its commercial impact.  He emphasised how valuable trade marks are and referred, by way of example, to the trade mark GOOGLE which represents 27% of the company’s overall value.

Given the fact that the aim of plain packaging legislation is to discourage the use of tobacco products , Dr Dean stated that it defies comprehension how destroying an item of property, namely a trade mark, could be brought into relation with the discouraging of smoking. A trade mark is an instrument for creating clarity in regulating the consumer’s ability to choose between competing products. He stated that it is a non sequitur to suggest that if the ability of the consumer to distinguish between producer A and producer B is diminished or taken away, it will have the effect of discouraging or inhibiting smoking.  Hence Dr Dean opined that plain packaging legislation will infringe section 25(1) of the Constitution. If such legislation were to be held to be in the public interest, in terms of section 25(2) of the Constitution, appropriate compensation would be payable – which could amount to a substantial sum of money.

Dr Dean, during the course of his lecture, also analysed concepts such as whether trade marks are “property” for purposes of section 25 of the Constitution, the meaning of the phrase “law of general application” as set out in section 25(1), the effect of non-use of trade marks, different types of trade marks  and the value of trade marks.

His lecture was well received by an enthusiastic audience which consisted of members of law faculties, legal practitioners and corporate and other bodies interested in plain packaging legislation for tobacco products. It was followed by a well organized and well attended cocktail function. We were all ad idem that we had gained valuable insight into the imminent plain packaging legislation and it’s potentially far reaching ramifications."

Mabel is a busy and respected senior practitioner in South  Africa and this contribution is appreciated.

Look out for a post on the Virtues of a Trade Mark which will be published soon.

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