DISPUTE SETTLEMENT

DS: Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by Honduras. (See also DS434, DS441, DS458 and DS467)

On 4 April 2012, Honduras requested consultations with Australia concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging.

Honduras challenges the following measures:

  • An Act to discourage the use of tobacco products, and for related purposes, Australia's Tobacco Plain Packaging Act 2011, and its implementing regulations;
     
  • the Trade Marks Amendment (Tobacco Plain Packaging) Act 2011; and
     
  • any amendments, extensions, related instruments or practices.

Honduras claims that Australia's measures appear to be inconsistent with Australia's obligations under:

  • Articles 2.1, 3.1, 15.4, 16.1, 20, 22.2(b) and 24.3 of the TRIPS Agreement;
     
  • Article 2.1 and 2.2 of the TBT Agreement; and
     
  • Article III:4 of the GATT 1994.

On 11 April 2012, Brazil requested to join the consultations.  On 12 April 2012, Guatemala and Nicaragua requested to join the consultations.  On 16 April 2012, New Zealand and Zimbabwe requested to join the consultations.  On 18 April 2012, the European Union, Ukraine and Uruguay requested to join the consultations.  On 19 April 2012, Canada and El Salvador requested to join the consultations.  On 20 April 2012, Indonesia, Norway and the Philippines requested to join the consultations.  Subsequently, Australia informed the DSB that it had accepted the requests of Brazil, Canada, El Salvador, the European Union, Guatemala, Indonesia, Nicaragua, New Zealand, Norway, the Philippines, Ukraine, Uruguay, and Zimbabwe to join the consultations.

 

Panel and Appellate Body proceedings

On 15 October 2012, Honduras requested the establishment of a panel.  At its meeting on 19 November 2012, the DSB deferred the establishment of a panel.

At its meeting on 25 September 2013, the DSB established a panel. Argentina, Brazil, Canada, Chile, China, Cuba, the Dominican Republic, the European Union, India, Indonesia, Japan, Korea, New Zealand, Nicaragua, Nigeria, Norway, Oman, Panama, the Philippines, South Africa, Chinese Taipei, Thailand, Ukraine, the United States, Uruguay and Zimbabwe reserved their third-party rights. Subsequently, Ecuador, Guatemala, Malawi, Malaysia, Mexico, Peru, Singapore, Turkey and Zambia reserved their third-party rights.

On 26 March 2014, Australia requested the Director-General to compose the panel. On 5 May 2014, the Director-General composed the panel. On 10 October 2014, the Chair of the panel informed the DSB that the panel expected to issue its final report to the parties not before the first half of 2016, in accordance with the timetable adopted by the panel on 17 June 2014 on the basis of a draft timetable proposed by the parties. On 29 June 2016, the Chair of the panel informed the DSB that due to the complexity of the dispute, the panel expected to issue its final report to the parties not before the end of 2016. On 1 December 2016, the Chair of the panel informed the DSB that in light of the complexity of the legal and factual issues that arise in this dispute, the panel expected to issue its final report to the parties not before May 2017. On 21 September 2017, the Chair of the panel informed the DSB that in light of the of the complexity of the legal and factual issues that have arisen in this dispute, the Panel expected to issue its final report to the parties by the end of the third quarter of 2017.

On 28 June 2018, the panel report was circulated to Members.

  1. In respect of the claims developed by the complainants, the Panel found that:
    1. The complainants had not demonstrated that Australia's tobacco plain packaging measures (the TPP measures) are inconsistent with Article 2.2 of the TBT Agreement on the basis that they are more trade-restrictive than necessary to achieve a legitimate objective;
    2. The complainants had not demonstrated that the TPP measures are inconsistent with Article 6quinquies of the Paris Convention (1967), as incorporated into the TRIPS Agreement by Article 2.1 thereof, on the basis that Australia does not accept for filing and protect “as is” every trademark duly registered in the country of origin;
    3. The complainants had not demonstrated that the nature of the goods to which the TPP measures apply (i.e. “tobacco products”) forms an obstacle to the registration of trademarks in violation of Article 15.4 of the TRIPS Agreement;
    4. The complainants had not demonstrated that the TPP measures are inconsistent with Article 16.1 of the TRIPS Agreement on the basis that they stop the owner of registered tobacco trademarks from preventing unauthorized use of identical or similar tobacco trademarks on identical or similar products where such use would result in a likelihood of confusion;
    5. The complainants had not demonstrated that the TPP measures are inconsistent with Article 16.3 of the TRIPS Agreement on the basis that they prevent tobacco trademarks from acquiring “well-known” status, and prevent already “well-known” trademarks from maintaining that status;
    6. The complainants had not demonstrated that the TPP measures are inconsistent with Article 20 of the TRIPS Agreement on the basis that the measures unjustifiably encumber the use of tobacco trademarks in the course of trade;
    7. The complainants had not demonstrated that the TPP measures are inconsistent with Article 10bis of the Paris Convention (1967), as incorporated into the TRIPS Agreement by Article 2.1 thereof, on the basis that the measures compel market actors to engage in prohibited acts of unfair competition, or that Australia fails to provide effective protection against acts of unfair competition;
    8. The complainants had not demonstrated that the TPP measures are inconsistent with Article 22.2(b) of the TRIPS Agreement on the basis that the TPP measures compel market actors to engage in acts that would amount to misleading indications or allegations about product characteristics within the meaning of Article 10bis(3)(3) of the Paris Convention (1967) in respect of geographical indications;
    9. The complainants had not demonstrated that the TPP measures are inconsistent with Article 24.3 of the TRIPS Agreement on the basis that the protection that geographical indications enjoyed immediately before 1 January 1995 has been diminished as a result of the TPP measures; and
    10. Cuba had not demonstrated that the TPP measures are inconsistent with Article IX:4 of the GATT 1994 on the basis that they do not constitute “laws and regulations relating to the marking of imported products” within the meaning of Article IX:4, and that in any case, Cuba had not demonstrated that the restrictions imposed by the TPP measures would lead to a material reduction in the value of the Habanos sign and the Cuban Government Warranty Seal within the meaning of Article IX:4.
  2. The Panel made no findings in respect of the complainants' claims that the TPP measures are inconsistent with Article 2.1 of the TRIPS Agreement (incorporating Article 6bis of the Paris Convention (1967)), Article 3.1 of the TRIPS Agreement, Article 2.1 of the TBT Agreement, and Article III:4 of the GATT 1994, in light of the absence of argumentation put forth by the complainants in respect of these claims.

On 19 July 2018, Honduras notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report.

On 17 September 2018, the Appellate Body informed the DSB that it decided to consolidate the appeals of the panel reports in Australia — Tobacco Plain Packaging, complaints by Honduras (DS435) and the Dominican Republic (DS441). The Appellate Body also informed the DSB that it would not be able to circulate the Appellate Body report in this appeal by the end of the 60-day period, nor within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body referred to the exceptional size and complexity of the consolidated proceedings, including, the considerable volume of the panel record and the size of the panel report, the number of issues appealed, and the many complex aspects of these appellate proceedings. The Appellate Body also referred to the backlog of appeals pending with the Appellate Body at present, and the overlap in the composition of all divisions resulting in part from the reduced number of Appellate Body members. The Appellate Body indicated that Division members could currently spend only very little time preparing for this appeal and that it would not be possible for the Division to focus on the consideration of this appeal for some time, that is, schedule internal meetings, fully staff it, and schedule the hearing. The Appellate Body informed the DSB that the Appellate Body would communicate appropriately with participants and DSB Members as soon as it knows more precisely when the Division can schedule the hearing in this appeal. On 31 March 2020, the Presiding Member of the Division hearing the appeals in these disputes, informed the DSB that the division expected to circulate the Appellate Body Reports in these appeals by early June 2020, in a date to be communicated in the preceding weeks. On 4 June 2020, the Presiding Member of the Division hearing the appeals in these disputes informed the DSB that the Appellate Body Reports would be circulated no later than 9 June 2020.

On 9 June 2020, the Appellate Body Reports were circulated to Members.

Honduras (DS435) and the Dominican Republic (DS441) (together referred to as the appellants) requested the Appellate Body to reverse the Panel's conclusions under Article 2.2 of the TBT Agreement, and Articles 16.1 and 20 of the TRIPS Agreement.

  1. With respect to Article 2.2 of the TBT Agreement:
    1. With respect to the contribution of the TPP measures to Australia's objective, the Appellate Body found that Honduras had not substantiated its claim that the Panel erred in its application of Article 2.2 to the facts of the case. Ultimately, the Appellate Body found that the appellants had not demonstrated that the Panel failed to make an objective assessment of the facts under Article 11 of the DSU. In particular, the Appellate Body found that, although the Panel erred by disregarding certain evidence adduced by the Dominican Republic, and acted inconsistently with Article 11 of the DSU by compromising the complainants' due process rights with respect to the Panel's reliance on multicollinearity and non‑stationarity when reviewing the parties' econometric evidence, such errors were not sufficiently material to vitiate the Panel's findings regarding the contribution of the TPP measures to Australia's objective, namely improving public health by reducing the use of, and exposure to, tobacco products.
    2. The Appellate Body found that the appellants had not demonstrated that the Panel erred in its intermediate conclusions pertaining to the trade restrictiveness of the TPP measures. In particular, the Appellate Body upheld the Panel's finding that the impact of the TPP measures on reducing the opportunity for producers to differentiate between different products on the basis of brands did not in itself necessarily amount to a limiting effect on international trade. The Appellate Body also upheld the Panel's finding that the complainants failed to demonstrate that the TPP measures would necessarily lead to a decline in the value of imported tobacco products as a consequence of consumers shifting from premium to non-premium products in response to the TPP measures (downtrading).
    3. With respect to the alternative measures, the Appellate Body found that the Panel erred in finding that the complainants had failed to demonstrate that each of the two alternative measures (the increase in the MLPA and an increase in taxation) would be apt to make a contribution equivalent to that of the TPP measures. However, the Appellate Body found that the Panel did not err in finding that the complainants had failed to demonstrate that these two alternative measures are less trade restrictive than the TPP measures. Consequently, the Panel's finding that the complainants had not demonstrated that the increase in the MLPA and the increase in taxation would each “be a less trade restrictive alternative to the TPP measures that would make an equivalent contribution to Australia's objective”, stands.
    4. Consequently, the Appellate Body upheld the Panel's conclusion that the complainants had not demonstrated that the TPP measures are more trade restrictive than necessary to fulfil a legitimate objective, within the meaning of Article 2.2 of the TBT Agreement.
  2. With respect to Article 16.1 of the TRIPS Agreement:
    1. The Appellate Body found that the Panel did not err in its interpretation of Article 16.1. The Appellate Body agreed with the Panel that Article 16.1 of the TRIPS Agreement grants a trademark owner the exclusive right to preclude unauthorized use of the trademark by third parties. However, Article 16.1 does not confer upon a trademark owner a positive right to use its trademark or a right to protect the distinctiveness of that trademark through use.
    2. Having found no error in the Panel's interpretation, the Appellate Body agreed with the Panel that there was no need to examine further the complainants' factual allegation that the TPP measures' prohibition on the use of certain tobacco related trademarks would in fact reduce the distinctiveness of such trademarks, and lead to a situation where a “likelihood of confusion” with respect to these trademarks is less likely to arise in the market.
    3. Consequently, the Appellate Body upheld the Panel's conclusion that the complainants have not demonstrated that the TPP measures are inconsistent with Article 16.1 of the TRIPS Agreement.
  3. With respect to Article 20 of the TRIPS Agreement
    1. The Appellate Body found that the Panel did not err in its interpretation and application of Article 20 of the TRIPS Agreement. In particular, the Appellate Body considered that the Panel did not err in its interpretation of the term “unjustifiably” in Article 20 and in its application of this interpretation to the facts of the case. The Appellate Body thus agreed with the Panel that the complainants had not demonstrated that trademark-related requirements of the TPP measures unjustifiably encumbered the use of trademarks in the course of trade within the meaning of Article 20.
    2. Consequently, the Appellate Body upheld the Panel's conclusion that the complainants had not demonstrated that the TPP measures are inconsistent with Article 20 of the TRIPS Agreement.

The Appellate Body recalled that, having rejected all of the complainants' claims, the Panel had declined Honduras' and the Dominican Republic's requests that the Panel recommend, in accordance with Article 19.1 of the DSU, that the DSB request Australia to bring the measures at issue into conformity with the TRIPS Agreement and the TBT Agreement.

Having upheld the Panel's findings under Article 2.2 of the TBT Agreement and Articles 16.1 and 20 of the TRIPS Agreement, it followed that the Appellate Body also agreed with the Panel that Honduras and the Dominican Republic had not succeeded in establishing that Australia's TPP measures are inconsistent with the provisions of the covered agreements at issue. Accordingly, the Appellate Body made no recommendation to the DSB, pursuant to Article 19.1 of the DSU.

At its meeting on 29 June 2020, the DSB adopted the Appellate Body reports and the panel reports, as upheld by the Appellate Body.

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