Legal reasons for (and against) enforcing plain packaging on cigarettes

In August, we wrote that the High Court of Australia had declared that the Tobacco Plain Packaging Act 2011 (Cth) did not breach section 51(xxxi) of the Constitution.  The Court has now published the reasons for its decision: JT International SA v Commonwealth of Australia [2012] HCA 43.

Chief Justice French provided an historical overview of intellectual property rights.  He noted that intellectual property rights are negative.  To take a well-known example, owning copyright in a film gives the owner the right to stop others from showing the film, but it does not follow that he has a positive right to show the film himself. 

The Chief Justice noted British American Tobacco’s submission that “rights to exclude others from using property have no substance if all use of the property is prohibited.”  However, section 51(xxxi) provides for legislation for “[t]he acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”.  His Honour said that while the packaging controls did impinge on the plaintiffs’ enjoyment of their intellectual property rights, this did not involve “the accrual of a benefit of a proprietary character to the Commonwealth which would constitute an acquisition.”

Justices Gummow, Hayne, Crennan, Kiefel and Bell agreed with the Chief Justice.  Justice Gummow added an argument from the famous United States Supreme Court judge, Justice Brandeis, that “restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking.”  Justices Hayne and Bell said that even assuming there was a “taking”, this would not affect the statute, as there was not an “acquisition” within the meaning of section 51(xxxi).

Justice Heydon, dissenting, accepted British American Tobacco’s submission that while, as a matter of form, the legislation had not deprived the proprietors of their proprietorship, in substance it had deprived them of everything that made the property worth having.  He said further that “the Commonwealth’s purposes were achieved by nullifying many of the proprietary rights of the proprietors and passing to the Commonwealth the corresponding benefits and advantages relating to the ownership or use of property – particularly control over the appearance of the cigarettes and their packaging.  That control was as intense and ample as that which the proprietors had formerly enjoyed.”  Accordingly, section 51(xxxi) of the Constitution was engaged.  Justice Heydon noted that both sides accepted that tobacco products cause harm, but he said that it was more controversial whether reducing the use of intellectual property on their packaging would reduce that harm and that even if it would, the legislation was still unconstitutional.  His Honour concluded: “The flame of the Commonwealth’s hatred for that beneficial constitutional guarantee [of compensation] may flicker, but it will not die.”

Justice Heydon’s final statement, while strongly expressed, corresponds with the fear expressed by some intellectual property lawyers and brand owners that tobacco packaging could be the thin end of the wedge, with alcohol and even food liable to follow.  This consideration, along with the argument that plain packaging will not actually stop people from smoking, is likely to be a factor when plain packaging is debated in World Trade Organisation proceedings.  New Zealand does not have an entrenched constitution like Australia’s, where the High Court can strike down unconstitutional legislation, but it does have international obligations by virtue of its membership of the WTO.  Those interested in intellectual property and consumer law, as well as public health, will watch the WTO proceedings with considerable interest.