As various countries introduce restrictions on trademark rights with regard to certain products – most notably tobacco – there is growing concern about whether such national rules may undermine trademark rights and how they apply internationally.
Rights holders and IP lawyers constantly deal with questions of whether to register a trademark or how best to protect a logo or other mark that may be used, or is intended to be used, in the course of trade. Having a trademark registration is surely better than having no protection at all; but does a trademark registration provide the owner with the full ambit of rights that it was expecting or that it deserves?
The US Patent and Trademark Office (USPTO) website’s “frequently asked questions” section notes that a trademark affords the owner: “A legal presumption of your ownership of the mark and your exclusive right to use the mark.” The UK Intellectual Property Office published a trademark guide in March 2013 (Intellectual Property Office, Trademarks: Quick Facts) stating that a trademark registration “provides ‘concrete proof’ of your legally protected rights”. However, there is now concern about exactly how concrete such rights are with regard to new rules introduced by certain countries around the world that restrict trademark use on certain goods.
Trademarks – Value and a Right to Use
Brand owners see a trademark as an asset, something with a positive value that may account for a significant percentage of the company’s value. The registration of a trademark provides a certificate which represents an entitlement to the brand and all the goodwill and value that has been built up (or will be built up) over the duration of its use and registration. Regardless of the business’s size, a significant value can be derived from the trademarks and/or service marks that the business owner has developed, registered and uses.
Over time, these marks can create value and generate revenue in a number of ways, including being sold, licensed in or out, used as capital into a joint venture, offered to enter into strategic alliances, integrated with a current business or used to create a new business. During economic downturns, trademarks can also be used as collateral when pledged, mortgaged or charged.
Another value of trademarks is in the owner’s ability to exclude others from using the same mark, or something confusingly similar. In some cases, the motivation to register may be simply the intention to exclude others from the market. In other cases, registrations can be purely defensive.
Rights holders are well used to having to disclaim exclusivity for certain parts of their trademark which may not qualify under the registrability criteria of local laws. This is usually done under the guidance of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and serves as an internally established fetter set by the established legal test of distinctiveness. Rights holders are less familiar with externally established fetters. These are restrictions that affect the use of a trademark from sources outside of each country’s IP department or court and, when disputed, lead us to take a closer look at whether registering a trademark gives the owner a positive or negative right.
This article looks at the position in Thailand, Vietnam and Indonesia in relation to a variety of affected products, from tobacco to medical devices.
There are restrictions on trademarks for several different types of products in Thailand, including the following:
Tobacco laws and draft Tobacco Consumption Control Act
Tobacco products may not be advertised or marketed in Thailand. However, under the draft Tobacco Consumption Control Act, the Ministry of Public Health is trying to impose further restrictions on tobacco companies, retailers, distributors and others from conducting additional activities essential to any business, including providing price discounts as a part of advertising and promotion; displaying prices for products; extending trademarks to other goods and services; and even deciding themselves on how to design their product packaging (this decision will become the decision of a body of people, none of whom can be related to the tobacco business or it seems, the Department of Intellectual Property).
Thailand already has some of the strictest tobacco regulations in the world. For example, all packs include graphic health warnings that cover 55% of the front and back of the pack, smoking is banned in most places, and tobacco products may not be advertised or marketed at all. In August 2013 various interested parties obtained a preliminary injunction against the Ministry of Public Health’s proposed legislation to increase the size of the graphic health warnings from 55% to 85%. The litigation on that matter continues.
In addition, there are suggestions that the ministry may be considering introducing plain packaging. The draft Tobacco Consumption Control Act is set to introduce more restrictions, including the government dictating the design of tobacco product packaging and facilitating the introduction of plain packaging. Certain advertising and marketing restrictions would impinge on trademark rights – primarily draft Article 40, which will be the instrument through which the plain packaging requirement is introduced once further ministerial regulations dictating how tobacco products are to be packaged are enacted by the Ministry of Public Health.
However, it is draft Article 31 which will likely be the most troubling for rights holders, as it serves as a wide-reaching prohibition on advertising which goes beyond the existing language prohibiting the display of the name or trademark of tobacco products. The new language prohibits the use of the importer’s or manufacturer’s name or trademark and includes a ban on all “advertising or marketing communications”.
Additionally, the draft of Article 32 goes even further by prohibiting the display of tobacco product names or trademarks or tobacco product importer or manufacturer names or trademarks on any other products. Ostensibly, this would prohibit any mark that is used for tobacco products or registered in Class 34, and also ban the sale of any such products.
By registering a trademark, the rights holder has obtained the exclusive rights to use it and license its use in Thailand. Section 44 of the act sets out the trademark owner’s right to use the trademark: “A person who is registered as the owner of a trademark shall have the exclusive right to use it for the goods for which it is registered.”
A ban on use of trademarks on tobacco products would serve to disallow rights holders’ use of their trademarks and put those marks at risk of cancellation for non-use.
Indeed, as Thailand prepares for accession to the Madrid Protocol, Thai companies may choose to use this new international trademark application system as their businesses grow and expand into new overseas markets. However, if their original Thai trademark is cancelled for any reason, including for non-use, then this would amount to a central attack and their equivalent trademarks in those other countries would be cancelled as well.
Thailand’s international obligations
In addition to the protection that a business’s valuable trademarks enjoy under Thai law, they are also protected under international treaties, including the World Trade Organization’s (WTO) TRIPs Agreement. Thai laws and regulations controlling the use of trademarks would bring into question Thailand’s obligations under various TRIPs articles, including Article 20, which prohibits unjustifiable encumbrances on the use of a trademark in the course of trade.
Australia is currently dealing with the consequences of enacting plain packaging in the WTO. Since it introduced plain packaging measures, three countries have formally requested WTO consultations with Australia. On September 28 2012 the WTO Dispute Settlement Body agreed to establish a panel to hear Ukraine’s complaint against the plain packaging measures taken by Australia. Loss of the WTO cases and other pending related international cases could result in the annulment of the Australian law. Thailand has been down this road before, when the Ministry of Public Health proposed putting graphic health warnings on alcoholic beverages and a number of countries questioned the proposal before the WTO as well.
New Advertising Law and its effect on trademarks
The Advertising Law, which came into effect on January 1, 2013, prohibits any form of advertising of the following (among others):
Closer linkage between regulators and IP departments
In Indonesia, regulators are a little less zealous about impinging on registered trademarks. Either due to a more sophisticated and informed consumer public or perhaps closer links between the National Agency of Drug and Food Control (Badan POM) and the Directorate General of Intellectual Property, trademarks are less likely to be precluded from use on certain highly regulated goods, such as food, pharmaceuticals, alcohol and tobacco, than in other Southeast Asian countries. While there is a partial ban on tobacco advertising in electronic media, with restricted airing allowed only between 9:30pm and 5:00am, currently there is just one authorized text warning required, but no specific size has been assigned.
Trademarks Help to Combat Counterfeits
Thailand and Indonesia have been placed on the Office of the US Trade Representative’s Priority Watch List for the world’s most notorious IP violators (Vietnam is listed one level down on the Watch List). By restricting the use of trademarks, it will become more difficult to identify counterfeit, smuggled or other illicitly traded products in these countries. For tobacco products, for example, if plain packaging is implemented and all packages are identical, with no security features, Customs may be unable to tell a counterfeit from a genuine product. This will also likely increase the ease with which infringers can copy such products, which in turn will increase the trade in unlawful products and cause confusion in consumers’ minds about which products are genuine and which are not. The social impact is that an increase in low-quality counterfeits could actually increase the health risk for consumers, not to mention the tax income lost to the government.
The 10 nation members of ASEAN have committed to implement an ASEAN Economic Community (AEC) by 2015. As of January 1, 2010, with the full implementation of the ASEAN Free Trade Agreement (now the ASEAN Trade in Goods Agreement), the trading bloc has created a single market of more than 600 million people, making it the world’s ninth largest economy, with a growth rate of 7.5%.
The problem will be further exacerbated in 2015 when goods – including counterfeit tobacco – are allowed to move freely around ASEAN. Plain packaging measures would not be conducive to efforts to reduce the trade in illicit and counterfeit goods.
Different government ministries deal with different issues in different ways. Conflicts will arise from time to time – for example, between the ministries of health (where food and drug officials sit) and the ministries of commerce (where IP officials sit). Seldom does the ministry of health converse with or consult the government body responsible for intellectual property before making a decision. Such a relationship, which is rare in many jurisdictions, is known as linkage and is to be encouraged to avoid undue fetters on trademark usage.
While it may take a few more years to harmonize IP registration systems within the 10 ASEAN nations, regional FDAs and departments of agriculture have already begun to streamline and harmonize their registration procedures. Some examples include the following:
In terms of the future, it will be interesting to see whether such common approaches to product registration can be extended to harmonized agreements on how those products, once registered, may be marketed, advertised and branded with the valuable trademarks that they carry in most other countries. ASEAN is proving to itself and the world that its FDAs can work together to agree on the registration of products under their respective responsibilities. The challenge will be to see whether these regulators can work with their IP departments to ensure that these valuable trademarks are recognized and are allowed to be used when registered.