The unreasonable expropriation of intellectual property or the advancement of public health? This was the question posed by Philip Morris Asia Limited v. The Commonwealth of Australia.
In 2011, Australia passed its “plain packaging legislation,” creating restrictions on the fonts, size, colors, and location of tobacco brand marks on product packaging. The legislation also requires enlarged health warnings and creates limitations on the quantity and color of cigarette products per package. Needless to say, tobacco companies across the world were outraged.
Philip Morris Asia (“PM Asia”), a Hong Kong corporation, owns Philip Morris Australia (“PM Australia”) and PML, both incorporated in Australia. PML owns a whole slew of tobacco trademark licenses that were negatively impacted by Australia’s plain packaging legislation. PM Asia brought suit under the 1993 Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments (“BIT”). Its primary argument was that the legislation’s trademark limitations unreasonably expropriated the value of PM Asia’s investments in Australia. The Commonwealth responded with a thoughtful and solid justification for its legislation as a means to protect the public health of its citizens. The government also convincingly alleged that PM Asia was likely abusing its power under the BIT, in light of its awareness of Australia’s ongoing efforts against tobacco sales. So who has the more convincing argument?
On the procedural front, this case most favorably leans towards Australia. PM Asia had the ability to consider any potential economic impacts to its business prior to its acquisition of PM Australia and PML given its awareness of Australia’s ongoing efforts against tobacco sales. It, therefore, cannot argue that its intellectual property or the value of its Australian investments has been expropriated due to the plain packaging legislation. This prior knowledge will likely be seen as an abuse of power under the BIT.
But in a broader sense, it’s worth questioning whether Australia is overreaching its bounds as a regulator by unreasonably inhibiting consumer choice. Is it reasonable for a government to dictate the consumption of social vices by its citizens?
To begin purely in the realm of philosophy, on one end of this dispute is the claim that such vices (e.g., gambling, alcohol, tobacco) exist in the market simply because there is a demand for it. If citizens want to consume such products and/or services, that is their choice, and governments should not inhibit the free will of its citizens. On the other end of the spectrum is the contention that the government was created for the sole purpose of enhancing the quality of its citizens’ lives by creating order, a system of checks and balances, levying taxes, and providing social welfare services. Vices such as smoking inhibit citizens’ quality of health. Furthermore, private corporations solely concerned with profits will do whatever is necessary, by way of catchy advertising and alluring products, to exploit the weaknesses of human character. It is, therefore, the government’s responsibility to protect the citizenry from such deceit through legislation like the one in question in this case.
There is no easy middle ground in this case. Therefore, I think it would be wise to step away from vices and social conduct, and turn, instead, to the role of intellectual property in international business. The plain packaging legislation can, in many ways, be seen as giving a government broad-reaching authority over international trademarks. This, I believe, is a more easily settled debate. To take away a corporation’s right to use its own distinguishing mark, over which it has a legal right to exclude use by others, strips it of its ability to engage with its consumers. The entire concept of brand loyalty becomes compromised. To limit intellectual property use in an industry often burdened with social stigma can serve as a starting point for further and more restrictive regulation of intellectual property in other industries. There is no such thing as moral utility in the world of intellectual property law. To keep it as such is the necessary tradeoff for promotion of innovation and advancement globally.
Philip Morris Asia v. Australia, Case No. 2012-12, Notice of Claim, (UNCITRAL Jun. 27, 2011).
Philip Morris Asia v. Australia, Case No. 2012-12, Australia’s Response to the Notice of Arbitration, (UNCITRAL Dec. 21, 2011).