2020 · Intellectual Property · International Trademark Law · IP Policy · Tobacco Plain Packaging · Trademark · Uncategorized

Does Article 20 of TRIPS require a Rigid & Exact Set of Factors to Determine Whether an Encumbrance is Unjustifiable?

Last week, I blogged about the recent decision of the WTO’s Appellate Body that upheld Australia’s  tobacco plain packaging measures. While the Appellate Body largely agreed with the earlier interpretation of both Articles 16(1) and 20 of the TRIPS Agreement by a dispute settlement panel (hereinafter, panel), there are some notable differences in the way that the Appellate Body approached the interpretation of the term ‘unjustifiably’ in Article 20. One of these key differences concerns the factors that are to be considered when determining whether an encumbrance is unjustifiable pursuant to Article 20 of the TRIPS Agreement and this will be the focus of this blog post.

Based on its own analysis, the panel developed a test consisting of three factors that in its view should be considered in determining whether the use of a trademark in the course of trade is being ‘unjustifiably’ encumbered by special requirements. According to the panel:

In light of the above, we find that a determination of whether the use of a trademark in the course of trade is being “unjustifiably” encumbered by special requirements should involve a consideration of the following factors:

      1. the nature and extent of the encumbrance resulting from the special requirements, bearing in mind the legitimate interest of the trademark owner in using its trademark in the course of trade and thereby allowing the trademark to fulfil its intended function;
      2. the reasons for which the special requirements are applied, including any societal interests they are intended to safeguard; and
      3. whether these reasons provide sufficient support for the resulting encumbrance.[1]

However, it is not entirely clear from the panel report whether, in determining if the use of a trademark is being unjustifiably encumbered, the consideration of these three factors is mandatory or not. Crucially, when the panel initially stated its three-factor test in the paragraph quoted above, it stated that ‘a determination of whether the use of a trademark in the course of trade is being “unjustifiably” encumbered by special requirements should involve a consideration of the following factors’.[2] This suggests that the three factors must considered. However, in a latter part of the same report, the panel seems to suggest that a consideration of these three factors is not mandatory. In this latter part of the report, the panel stated that:

…a consideration of whether the use of a trademark is “unjustifiably encumbered” will normally involve a consideration of various elements, including the nature and extent of the encumbrance arising from the special requirements at issue, the reasons for which these requirements are applied, and whether these reasons sufficiently support them.[3]

While this might be a case of using imprecise language to describe the same test, on appeal, the Appellate Body felt the need to clarify the situation and in this regard it expressed its preference for a less rigid test in determining whether the use of a trademark is unjustifiably encumbered. In a footnote, the Appellate Body observed that:

We note, however, that, in paragraph 7.2430 of its Report, the Panel used the auxiliary verb “should” in introducing the factors pertinent to the examination of whether the use of a trademark in the course of trade is unjustifiably encumbered by special requirements. Later, the Panel stated that “a consideration of whether the use of a trademark is ‘unjustifiably encumbered’ will normally involve a consideration of various elements, including the nature and extent of the encumbrance arising from the special requirements at issue, the reasons for which these requirements are applied, and whether these reasons sufficiently support them.” (Panel Report, para. 7.2441 (emphasis added)) We wish to clarify that, while an inquiry under Article 20 could include the consideration of the above-mentioned factors, the degree of discretion vested in Members under Article 20 does not call for a rigid and exact set of considerations that are relevant for the examination of whether the use of a trademark is unjustifiably encumbered by special requirements[4]

The Appellate Body therefore modified the three factor test that was developed by the panel and adopted a less rigid approach. In this regard, the Appellate Body stated thus:

…we agree with the Panel that a determination of whether the use of a trademark in the course of trade is being “unjustifiably” encumbered by special requirements could involve a consideration of: (i) the nature and extent of encumbrances resulting from special requirements, taking into account the legitimate interest of the trademark owner in using its trademark in the course of trade; (ii) the reasons for the imposition of special requirements; and (iii) a demonstration of how the reasons for the imposition of special requirements support the resulting encumbrances.[5]

The approach of the Appellate Body in this regard shows greater deference to states and it respects the regulatory autonomy that states have under Article 20 of the TRIPS. However, this less rigid approach may arguably create some uncertainty for states with regard to the criteria or set of considerations that a future dispute settlement panel might consider relevant for determining whether the use of a trademark is being unjustifiably encumbered by special requirements. At the same time, one could also argue that the most important issue is not how the factors or criteria for determining whether an encumbrance is unjustifiable is defined but how these are applied to the facts of each specific case. Ultimately, since the text of Article 20 of the TRIPS Agreement does not warrant a strict and rigid approach, unlike (for instance) the text of Articles 13 and 30, this clarification from the Appellate Body is commendable.

(An extended critical analysis of this dispute is contained in my forthcoming book on international intellectual property law)

[1]  Australia – Plain Packaging, Panel Report, para 7.2430.

[2] Ibid para 7.2430 (emphasis added).

[3] Ibid para 7.2441 (emphasis added).

[4] Australia – Plain Packaging, Appellate Body (AB) Report, para 6.651, footnote 1683.

[5] Australia – Plain Packaging, AB Report, para 6.651 (emphasis added).

2 thoughts on “Does Article 20 of TRIPS require a Rigid & Exact Set of Factors to Determine Whether an Encumbrance is Unjustifiable?

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