JT International SA v. Commonwealth

Australia’s Tobacco Plain Packaging Act 2011 (“TPP Act”) imposed restrictions on the color, shape and finish of retail packaging for tobacco products. It prohibited the use of trade marks on such packaging other than the use of a brand, business or company name for the relevant tobacco product. Preexisting regulatory requirements for health messages and graphic warnings remained in place, including a requirement that the Quitline logo of the Victorian AntiCancer Council and a telephone number for the Quitline service be included on packaging for tobacco products. The purpose of the TPP Act was to give effect to Australia’s obligations as a party to the Convention on Tobacco Control.

The plaintiffs, tobacco companies JT International SA (“JTI”) and members of the British America Tobacco Group (“BAT”) challenged the TPP Act, argued that it amounted to an acquisition of their intellectual property rights and goodwill on other than just terms, contrary to section 51(xxxi) of the Australian Constitution. 3. The categories of property rights they claimed were affected were, in the case of JTI, its registered trade marks and get-up, and, in the case of BAT, its registered and unregistered trade marks, copyright, get-up, licensing goodwill, design, patents, packaging rights, packaging goodwill and intellectual property licensing rights.

The Court held that the TPP Act did not unlawfully intrude on the plaintiffs' intellectual property rights. The Court reasoned that the right to use a registered design or trademark is a negative right, meaning that the owner has the right to prevent others from using the trademark but does not have the positive right to use the trademark in whatever manner he or she wants.

The Court found that the TPP Act was part of a legislative scheme to control the way in which tobacco products could be marketed. While the imposition of those controls may be said to constitute a taking in the sense that the plaintiffs' enjoyment of their intellectual property rights and related rights was restricted, the corresponding imposition of controls on the packaging and presentation of tobacco products did not involve the accrual of a benefit of a proprietary character to the Commonwealth which would constitute an acquisition.

"It may also be observed that the negative character of the plaintiffs' property rights leaves something of a logical gap between the restrictions on their enjoyment and the accrual of any benefit to the Commonwealth or any other person. Unlike the Newcrest case, there is no expansion in rights, interests, or benefits accruing to the Commonwealth that corresponds to or bears any relationship to the restrictions imposed on the use of the plaintiffs' intellectual property rights. The fact that the restrictions and prohibitions imposed by the TPP Act create the 'space' for the application of Commonwealth regulatory requirements as to the textual and graphical content of tobacco product packages does not constitute such an accrual. Rather, it reflects a serious judgment that the public purposes to be advanced and the public benefits to be derived from the regulatory scheme outweigh those public purposes and public benefits which underpin the statutory intellectual property rights and the common law rights enjoyed by the plaintiffs. The scheme does that without effecting an acquisition." Para. 43.