Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A (the Claimants) and Oriental Republic of Uruguay (The Respondent), ICSID Case No. ARB/107.
Background
Intellectual property, for a long time, did not figure as a form of property addressed by general international law of expropriation and compensation, whether full or fair and equitable. Bilateral investment agreements (BITs) appearing as of 1959 did not explicitly mention intellectual property. Modern BITs, however, explicitly or implicitly include the protection of intellectual property rights owned by foreign investors. Comprehensive preferential trade agreements contain chapters on investment protection, including the protection of intellectual property rights. Also, intellectual property was recognized in Anheuser Busch Inc. v. Portugal in 2007 by the European Court of Human Rights, to be included in Protocol I to the European Convention for the Protection of Human Rights (ECHR 2007 I). This shift reflects the increasing importance of intellectual property in a globalized economy relying upon global value chains. Litigation on intellectual property related investments, however, has remained scarce up to 2020. Eli Lilly Company brought a case against Canada following adjustments made in patent law (ICSID, Case No UNCT/14/2, award of March 16, 2017). One year prior, in 2016, a court of arbitration ruled on the very first investment protection case on intellectual property ever brought. Philip Morris v. Uruguay involved a Swiss tobacco company, and the case was litigated on the basis of the Agreement between the Swiss Confederation and the Oriental Republic of Uruguay on the Reciprocal Promotion and Protection of Investments dated 7 October 1988. This is one of more than 120 BITs that have been concluded but are rarely invoked. The case marks the very first international litigation relating to the protection of intellectual property rights under a bilateral investment agreement. It addresses restrictions imposed on the use of trademark rights in combatting smoking, and parallels a case brought by Cuba, Dominican Republic, Honduras and Indonesia that was litigated in the WTO against comparable but not identical measures imposed by the Government of Australia (Australia – Certain Measures Concerning Trademarks, Geographical Indications and other Plain Packaging Requirements applicable to Tobacco Products and Packaging, WT/DS 435/R, WT/DS441/R, WT/DS441/R, WT/DS458/R,WT/DS467/R (28 June 2018), WT/DS/435/AB/R, WT/DS44/AB/R (9 June 2020). The two cases raise interesting questions as to what extent owners of private trademarks have a right to use these vis-à-vis governments, and to what extent health policy measures can restrict the use of trademarks. In both cases the challenges were dismissed and governmental measures restricting the use of trademarks approved.
Summary
Philip Morris v. Uruguay addresses measures implemented by the Republic of Uruguay on the basis of the WHO Tobacco Framework Convention aiming to reduce the health hazards of cigarette smoking. The measures imposed included the requirement to include health warnings and pictograms of harmful effects on the package to avoid communicating an impression that some products are less dangerous than others, and to limit trademark branding to the remaining 20% of the package. The Swiss company Philip Morris argued that the measures unduly restrict the use of their trademarks and amount to regulatory taking, thus subject to full compensation. The Republic of Uruguay argued that private intellectual property rights do not entail a right to use in relation to governmental relations. The court of arbitration ruled in its 170-page opinion that assessment of the measure does not depend on the issue of the right to use, the basis for assessment instead being expropriation, regulatory taking and fair and equitable treatment. It found that trademarks do not amount to a protected commitment, and that the measures neither amount to expropriation, regulatory taking or inequitable or unfair treatment. The complaint was fully dismissed.