1994 X'FY ARVA : TYGAT. AFFATRIS
L SiMOKWG AND FMAT TH MSURS
Smoking and health related issues have a serious
potential impact on BATCo
and its group companies. These issues may give
rise to product liability
claims from smokm, personal injury claims firom
non-smokm in relation to
environmental tobacco smoke, and legal challenges
to normal commercial
practices such as advertising.
Attacks on the industry by anti-smoking groups,
health authorities and the
media continue to show a trend worldwide of
proposals for new legislation
affecting the marketing and sale of tobacc
products- Legal Department will
continue to work closely with Corporate Affairs.
Smoking Issues and R&D
departments in resisting unwelcome legislative
proposals.
BATCo's strztegy for handling smoking and health
issues is to take pro-active
steps in order to protect the Group's position.
These include: -
witness identification work in respect of
potential lawsuits,
documentation of relevant issues including, public
awareness of the
claimed risks of smoking in individual markets,
the introduction of a practical and consistent
records management
policy,
reseanh work consistent with the Company's legal
obligations, and
liaison with national manufacturing associarions
in individual markets
and discussions with Governments on legislative
proposals and
voluntary codes of practice.
In addition, BATCo's policy will continue to be
stre, uously to defend product
liability and ETS claims brought against the
Company.
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EL 1 N I VI I rCTUAT - PROPIFRTY
A- Rack-ound
It is essential that the Group's intellectual
property (in particular its trademark
portfolio) should be protected in order to
preserve and enhance the goodwill
attaching to the Group's brands and to develop
competitive advantages in our
business.
Traderr--ks
There will continue to be a number of
developments, both legal and commercial,
which affect BATCo's n-aditional perception and
use ofwademarks. These are:
a) the creation of a single unified market in the
EU based on the removal of
national barriers to the fi-ee movement of goods.
This approach is also
influencing other economic groups e.& the Andean
Pact which has very
recenitly introduced innovative trademark
coexistence provisicas in its
laws. At present the legal consequences resulting
from developments in
the EU are;
i. It is not normally possible for a trademark
owner to prevent
branded products sold in one EU country from being
exported to
other countries within the ELT.
U. A trademark owner cannot impose restrictions on
its lic-muees or
distributors in the EU which prohibit them fmm
selling in the FU
outside specified countries.
iii. HarmonLcation of trademark laws in the EU may
cam some
complex problems for the BAT Group due to the long
history of
split ownership ofsome important marks.
b) the developments in the concept of trademark
use, i.e. under most
national trademark systems some use ofa trademark
is required to justify
its remaining on the Register if the registration
is attacked by a
competitor. Mere token Wes rnay not be wfficient
for this purpose and
.genuine commercial use* may be necessary.
C) the increasing range and extent of advertising
bans on tobacco products
is likely to affect the use oftrademarks on
non-tobacco products.
d) countmfeits, look alikes and trademark piracy.
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2. Coovriqht
Copyright is important to BATCo in protecting
brand image for its products in
the market place. ParticuW beriefits afforded to
BATCo by copyright include
the following:-
a) Copyright automwically vests in the author and
does not need to be
registered on any register in order to be
enforced- It can therefore be
used against an infiinger immediately without
incurring the lengthy delays
often assodated with trademark inflMement
proceedings. To preserve
our copyrights it is important that all onginal
drawings and artmmrk for
labels, packs and advertising are signed, dated
and saffiy stored and that
the Group should have water-tight coraacts with
its desigmrs and
agencies vesting the ownership of copyright in
BATCo or the relevant
group company-
b) Copyright can provide a right ofaction where
BATCo is unable to obtain
trademark protection for any reason e.g. because
of non-use.
C) A breach of copyright can have a very
bene:ficial psychological effect on a
judge dearing with a trademark infringement when
he sees a complicated
design copied down to the last detail.
d) Copyright may cover the total design of a pack
or label whereas a
registered trademark generally only protects a pan
ofthe product get-up.
Patents
Patents are important to BATCo in protecting its
new technology. Some of the
developments mentioned above in relation to
trademarks apply equally to the
exploitation of patents e.g. patent protection
cannot be used to exclude parallel
imports within the EC and in some countries if a
patent is not used, it may be
vulnerable to the issue of a compulsory licence to
third parties including
competitors.
B. Future Policv
BATCo will continue to register the Group's
trademarks in all territories deemed
appropriate to each mark. New registration
policies based on priority brands and
territories will be developed.
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2. Group Trademarks Department ('GM*) in Millbank
will continue to be
responsible for the protection of the GrouVs
international trademarks on a global
basis. It is essential that GM shoWd receive as
much information as possible
about the use or proposed use of trademarks
throughout the world and tbat
marketing departments, both at an international
and a local level, communicate
their priorities so that GTD know what trademarks
and territories are seen as
important for furtire brand development. In the
light of this information, GTD
can make judgements and recommendations about the
Group's trademark
portfolio, including the opportunity to dispense
with trademarks that are no
longer of interest.
GTD will continue to have a key input with regard
to Brand Control Procedures
which miust be complied with prior to the launch
of any new brands. These
procedures must be originated by the RBUs but GTD
will ensure the legal
intem-iry of brand use including trademark
verification and protection and
appropriate licences (see M 3 below). The launch
of any brand must be signed
off by the RBU (Marketing and Finance), Accounts,
GTD and finally the
Markeding Director (or his delegate).
4. BATCo will keq under review the operation of
those agreements to which it is
a parry and which have the effect of dividing
European markets for particular
brands in order to identify potential legal
threats to its markets and potential
marketing opportunities afforded by the creation
of the Single European Market.
5. BATCo will not knowingly adopt trademarks
registered by its competitors or
s--k to usurp the copyright or patent rights of
its competitors. It must however,
take a strong line in situations where competitors
seek to encroach upon
BATCo's rights. A tough policy towards
infringement is of particular
importance in markets where new products seek to
gain market share by
imitating or'feeding off established brand names.
6. Copyright should be used as a supplement to
BATCo's trademark rights, so as to
widen the scope for retaining BAT's exclusive
right to use its brand names and
label designs.
7. BATCo will continue to seek patent protection
for new technology which it
invents in those countries where the technology
may be of relevance to its
business and future operations or where BATCo
wishes to block the use of the
technology by its competitors. Patent filing is
essential to protect the fruits of
BATCo's research. Howcver~ patent filing tends to
be more expensive than
trademark registration and therefore there is a
requirement to be more selective
in the number of international filings which are
made of any particular patem
Patents in which BATCo has no immediate interest
will be offiered to other
companies in the Group. It is essential that there
should be regular exchanges of
information about the patent filing programmes of
BATCo and other principal
tobacco operating companies, namely Brown &
Wiffliamson, BATCF and Souza
Cruz- Othm-wise, there is a risk of duplication or
conflict if patent filing
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BATCo document for Province of BritiSh Columbia 23
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prograrnmes relating to the same area of techwlogy
are pursued in isolation by
the companies involved.
Legal DeparmentIGM/Patents Department should
commue to Ham with the
R&D Department in order to preurve the
huellectrzal property rights JCV~;2M/l
with R&D ac:ivities. It is particularly important
to ensure that the Group's
ownership of inventions, new developments and
confidential information is
propedy safeguarded by seeking to secure patent,
copyright and trademark
protection at an early stage. In dealings with
outside agencies or other third
parties who rnay be involved with BATCo in RAD
work it is intportam that
BATCo continues to make every effort to secure
that whenever possible the
ownership of intellectual property rights arising
from such work vesLs in BATCo
and confidential and proprietory information is
propedy protected by contract.
C. Comimmciation
The complex imemational make-up ofthe BAT
Industries Group m== that it is
essential to maintain adequate communication and
infbnnation exchange
between overseas operating companies and the BATCo
Legal Department
(including G-LD and Patents Department) on the one
hand and the overseas
operating companies and other tobacco companies in
the BAT Industries group
on the other hand. This helps to avoid aMtional
problems in the protection of
the Group's intellectual property rights which
have to be viewed on a
comprehensive international basis if they are to
be properly maintained and
managed. To zssist in this process, GTD will
mhance its computer "em ffir
administering the Group's ti-ademark portfoHo.
M KAJOR CO1,7RACTS
Maior Contrams
It is BATCo's policy that all major contracts (as
defined below) emered into by
the Company and its subsidiaries should be
reviewed by appropriate in-house or
external lawyers. For BATCo and BATUKE major
contracts, BATCo Legal
Department/Group Trademarks Department should
always be consulted. In
additiom *or contracts entered into by
subsidiaries in =egories (1). (9), (10),
(13) and (14) and A trademark licences should in
any event be reviewed by the
BATCo Leo Department/Group Trademarks Department.
The purpose of the review is to ensure that aU
material risks are idectified and
appropriate action taken prior to entering into a
contractual commitment so that
BATCo or the relevant subsidiary does not
unintentionaDy accept onerous or
unusual contractual commitrnents. Ultimate
approval of a major contract
remains with BATCo or local line m-grment; the
purposes of the review are
to alert management to opportunities for reducing
ri" to enable management
to negotiate prices that recognise specific risk
arms associated with proposed
contractuai tm-ms, and to ensure that BATCo or the
relevant subsidiary is
protected as far as is practicable against the
occurrence of unforeseen C1,
circumstarices or unscrupulous behaviour by the
other contracting party. r1l;
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The legal review is intended to be additional to
financial and tax reviews to
which a proposed contract will also be subjecL
Questions of methods of
payman, compliance with exchange controls zrW
curr=icy rish will normally be
the responsibility of the relevant Finance
Director.
For the purposes of this policy, major contracu
should be regarded as includ-
(1) Conw= or licensed rnamdkcnning agreements
placed or accepted by BATCo
and its subsidiaries.
(2) Cont:racts for the purchase or lease of land
and bufldings.
(3) Contracts for the purchase of plant and
machinery where not subject to BATCo
standard purchase terrns and conditions.
(4) Leaf and materials procurement contracts where
not subject to BATCo's or a
subsidiary's s=dard purchasing terms and
conditions.
(5) Snancing agreements relating to the provision
of security over BATCo's or a
subsidiar/s assets, capital reconstructions,
equity and bond issues.
(6) Cont-Acts outside the nomial scope ofBATCo's
or a subsidiatys business.
(7) Agency and distribution contracts.
(8) Design, advertising, marketing and sponsorship
agreements.
(9) Agreements for the provision or acquisition of
technical know-how.
(10) Patent licences to or from a subsidiary or a
third party.
(11) Consultancy contracts involving access to
commercially sensitive infbrmation
and/or the production of valuable intellectual
property.
(12) Leaf export contracts which vary in any
material respect from BATCo's
established guidelines for such cordracts.
(13) Mergers and joint venture agreements.
(14) Acquisitions and disposals of businesses.
2. Contracts reeistration smem.
The contracts registration system set out in the
BATCo Manual of Operating
Procedures volume 1, section 9 01 must be observed
in relation to an major
contracts entered into by BATCo and BATUKE C--
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BATCo document for Province of BritiSh Columbia 23
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Tradern-k T ;cences
Trademark licences relating to the exploitation of
the Group's trademarks
be entered into oWy in accordanze with the BAT
Group's established policies.
These are currently it=rporated in the docunects
entided respectively 'rhe
Responsible Companies Register" (Jamuory 1997),
"The Management of
Trademarks Regisa-Ation Policy" (July 1988) and
`Trademark Protection Policy'
(July 1988) although new policies are in the
course ofbeing developed.
31 March 1994
PLC638fls/S.143
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BATCo document for Province of British Columbia 23
April 1999