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Focus: Food – November 2005

In this issue: we look at an American Bill that could stop obesity law suits; a series of changes to the Australia New Zealand Food Standards Code; a move by McDonald's to disclose nutritional information; and a Federal Court decision that indicates Australia is not to become a 'resting ground for bad patents'.

American 'Cheeseburger Bill' may deep-freeze obesity law suits

In brief: The US House of Representatives has passed a Bill that provides for a prohibition on civil actions against food manufacturers or sellers on grounds that they have caused excess food consumption, weight gain, obesity or associated health conditions. The Bill is now being considered by the US Senate. Lawyer Chris Peadon discusses this recent development and whether Australia is likely to follow suit. 

Background

In AAR's Focus: Food, April 2005, we reported on developments in the class action begun by the Pelman family in August 2002 in the Supreme Court of New York against McDonald's, and the US legislative response. Briefly, the Pelmans sued McDonald's on behalf of all children and their parents who had eaten at its restaurants and developed obesity and other adverse health effects.

In January 2003, the court granted an application to strike out the claim, but gave the Pelmans leave to replead.1 The family filed an amended complaint, alleging that McDonald's had contravened section 349 of the New York Consumer Protection Act, which makes it unlawful to engage in deceptive acts in trade or commerce (similar to s52 of Australia's Trade Practices Act 1974 (Cth)) and s350, which prohibits false advertising. The court again struck out the proceedings, this time on the basis that the Pelmans had failed to plead any causal connection between the consumption of food from McDonald's and the alleged injuries.

Next, the US Court of Appeals for the Second Circuit allowed the appeal against dismissal of the claim, in which the family alleged that McDonalds had unlawfully engaged in deceptive acts in trade or commerce, on the basis that it would be sufficient if the causal connection was established by the evidence and ordered that the claim proceed to discovery.

Immediately afterwards, a Bill was introduced into the US House of Representatives in the 108th Congress, which proposed limiting the circumstances in which a person could bring a civil liability action against a food or beverage manufacturer or seller arising out of a person's consumption of food or beverages, resulting in obesity or other adverse health consequences.

The 108th US Congress ended without the US Senate acting on the Bill passed by the House of Representatives.

The 'Cheeseburger Bill'

On 19 October 2005, the US House of Representatives in the 109th Congress passed the Personal Responsibility in Food Consumption Act of 2005, popularly known as the 'Cheeseburger Bill'.

The introductory sections of the Cheeseburger Bill state that the US Congress acknowledges that:

  • a person's weight gain, obesity or associated health condition is based on a multitude of factors including genetics and lifestyle, such that a person's condition 'cannot be attributed to the consumption of any specific food or beverage';
  • the food and beverage industries make a significant contribution to the US economy; and
  • actions seeking to blame individual food and beverage providers for adverse health conditions associated with weight gain or obesity are 'legally frivolous and economically damaging'.

The stated purpose of the Cheeseburger Bill is to foster a culture of accepting personal responsibility to promote a healthier society.2

The US House of Representatives seeks to foster such a culture by prohibiting civil actions brought against 'a manufacturer, marketer, distributor, advertiser, or seller' of any food or beverages related to a person's accumulated food consumption and weight gain, obesity, or associated health conditions, and providing for the immediate dismissal of any such actions that have already begun. Actions will be exempt from the prohibition if they are based on allegations that:

  • a food manufacturer or seller knowingly violated a federal or state statute applicable to the marketing of food or beverages and intended that a consumer rely on that violation;
  • a consumer did rely on that violation; and
  • such reliance was the proximate cause of the consumer's weight gain, obesity or associated health condition.

The Cheeseburger Bill provides that, in all exempt actions, the plaintiffs will be required to plead these matters with particularity and also plead the provision of the Act providing the exemption.

While the Cheeseburger Bill received strong support in the US House of Representatives (it passed by 306 votes to 120), there are reports that it may not receive such support in the US Senate, which declined to consider a Bill to a similar effect passed in the 108th Congress.

Similar legislation has been passed in approximately 20 US states.

How will this legislation affect proceedings in Pelman v McDonald's and similar actions?

If the Cheeseburger Bill is enacted, it may not lead to the immediate dismissal of the proceedings in Pelman v McDonald's, because the Pelmans allege a contravention of a state law and, therefore, may fall within the exemption provided for by the Bill.

Nevertheless, the Pelmans will be required to plead with particularity reliance on the contravention and the causal connection between that reliance and the injuries alleged. That is, the Pelmans must plead such matters as what else they ate, how much exercise they did and whether there was a family history of the conditions allegedly caused by eating McDonald's food – matters that the US Court of Appeals of the Second Circuit held it was currently unnecessary to plead and which could be left to the evidential stage of the proceedings. Consequently, while the Pelmans' claim may fall within the scope of the exemption, the practical effect is likely to be to give McDonald's grounds for seeking to strike out the claim as currently pleaded. If this happens, it may be difficult for the Pelmans to satisfy the Act's requirements.

Will Australia follow suit?

At this stage, it seems unlikely that Australia will enact similar legislation, for the reasons set out in AAR's Focus: Food, April 2005: namely, the limited prospects of success of similar actions in Australia in light of recent emphasis by Australian courts on notions of free will, individual choice and responsibility as relevant to determining liability in negligence-type claims, and recent civil liability reforms in relation to 'obvious risks' and the application of the doctrine of voluntary assumption of risk.

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FSANZ seeks to strengthen and extend country of origin labelling requirements

In brief: Food Standards Australia New Zealand has recommended a series of changes to the Australia New Zealand Food Standards Code. Law Graduate Robert Kerr and Partner Peter O'Donahoo considers the recommendations made to strengthen and extend country-of-origin labelling requirements.

Introduction

Food labelling falls under the jurisdiction of Food Standards Australia New Zealand (FSANZ). FSANZ is a bi-national independent statutory authority under the Australian Food Standards Australia New Zealand Act 1991 (Cth) and it is subject to policy guidelines set by the Australia and New Zealand Food Regulation Ministerial Council (Ministerial Council).

FSANZ is responsible for the Australia New Zealand Food Standards Code (the Code), which regulates food labelling in Australia and New Zealand. When approved by the FSANZ Board and subject to a review by the Ministerial Council, standards become law in Australia by being adopted by reference under the food laws of the states and territories. In New Zealand, the Minister of Health must gazette the food standard under the Food Act 1981 (NZ). However, to date, New Zealand has preferred a voluntary approach to country-of-origin labelling and has never legislated to make it mandatory (except for wine products).

FSANZ is in the process of reviewing the standards in the Code concerning country-of-origin labelling. The principal objective of the review is to ensure that adequate information is provided about the origin of food products, to enable consumers to make informed choices. There is also an acknowledgement that the benefit to consumers must be balanced with the cost to industry.

The review is in its final stages and a Final Assessment Report was published on 5 October 2005 (the report). The proposals could become law in Australia as early as this month. New Zealand has not yet indicated whether it intends to implement the proposals and introduce a mandatory country-of-origin labelling regime for the first time.

What is the current law?

In Australia, the current standard in the Code requires labels to be attached and to contain a statement that identifies the country or countries where the food was produced. This can often be satisfied by identifying the country where the food was packed for retail sale. Also, if any of the goods do not originate in the country, it is often acceptable to give a statement saying that the food is made from ingredients that are imported.

This applies to all packaged food. It also applies to the following unpackaged foods that do not originate in Australia or New Zealand:

  • fish;
  • fresh vegetables;
  • nuts; and
  • fruit.

Fruit juice that contains one or more imported fruit ingredients must also comply, and there are specific requirements for spirits that are produced in countries other than Australia.

However, the Code is not the only source of law on country-of-origin labelling. In Australia, the Trade Practices Act 1974 (the TPA) prohibits conduct that is misleading or deceptive, and prohibits the making of false or misleading representations about the origin of goods. Division 1AA of Part V of the TPA, which contains sections 65AB and 65AC, explains how to make country-of-origin representations that do not contravene the prohibitions on engaging in misleading or deceptive conduct (s52), falsely representing that the goods have had a particular history (s53(a) and s75AZC(1)(a)), and making false or misleading representations concerning the place of origin of the goods (s53(eb)).

Section 65AB provides that where country-of-origin representations are made (such as where a label states that a product is 'made in' a particular country), a corporation does not contravene the prohibitions if:

  • the goods have been substantially transformed in that country;
  • 50 per cent or more of the cost of producing or manufacturing the goods (as the case may be) is attributable to production or manufacturing processes that occurred in that country; and
  • the representation is not a 'product of' or 'produce of' representation (to which s65AC applies), or a prescribed logo representation (to which s65AD applies).

Section 65AC provides that a corporation does not contravene the prohibitions if it makes a representation that goods are the produce of a particular country (whether the representation uses the words 'produce of', 'product of', or any other grammatical version of the word 'produce') if:

  • the country was the country of origin of each significant ingredient or significant component of the goods; and
  • all, or virtually all, processes involved in the production or manufacture happened in that country.

The TPA is administered by the Australian Competition and Consumer Commission (the ACCC). On 30 June 2005, the ACCC published a guide for businesses about country-of-origin labelling: Food and beverage industry: country of origin guidelines to the Trade Practices Act.

In New Zealand, there are no mandatory country-of-origin labelling requirements (except for wine products). However, where the country of origin is voluntarily indicated, the Fair Trading Act 1987 (NZ) prevents businesses from misleading consumers about the origin of goods. The Act is administered by the Commerce Commission, which has published a guide for businesses: Food Labelling, Promotion and Marketing – a guide for manufacturers, importers and retailers.

What is proposed?

The report recommends developing a revised standard in the Code. Nothing radically new is proposed – the goal is more to extend and strengthen the current regime by adopting the following recommendations:

  • For whole foods, the actual country where the food was produced, made, manufactured, or packaged must be identified on the label. It would no longer be adequate to note that ingredients are 'imported'.
    However, for mixed foods, the recommended standard does not go as far as requiring information about the country of origin of each ingredient. For such foods, it will be adequate to indicate where the food was made, manufactured or packaged for retail sale and that the food is constituted from ingredients imported into that country or from local or imported ingredients.
  • The existing requirements for unpackaged food should be extended to a wider range of foods, including semi-processed fish, fresh and preserved pork, and whole or cut fruit and vegetables that have been preserved, pickled, cooked, frozen, or dehydrated.
  • New requirements be introduced for labelling and display signs to make sure that the statement of country of origin is clear and unambiguous.
  • Changes in the characterisation of certain products, for example, specific requirements relating to fruit juices, would be removed because they would be treated under the general banner of packaged food.
  •  In Australia, the terms 'made in' and 'product of' must continue to comply with trade practices legislation, as discussed above.

The Ministerial Council met in Sydney on 28 October 2005 and decided that FSANZ should explore one more issue: where one or two whole pieces of fruit and/or vegetables are packaged together (even if there are other incidental ingredients), it was proposed that the label should identify the actual country of origin of each of the two pieces of fruit or vegetable. FSANZ has not indicated when it will report back on this issue.

Stated benefits of proposed requirements

The purported benefits identified in the report of the proposed changes are:

  • that consumers will be provided with clear and unambiguous information on the source of a food product, both packaged and unpackaged;
  • unpackaged foods will be treated in a like manner – whether locally produced or imported, which would address a present inconsistency;
  • unpackaged foods will be brought into line with general labelling provisions in the Code;
  • the Code will become consistent with trade practices legislation; and
  • consumers will be able to identify locally produced fresh and semi-processed unpackaged foods, which research suggests are preferred by consumers.
Transitional issues

There will be a phase-in period with different time periods specified for different products. For example, some foods with relatively long shelf lives will have a longer phase-in period than foods with shorter shelf lives, to account for differing turnaround timeframes.

Compliance and costs of implementation

The costs to producers, processors and distributors are likely to be:

  • the one-off cost of changing the label design. This will primarily affect packaged food suppliers; and
  • the recurring cost of re-labelling products to comply with the Code. This will affect importers and some retailers who need to re-label packaged food that they import.
Where will the changes mainly be felt?

The principal costs will be borne in relation to packaged goods. In relative terms, New Zealand producers are likely to be more affected than Australian producers if New Zealand chooses to implement the proposals, because the current country-of-origin labelling standard does not apply in New Zealand (except for certain wine products).

For fresh and unpackaged foods, the major impact will be on the retail sector, which will be required to provide more specific information than is currently the case. The main change will be the need to provide display materials indicating country of origin, adjacent to food on display.

Further information

The report provides detailed information about the changes, which are summarised in general terms in this article.

Please contact us if you would like more information on how the proposed changes to the Code apply to specific products.

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McDonald's move to disclose nutritional information

In brief: McDonald's has announced plans to roll out nutritional information on its food packaging worldwide. Lawyer Clare Cunliffe reports.

McDonald's announced last week that it would start printing nutritional information on its global food packaging. This information is already available from stores and the company website.

McDonald's is already required to include nutritional labelling on food sold in some countries, but it has announced plans to roll out the packaging worldwide. McDonald's plans to have the new packaging in more than 20,000 of its roughly 30,000 restaurants by the end of 2006.

This change follows McDonald's recent efforts to promote balanced, active lifestyles, eliminate 'super size' menu options, and add healthier options to its menu.

The campaign followed the 2004 release of Morgan Spurlock's film, Super Size Me. It also follows recent attempts in the US to bring a class action against McDonald's (as reported in our article, US 'Cheeseburger Bill' may deep-freeze obesity law suits, above). It will be interesting to see whether other food manufacturers adopt a similar approach to providing nutritional information for their products.

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Australia not to become a 'resting ground for bad patents'

In brief: Senior Associate Caroline Ryan outlines the recent Federal Court decision that considers the validity of a selection patent against the backdrop of international food technology research and development.

Background

Ajinomoto Co., Inc (Ajinomoto) is the proprietor of Australian Patent No. 727199, entitled 'Sweetener composition improved in taste' (the patent ). The invention described in the patent relates to a sweetener composition now known commercially as Neotame, Aspartame and/or Acesulfame K.

Neotame was the subject of Australian Patent No. 664663 (the Nofre Tinti patent), entitled 'novel compounds derived from aspartame which are useful as sweetening agents and to their method of preparation'. Neotame was the invention of French scientists, Claude Nofre and Jean-Marie Tinti, and the result of an international research program conducted with The NutraSweet Company. 

The evidence established that it was well known as at 10 March 1997 (the priority date) that intense sweeteners could be blended, and that using sweeteners in combination often produced a composition that exhibited taste characteristics closer to that of sucrose. Aspartame and Acesulfame K were both commercially used as at the priority date, and the evidence established that it was commonplace to blend the two sweeteners in diet soft drink products.

NutraSweet Australia Pty Ltd (NutraSweet) sought to attack the validity of Ajinomoto's patent on the grounds of want of novelty, obviousness and lack of fair basis. On 28 October 2005, Justice Finkelstein found the grounds of obviousness and lack of fair basis had been established. 

Obviousness

NutraSweet based its claim of obviousness on common general knowledge as at the priority date, together with the Nofre Tinti patent, for the purposes of establishing section 7(3) of the Patents Act 1990 (Cth) (the Act).

Obviousness is tested with reference to the knowledge of a notional relevantly skilled person, being someone who has a practical interest in the subject matter of the invention. The notional skilled addressee in this case was considered to be a team of people interested in the investigation of intense sweeteners (either alone or in combination) for industrial application. Such an investigation was considered to include the selection, evaluation and blending of intense sweeteners, which required a rudimentary knowledge of chemistry, food technology, sensory evaluation of food and an appreciation of the commercial use and application of intense sweeteners. 

Ajinomoto asserted that this ground of invalidity should fail, given that there was an absence of such research being undertaken in Australia as at the priority date and, therefore, no person or team in Australia could be considered to be skilled in the relevant art. 

This submission was rejected on the basis that it implied that a patent can only be struck down for lack of an inventive step if there is some industry in Australia that would be affected by the grant of the patent. The evidence demonstrated that at the priority date, there were individuals working in closely related areas with an interest in the relevant information in Australia, and that the manufacturers of intense sweeteners conducted research on a global scale. Particularly relevant to this case was evidence of the wide circulation of international textbooks and journals in Australia that would ordinarily be referred to by a person interested in the area. Justice Finkelstein stated that if such information was ignored, 'Australia would become a resting ground for bad patents'.

In relation to the state of common general knowledge in Australia as at the priority date, the concept of blending intense sweeteners was not only known, but had been commonly practised since the 1960s. Similarly, the evidence established that, as at the priority date, Aspartame and Acesulfame K were commercially used intense sweeteners that were known to be suitable for blending, particularly as the sweetening agent for diet soft drinks.

In relation to the Nofre Tinti patent, the evidence established that a patent literature search would have been undertaken by the notional skilled team, and that the Nofre Tinti patent would have been ascertained, understood and regarded as relevant by the notional skilled team for the purposes of s7(3) of the Act.  To this end, the evidence established that the Neotame compound, as described in the Nofre Tinti patent, would have been considered attractive to the notional skilled team, as it displayed high intensity sweetness (and therefore potential cost benefits), similar properties to the commercially successful sweetener Aspartame, and appeared to be a promising candidate for blending.  The evidence further established that it would have been expected at the priority date that a blend comprising of Neotame, Aspartame and/or Acesulfame K would display a sweetness quality closer to that of sucrose than any one of the individual compounds.

On this basis, the invention described in the Ajinomoto patent was held by Justice Finkelstein to be obvious.

Fair basis

The other successful ground of invalidity related to Claims 2 to 7 of the patent, which identified specific ratios of the individual sweeteners that, when blended, displayed a sweetness quality closer to that of sucrose than any one of the individual sweeteners. 

The evidence established that there were combinations selected in claims 2 to 7 of the patent that would not result in the promised improvement in sweetness quality, as the ratios claimed were so wide as to be 'almost unlimited', and not every combination selected was useful.

Conclusion

Justice Finkelstein's decision of NutraSweet Australia Pty Ltd v Ajinomoto Co., Inc [2005] FCA 1524 acknowledges that food technology research and development is a global industry, and rejects the proposition that a patent can only be struck down for lack of inventive step if there is an identifiable industry presence in Australia that would be affected by the grant of such a patent. This decision is a further indication that the Federal Court of Australia is determined not to allow Australia to 'become a resting ground for bad patents' where the technology and common general knowledge in question is part of an international field of research and development. 

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Footnotes
  1. Pelman v McDonald's Corp, 237 F. Supp 2d 512, 543 (S.D.N.Y. 2003).
  2. Section 2. 

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