The world's biggest tobacco firms are challenging the Australian government in court over a law on mandatory plain packaging for cigarettes.
The suit, led by British American Tobacco, is being watched around the world as a test case.
Australia last year passed legislation requiring all tobacco to be sold in plain packets with graphic health warnings from 1 December 2012.
It is the first country to pass such stringent packaging legislation.
The proceedings, being heard before the High Court in Canberra, are scheduled to run until Thursday. It is not clear when a decision might be reached.
"We're very conscious that we're being watched around the world," Australian Attorney-General Nicola Roxon said.
Countries such as Britain, Canada and New Zealand are considering similar moves.
Public health impact
The companies, including Philip Morris, Imperial Tobacco Australia and Japan Tobacco International, claim the law infringes their intellectual property rights by banning the use of brands and trademarks.
They argue that removing logos and company colours will lead to a drastic cut in profits and see fake products enter the market.
They also say that it is unconstitutional for the government to remove trademarks from packaging without compensation.
Ms Roxon rejected the claims, saying that the sale and advertising of tobacco had always been subject to laws and regulations.
The law, she added, was constructed ''in a way that it will have the most public health impact''.
"I think big tobacco's throwing everything at it because they're scared it will be successful and they're scared it will be copied then around the world," she said.
A spokesman for British American Tobacco told Australian media that the company would prefer not to have had to take the government to court ''but unfortunately they have taken us down the legal path''.
Under the law, the only thing distinguishing tobacco brands on packets will be the brand and product name in a standard colour, position, font size and style.
The government says the aim of the law is to cut the number of smoking-related deaths.