Advocate general deconstructs Lego's appeal

European Union
In Lego Juris A/S v Office for Harmonization in the Internal Market (OHIM) (Case C-48/09 P, January 26 2010), Advocate General Mengozzi has considered a rarely discussed overlap: whether products eligible for design and/or patent protection may have their shapes protected ad infinitum as Community trademarks (CTMs). In principle, there is no reason why they should not if they are (or, in some cases, have become) distinctive as an indication of origin. The Court of Justice of the European Union (ECJ) has accepted this on a number of occasions, including Linde (Joined Cases C-53/01 to C-55/01) (for further details please see "Law on three-dimensional marks knocked into shape by ECJ"). However, there are some specific exclusions which are relevant to shape marks.

On October 19 1999 the predecessor of Lego Juris (both referred to as 'Lego') obtained a CTM registration in Classes 9 and 28 of the Nice Classification for a photographic representation of one of its red three-dimensional toy bricks. Two days later, the predecessor of MEGA Brands (both referred to as 'MEGA') sought a declaration of invalidity under, among other things, Article 7(1)(e)(ii) of the Community Trademark Regulation (40/94), which reads as follows:

"1. The following shall not be registered [as CTMs]:
           …
           (e) signs which consist exclusively of:
                     …
                     (ii) the shape of goods which is necessary to obtain a technical result."
                    
In its previous ruling in Philips (Case C-299/99), the ECJ had held that the rationale for this provision is that trademarks should not be awarded where they would grant a perpetual monopoly on technical solutions or functional characteristics.

The present proceedings relate only to Lego's registration in Class 28 ("construction toys"). The Cancellation Division of OHIM, the Grand Board of Appeal and the Court of First Instance all found in favour of MEGA on the basis of Article 7(1)(e)(ii) and Philips.

Lego submitted that its registration was not blocked by Article 7(1)(e)(ii). It argued that this provision does not preclude registration of a shape embodying a technical solution where the same technical solution can be achieved using an alternative shape: only the functional characteristics, and not any particular shape which implements them, must remain available to all.

Secondly, Lego argued that while it is only the "essential characteristics" of the shape which count for determining what the sign consists "exclusively" of, the test for "essential characteristics" is synonymous with the test for "dominant and distinctive elements" and must be addressed from the point of view of the average consumer.

Finally, Lego argued that if altering a shape has no impact on the function of that shape, its characteristic is not functional. The existence of alternative shapes performing the same technical function negated any risk of the registration providing a monopoly on a technical solution.

Mengozzi rejected Lego's appeal in its entirety and took the opportunity to set out a three-stage test to Article 7(1)(e)(ii), which, if adopted by the ECJ, might result in many more applications falling within its ambit. The test seems to be based mutatis mutandis on German and US law. A failure at any one of these points means that the mark cannot be registered:
  • Stage 1 - identify the "most important" elements of the shape applied for. Each feature must be analyzed to ascertain the shape's essential characteristics. This step is not undertaken to determine whether the sign can perform the essential function of a trademark, but as a preliminary matter to determine whether the essential characteristics are necessary in relation to the technical result (with expert, and not consumer, evidence being admissible). If not all of the characteristics are functional (ie, it is only composed in part, and not exclusively, of functional elements), proceed to stage 2.
  • Stage 2 - determine whether the right to be granted would "lead to significant non-reputation-related disadvantage for competitors vis-à-vis their own signs". The alternative shapes "would have to be analyzed taking into account interoperability and the requirement of availability".
  • Stage 3 - determine whether the sign has inherent distinctive character in the eyes of the consumer.
Stage 2 is particularly unclear and not found in the previous case law. It seems to be an attempt to make a new test for CTMs to deal with some of the perceived difficulties caused by the Philips decision, which, according to Mengozzi, "introduced an element of vagueness, which is now exacting its price".
 
Mengozzi completed his opinion by stating that Lego's mark should be revoked because the "trademark which would be granted would always monopolize the shape". That justification is difficult to reconcile with the fact that a successful shape mark would "monopolize" a shape; the difference with three-dimensional signs is only that there is a legislative exclusion from registration (where they are otherwise registrable) in certain circumstances (eg, if the sign consists "exclusively" of shapes which are "necessary" to obtain a technical result) in order to prevent the stifling of a competitive market in technical solutions. Lego appears to have shown that other shapes in competing products achieve the very same technical result, but the Grand Board of Appeal, in an earlier stage in this case, held that the word 'necessary' in Article 7(1)(e)(ii) only meant that the shape "is required to achieve that technical result, although there may be other shapes which can also perform the same task". Seemingly, then, a shape can be "necessary" even when it is optional.

While perhaps the result is not surprising, some of the comments are. Whether the ECJ will follow Mengozzi's opinion (and particularly stage 2) may, in part, turn on whether the ECJ trusts OHIM, as well as national boards and courts, not to grant overly broad protection to shape marks simply because the registration includes a particular shape that happens to be a non-exclusive means of achieving a technical result.
 
Gareth Dickson, Ashurst LLP, London 

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