Court of Appeal deals blow to Nestlé in Kit Kat shape mark case

Portugal

In Société des Produits Nestlé SA v Imperial - Produtos Alimentares SA (Case No 2/13.7YHLSB), the Lisbon Court of Appeal has upheld a decision of the Portuguese Intellectual Property Court finding that there was no likelihood of confusion between two three-dimensional (3D) marks consisting of a two-fingered chocolate bar.

Portuguese company Imperial - Produtos Alimentares SA filed an application for the registration of a shape consisting of two chocolate fingers joined on a rectangular base as a Portuguese 3D trademark. Protection was sought for chocolates, cocoa, pastry, confectionery products, bonbons and sweetmeat in Class 30 of the Nice Classification.

Société des Produits Nestlé SA opposed the application, claiming that the registration would infringe its earlier international 3D trademark No 804396 (known as the shape of the famous Kit Kat chocolate bar), which was also registered in Class 30. Nestlé argued that the registration of Imperial's mark would create a likelihood of confusion between the two marks.

Imperial’s Portuguese trademark No 447113
 

Nestlé’s international trademark No 804396

In 2012 the Portuguese Industrial Property Office (INPI) rejected Nestlé’s arguments and allowed the registration of Imperial’s 3D trademark, considering that it did not conflict with Nestlé’s earlier IP rights.

Dissatisfied with INPI’s decision, Nestlé appealed to the Portuguese Intellectual Property Court on the same grounds (ie, arguing that there was a likelihood of confusion between the two trademarks). However, the Intellectual Property Court upheld INPI’s decision.

Nestlé then appealed to the Lisbon Court of Appeal, which upheld the previous decisions.

The Court of Appeal’s judgment was based mainly on the argumentation developed by the Intellectual Property Court. The court thus considered whether the two 3D marks were sufficiently similar to create a risk of confusion or association between them. The core question was whether their characteristics would allow differentiation - that is, whether they were easily distinguishable by ordinary consumer, without careful examination.

In this respect, Nestlé claimed that the common element in both trademarks – the two bars – was sufficient to demonstrate a likelihood of confusion. The court, however, stated that, in the market for chocolates, the number of bars was not a relevant element of similarity, since originality in choosing the shape of portable chocolate bars was limited. Forbidding the use of two bars for chocolates in order to protect Nestlé’s trademark rights would excessively restrict the creativity of competitors.

Therefore, the court stated that the key element to assess the risk of confusion between the marks was the actual shape of each individual bar. Based on this, the court decided that the bars making up both trademarks were not sufficiently similar to create a likelihood of confusion. In the court’s view, three features allowed differentiation:

  1. the central separation of the bars - in Nestlé’s trademark, the separation made up a 'V', whilst in Imperial’s mark, it made up a 'U';
  2. the shape of the corners – in Nestlé’s mark, the corners were sharp, while in Imperial’s mark, they were rounded; and
  3. the shape of the individual chocolate fingers - Nestlé’s chocolate fingers were moulded in a trapezoid shape, while Imperial’s bars were a parallelepiped.

As such, the Court of Appeal concluded that the signs were not similar and that consumers would easily recognise the differences between the two chocolate bars, holding as follows:

“We have to look at the necessarily small elements that distinguish them and are listed above. In our view, those elements have a sufficiently distinctive character for the average customers of said bars. Therefore, it is unacceptable to grant [Nestlé] exclusive rights of production and marketing of the two bars, as seems to be its claim.” (authors' translation).

As a result, the Lisbon Court of Appeal also confirmed INPI’s decision allowing the registration of Imperial’s 3D mark. Both the court and INPI considered that Imperial’s mark did not conflict with the earlier trademark registered by Nestlé.

This decision raises the issue of the requirements that must be met in order to register 3D trademarks. These seem especially high, since innovation in this type of signs is much more limited than for traditional trademarks. For example, the products’ shape is often imposed by their function, which does not allow the designer to make aesthetic or original choices. Therefore, granting IP rights over shapes requires a detailed analysis of the object of protection.

The shape of the Kit Kat product has already presented the matter for consideration. In Société des Produits Nestlé SA v Cadbury Holdings Ltd (Case R 513/2011-2), Nestlé had applied for the registration of a four-fingered shape as a 3D Community trademark. Cadbury filed an application for a declaration of invalidity, stating that the shape was not sufficiently distinctive to be exclusively granted to Nestlé.

At first, the Cancellation Division of the Office for Harmonisation in the Internal Market (OHIM) held that the shape lacked inherent distinctive character. Nevertheless, the Second Board of Appeal overturned that decision, declaring that the shape could be registered as 3D trademark, since it had acquired distinctiveness through use in the European Union.

Cadbury also opposed (with the same arguments) Nestlé's application for the registration of the shape of the Kit Kat product as a 3D mark in United Kingdom. However, the UK Intellectual Property Office reached a different decision. In June 2013 the office refused Nestlé’s application, stating that the Kit Kat shape was not sufficiently inherently distinctive to be registered as a trademark.

Nestlé appealed to the High Court, claiming that the Kit Kat shape had acquired distinctiveness through use (as stated in OHIM’s decision). The decision is yet to be issued, as the court is still waiting for the answers to three questions that it referred to the Court of Justice of the European Union. The response is expected this year.

The European courts and authorities seem to centre this discussion on the relevance of acquired distinctiveness for the protection of the Kit Kat shape as a 3D mark. However, the Portuguese courts did not address the question in Case No. 2/13.7YHLSB - they seem to have simply assumed that inherent distinctive character is mandatory for the purposes of registering 3D marks, disregarding any distinctiveness acquired through use.

It would have been helpful if the Portuguese courts had clarified their position on the registration of trademarks based on acquired distinctiveness, as that argument has been accepted by other EU authorities, and it will surely be raised by Nestlé in other instances. Indeed, it is highly probable that Nestlé will appeal this decision to the Portuguese Supreme Court; the case is thus far from over.

Ana Teresa Serafino and Manuel Lopes Rocha, PLMJ - Sociedade de Advogados, Lisbon

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