ECJ clarifies law on shape marks in Kit Kat case

European Union

The Court of Justice of the European Union (ECJ) has given its decision on a reference by the High Court of England and Wales in Société des Produits Nestlé SA v Cadbury UK Ltd (C-215/14), a case involving the registrability of the shape of Kit Kat chocolate bars as a UK trademark. The court has clarified the position on shape marks, finding that a shape mark will be precluded from registration if the grounds for refusal of registration of a shape mark are fully applicable to the shape at issue. In assessing distinctive character, the relevant public must perceive the shape as exclusively designating origin.

The business impact of the decision is as follows:

  • Brand owners should take comfort that shape marks may well be registerable even if some of the individual essential features would be precluded from registration in their own right. The grounds for refusal of registration of a shape mark must be "fully applicable to the shape at issue". A shape mark may still be capable of registration provided that no one ground for refusal of registration applies to all the essential features of the mark.

  • If a brand owner's goods display any other trademarks (such as the brand name stamped on the shape), it may be difficult for brand owners to prove that the relevant public perceives the shape of the goods alone as identifying the origin of the goods. In order to satisfy the acquired distinctiveness test, the relevant public must perceive the shape as exclusively designating origin.

On January 17 2014 Mr Justice Arnold handed down judgment in the case of Société des Produits Nestlé v Cadbury UK Ltd ([2013] EWHC 16 (Ch)), which was on appeal from the UK Intellectual Property Office. This case arose from Nestlé's application in 2010 to register the following shape as a UK trademark for various goods in Class 30, which was opposed by Cadbury:

 

The shape had three essential features:

  1. the basic rectangular "slab" shape;

  2. the presence, position and depth of the grooves which divided the bar into ‘fingers’; and

  3. the number of the grooves, which together with the width of the bar, determined the number of fingers.

Arnold J (agreeing with the hearing officer) found that feature (1) resulted from the nature of the goods themselves (thus contravening the exclusion for registration of shape marks under Article 3(1)(e)(i) of Directive 2008/95). He held that features (2) and (3) were necessary to obtain a technical result (thus contravening the Article 3(1)(e)(ii) exclusion for registration of shape marks).

In considering the issues before him in the High Court, Arnold J referred three questions to the ECJ in relation to the interpretation of Directive 2008/95.

The first question was as follows:

In order to establish if a trademark has acquired distinctive character, is it sufficient for the applicant to prove that a significant proportion of the relevant class of people recognised the mark and associated it with the applicant's goods, in that if they were asked to consider who marketed the goods bearing the mark, would they identify the applicant; or must the applicant prove that a significant proportion of the relevant class of people rely upon the mark (as opposed to any other marks which may also be present) as indicating origin of the goods?

The ECJ found that the applicant must prove that the relevant class of persons perceive the goods and services designated exclusively by the mark applied for, as opposed to any other mark which might also be present.

It is of note that the ECJ has used the word 'perceive' as opposed to 'rely upon'. These words do not have the same meaning in trademark law and there is a question mark over whether the ECJ has actually answered the question that Arnold J referred on distinctiveness. The ECJ's finding may be unhelpful to Nestlé as, in the case of the Kit Kat bars, this means that people should perceive the shape applied for (which does not have the Kit Kat logo embossed on it) as indicating origin in its own right. The previous survey evidence as adduced by Nestlé and considered by the hearing officer may be to be re-analysed as a result of this finding.

Question 2 was as follows:

Where a shape consists of three essential features, one of which results from the nature of the goods themselves and two of which are necessary to obtain a technical result, is registration of that shape precluded under Article 3(1)(e)(i) (where shape results from nature of goods themselves) and/or Article 3(1)(e)(ii) (where shape of goods necessary to obtain a technical result)?

The ECJ held that a trademark shall be precluded from registration where a mark has three essential features (one of which results from the nature of the goods and two of which are necessary to obtain a technical result), provided that at least one of these grounds for refusal is fully applicable to the shape at issue.

This point appears to have gone in Nestlé's favour and it is of note for brand owners seeking to register shape marks that have multiple essential features which make up the shape as a whole. If one of these features falls foul of the shape mark exclusions, the mark could potentially still be registered provided that all of the other features do not fall foul of the same exclusion.

Question 3 was as follows:

Should Article 3(1)(e)(ii) be interpreted as precluding registration of shapes which are necessary to obtain a technical result with regards to the manner in which the goods are manufacture as opposed to the manner in which the goods function?

The ECJ answered that Article 3(1)(e)(ii) should not be interpreted as applying to the manner in which the goods are manufactured.

The hearing officer had previously held that Article 3(1)(e)(ii) embraced both kinds of technical result and there was nothing in the wording of the directive which limited it to the function of the goods. The point has now been decided in Nestlé's favour as it had argued that the technical result exclusion only applied where the shape is necessary to achieve a technical result, not where it was merely necessary to obtain a technical result with regard to the manner in which the goods were manufactured.

3D shape trademarks are registerable at UK and EU level as a matter of right, provided that the requirements of registrability are met. However, shape trademarks are notoriously hard to register since there is always a risk that the grant of the mark will give the proprietor an overly broad monopoly (bearing in mind that trademarks can last indefinitely provided that renewal fees are paid). The ECJ was keen to emphasise the public policy rationale for the grounds of refusal as set out in Article 3(1)(e) of the directive, referencing its previous judgments in Hauck (C-205/13) and Lego (C-48/09). The aim is to prevent monopolies over technical solutions or functional characteristics which users are likely to seek in the goods of competitors. The grounds of refusal serve to prevent an exclusive and permanent right (a trademark) serving to extend indefinitely the life of other rights which the EU legislature has made subject to a limited period.

This decision is a useful addition to the limited body of case law concerning 3D shape marks. Overall, brand owners should be encouraged by the decision, as it may make the registration of shape marks easier in certain circumstances, particularly where a shape mark has several distinguishable essential features.

As three separate questions were referred and answered by the ECJ, the end result is somewhat mixed for Nestlé since some elements of the decision have clearly gone in its favour, whereas some may have not. The ECJ's decision on acquired distinctiveness is not clear-cut and may require a further reference to the court. It remains to be seen whether the English High Court will now refuse Nestlé's trademark application, with both Nestlé and Cadbury professing themselves to be 'happy' with the ECJ's judgment.

If the mark is ultimately refused, it is of note that Nestlé will continue to have protection for the shape of its Kit Kat bars by way of its Community trademark (CTM) for the same shape, albeit the CTM does not cover 'chocolate'. Therefore, the issue is not whether Nestlé should be granted a monopoly for the shape of four-fingered chocolate bars, but whether Nestlé can extend its existing monopoly by way of adding a UK national mark.

Joel Smith, Sarah Burke and Rachel Montagnon, Herbert Smith Freehills LLP, London

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