Nestlé gets no break in KIT KAT Case

A delegate of the registrar of trademarks has upheld an opposition filed by Aldi Stores against Société des Produits Nestlé SA's application to register a trademark consisting of a shape applied to a piece of confectionery (Case 2008 ATMO 76, August 27 2008).  
Nestlé applied to register the shape of its four-finger Kit Kat confectionery as a trademark (Application 822780). A Kit Kat 'finger' consists of a long, thin wafer biscuit coated in chocolate, which Nestlé commonly sells in two or four-finger bars. 

Aldi opposed the application, arguing that the shape of the bar was a functional shape and could not be registered as a trademark. Aldi submitted that the Kit Kat bar shape, being "four bars attached to one another by a thin base", was a functional shape because "the thin portions between the bars are provided to facilitate the user breaking the block into four bars". The delegate considered that the evidence of other chocolate blocks and bars that consisted of pieces joined together by a thin base demonstrated "the commercial desirability of being able to break portions into smaller portions".
Nestlé argued that the shape of the Kit Kat bar was not the cheapest or simplest to produce. Therefore, the shape could not be said to be "commercially desirable". The delegate rejected this argument, noting that the process used by Nestlé produced a smooth finish on the surface of each finger, allowing Nestlé to emboss its KIT KAT mark on the top surface of each finger, which was impossible using more cost-effective production methods.
The delegate concluded that even if the shape of the Kit Kat bar had not been deliberately chosen by Nestlé for functional reasons, it was nonetheless a functional shape. Consequently, it was not "inherently adapted to distinguish" Nestlé's goods.
Section 41(6) of the Trademarks Act 1995 provides that a mark that has not been inherently adapted to distinguish particular goods may nonetheless be "factually distinctive" if the applicant can establish significant use of the mark. 
Nestlé was able to demonstrate extensive use of the shape (which was not contested by Aldi) as well as significant "consumer recognition" of the shape among the Australian population. However, the delegate was careful to avoid "the risk of an unspoken and illogical assumption that use equals distinctiveness" (see British Sugar plc v James Robertson & Sons Ltd ([1996] RPC 218). Aldi argued that in any event, for Section 41(6) to apply, Nestlé needed to establish that it had used the shape "as a trademark". 
The delegate commented that although the Kit Kat bars are sold wrapped in aluminium foil (and, therefore, the shape is not visible at the time of sale), this alone did not negate the use of the shape as a trademark. 
However, although Nestlé produced substantial evidence of advertisements featuring the shape, the delegate concluded that the advertising referred only to the shape "for the purposes of emphasizing that […] the Kit Kat product has a functional shape, of which a frangible base allowing the snapping off of individual fingers is the key". This conclusion was supported by examples of Nestlé's advertisements featuring the phrase "Have a break, have a Kit Kat" and other advertisements featuring puns involving the word 'break'. 
Consequently, the delegate found that Nestlé had not used the shape as a mark, but rather to show that "the product may readily and conveniently be snapped into either single or two-bar portions", and refused to register the shape as a trademark. 
Nestlé has appealed the delegate's decision to the Federal Court of Australia.

Lisa Ritson and Alex Dunlop, Blake Dawson, Sydney

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