What is distinctive about ‘distinctive character’ and who decides?

Consumers are becoming increasingly sophisticated when it comes to understanding brands, which is highly relevant to the understanding of ‘distinctive character’. However, courts and tribunals are not keeping up with this trend in their decisions

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The modern consumer has no problem understanding that (a particular shade of) purple in the context of chocolate indicates Cadbury

Picture: Jon Le-Bon /Shutterstock.com

Distinctive character is one of, if not the, key concept in trademark law. It determines what can be registered and what cannot, and is one of the key aspects to understanding how consumer confusion occurs and thus the scope of any registration. Whether a mark is distinctive and how distinctive it is are central questions in almost all trademark matters.

The concept of ‘distinctive character’ is deceptively simple – it is that aspect of a brand which allows the consumer to understand that it signifies a unique origin of goods or services. The consumer does not need to know what the origin is (otherwise, the concept of ‘inherent distinctive character’ would be difficult to understand), but must understand that there is only one origin.

Distinctive character, at least in relation to traditional marks, is mostly assessed by reference to whether and how the mark in question conveys meaning to consumers. If a mark does not inherently communicate anything relevant about the goods and services in question (eg, GOOGLE or KODAK), then there is a presumption that it is distinctive – logically, the assumption is that the consumer does not understand the mark as having any function other than that of a trademark. If a mark is descriptive or conveys other relevant meaning (eg, EAT or BRITISH AIRWAYS), then it will likely be regarded as inherently devoid of distinctive character and the rights holder will have to work hard to prove that it has persuaded the average consumer that the mark function as an indication of origin. Difficulties arise in relation to those marks that are somewhere in between – those that do convey relevant meaning, but are perhaps unusual in some way, such that a consumer may see them as an indication of origin.

I have always found the law relating to trademarks extremely interesting, not least because it is constantly evolving. I understand this evolution to relate to the fact that this area of law is about reflecting consumer understanding. If consumer understanding of brands changes, then the law needs to change to accommodate this. In the United Kingdom, protection for unregistered trademark rights – the common law action of passing off – is constantly being updated to accommodate developments in marketing and promotion.

Consumer perceptions of distinctive character change over time

Brands have become increasingly important to brand owners as consumers rely on them more and more. This is reflected in analysis by The Economist, which confirms that value in intellectual property in large companies grew from 20% of overall corporate value in 1980 to around 80% in 2010. The research went on to confirm that around half of this increase rested in brands. This is unsurprising, given that markets have become more and more saturated with apparently comparable products, making differentiation through brand ever more important.

Increasingly saturated markets have also led to more unusual approaches to branding. Companies are far more likely to use strap lines, colour, look and feel, and sound as brands. The modern consumer has no problem in understanding that the phrase “Believe in Better” indicates Sky; that (a particular shade of) purple in the context of chocolate indicates Cadbury; that certain rear pocket stitching or a red tab on jeans indicates Levi’s; or that the ident “ba da da da dah!” indicates McDonald’s. Look and feel is so important in some sectors (especially fast-moving consumer goods) that large retailers often produce their own products to resemble the market leaders. While the legal issues around this practice are not straightforward, it is a clear acknowledgement that consumers understand the significance of such look and feel. However, these sorts of mark are not only the domain of large companies.

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The decision in Starbucks v British Sky Broadcasting, resulting in an action from the Hong Kong-based owner of a Community trademark (pictured right), seems to move the bar relating to distinctive character such that allusive marks are not regarded as distinctive

Case law trends

Consumers have come to understand brands in a far more sophisticated way than would have been the case even 20 years ago, which is highly relevant to the understanding of distinctive character and thus the development of trademark law. It might be expected that courts and tribunals would reflect this in their judgments. However, it appears that the opposite is taking place and that courts and tribunals are in fact raising the bar in relation to distinctive character.

United Kingdom

I could choose any number of UK decisions to illustrate this, but arguably the most significant recent cases are NOW and KIT KAT.

NOW (Starbucks (UK) Ltd v British Sky Broadcasting Group Plc [2012] EWHC 1842 (Ch)) is important in the context of distinctive character in two different ways. Many readers will be familiar with the details of the case, which was a trademark infringement and passing-off action by the Hong Kong-based owner of a Community trademark for NOW (see image above), registered for telecoms and broadcasting services, to stop use of the mark NOW TV in relation to internet television services. In the context of distinctive character, the key issue here was that the court found the word ‘now’ to lack any distinctive character. In addition, it found that the stylisation did not assist in this regard. The analysis went as follows:

115. As counsel were agreed, context is everything. Counsel for PCCW’s core submission was that, viewed in context, NOW would be perceived by the average consumer as a brand name, rather than as a description of any characteristic of the services in question, even if it was understood to allude to such a characteristic. He cited as a good example some of Sky’s advertisements, which feature the question “What’s on NOW TV tonight?” He submitted, and I accept, that it was clear that Sky expected the reader to understand that NOW TV was the name of its new internet television service and that the reader would get the message. He further submitted this showed that NOW was inherently distinctive for a television service. I do not accept this. All the example shows is that the combination of NOW and TV viewed in the context of an advertisement which is carefully designed to convey the message that NOW TV is the name of a new service provided by Sky has some distinctive character. By way of counter-example, the question “What’s on NOW?” posed in relation to a television service without such supporting context would not convey the same message.

116. Taking all of the evidence into account, I conclude that the CTM is precluded from registration by Article 7(1)(c) in relation to the services in issue because NOW would be understood by the average consumer as a description of a characteristic of the service, namely the instant, immediate nature of the service. The figurative elements of the CTM do not affect this conclusion. In the alternative, if the inclusion of the figurative elements means that the CTM does not consist exclusively of the unregistrable word NOW, I consider that the CTM is devoid of distinctive character and thus unregistrable by virtue of Article 7(1)(b).

117. I would comment that it appears to me that PCCW only succeeded in obtaining registration of the CTM because it included figurative elements. Yet PCCW is seeking to enforce the CTM against signs which do not include the figurative elements or anything like them. That was an entirely foreseeable consequence of permitting registration of the CTM. Trade mark registries should be astute to this consequence of registering descriptive marks under the cover of a figurative figleaf of distinctiveness, and refuse registration of such marks in the first place.

When I see Sky’s use of NOW TV, I have no problem in understanding that it is a brand and I am sure that I am in line with the average consumer in this. Sky did not choose this mark because it describes its service. It chose it because it has useful allusive qualities and conveys relevant meaning to consumers, but it does so in an unusual way and so functions well as a brand. I do not accept that NOW in this context simply indicates the concept of ‘nowness’ (whatever that is). Of course, it is not right that the concept of immediacy should be monopolised, but registration of this mark would not accomplish this.

Even if the word is not distinctive, why does the presentation not make it so? Where a term is not a normal way of referring to services, it does not take much to persuade a consumer that this is a trademark. If the mark were ‘On Demand’ then perhaps this presentation would be insufficient; but in the context of the mark NOW, why is it not? After all, it is the overall impression of a mark as applied for/registered that must be assessed and not the separate elements. If the word element is not distinctive, but close to the line in terms of distinctiveness, presentation will have a greater impact in terms of overall impression. Naturally, if such a mark were registered, then the scope of the registration would be limited; but why is this a problem?

This case seems to move the bar relating to distinctive character such that allusive marks are not regarded as distinctive. It also makes extremely negative comments relating to the “figurative figleaf of distinctiveness”, suggesting a sceptical approach when it comes to assessing the visual impact of marks.

KIT KAT (Societe Des Produits Nestlé SA v Cadbury UK Ltd [2014] EWHC 16 (Ch)) was a High Court appeal from a UK IP Office (UKIPO) refusal to register the three-dimensional (3D) shape of Nestlé’s Kit Kat bar.

The UKIPO held that the mark was not registrable under the statutory objections to certain shapes, but also on the basis that it was non-distinctive and that Nestlé had not overcome this by providing appropriate evidence of distinctiveness acquired through use (despite providing surveys that showed significant recognition of the shape as a Kit Kat and as a Nestlé product).

On inherent distinctive character, the UKIPO examiner held: “94. In my judgment, the shape is therefore within the norms and customs of the sector and/or is a mere variant on common shapes for chocolate bars and biscuits, i.e. rectangular bars with breaking grooves resulting in individual pieces or ‘fingers’. The shape is not such as to permit average consumers to distinguish the product concerned from those of other undertakings. The shape mark is therefore prima facie devoid of any distinctive character.”

On acquired distinctiveness he held:

109. In my view, the applicant has shown recognition of the mark amongst a significant proportion of the relevant public for chocolate confectionery (only), but not that consumers have come to rely on the shape to identify the origin of the goods.

This is because:

i) There is no evidence that the shape of the product has featured in the applicant’s promotions for the goods for many years prior to the date of the application;

ii) The product is sold in an opaque wrapper and (until a few months before the filing of the application – and then only for a subset of the goods placed on the market), the wrapper did not show the shape of the goods;

iii) There is no evidence – and it does not seem likely – that consumers use the shape of the goods post purchase in order to check that they have chosen the product from their intended trade source.

In these circumstances it seems likely that consumers rely only on the word mark KIT KAT and the other word and the pictorial marks used in relation to the goods in order to identify the trade origin of the products.

They associate the shape with KIT KAT (and therefore with Nestlé), but no more than that. Therefore, if it is necessary to show that consumers have come to rely on the shape mark in order to distinguish the trade source of the goods at issue, the claim of acquired distinctiveness fails.

On appeal, the High Court judge upheld the UKIPO’s findings, but made a reference to the European Court of Justice (ECJ) for guidance on shape objections and acquired distinctive character. The shape objection issues are interesting, but the distinction drawn in relation to distinctive character is very important, especially in the context of acquired distinctive character.

While the distinction is intellectually understandable, it is an extremely fine one. The case distinguishes between the recognition by consumers that the sign relates to one unique origin and recognition that the sign is really being used as a trademark by that party. In the second paragraph of this article I set out my understanding of the normal position taken with regard to distinctive character – it is that aspect of a mark which allows the consumer to recognise that the sign relates to a unique origin of goods. Why does distinctive character rely on either consumer understanding that the sign is being used as a trademark or consumer reliance on it in a trademark sense? If the consumer sees the sign and understands it as relating to one origin of goods, why is anything else required? If anything else is required, where does that requirement come from?

When comparing marks, we are constantly reminded that consumers do not analyse in the same way that lawyers do. So if a consumer sees the shape and understands this to be a Kit Kat, why do we have to suggest that an additional step relating to reliance or understanding of the nature of the use of the sign is necessary?

Since this case, I have seen the same concept being applied to analysis of word marks and other more traditional trademarks. Even where there is agreement that the evidence of acquired distinctive character shows that consumers understand the mark to relate to the applicant, there are still questions as to whether consumers really understand that the mark is being used as a trademark. Given the scepticism in the United Kingdom towards surveys, how would one even attempt to address this?

The ECJ has repeatedly told us that we must (in theory) treat non-standard marks just the same as word marks in terms of distinctiveness. While this has never really rung true in practice (as cases have acknowledged that consumers are less likely to see and understand non-standard marks as an indication of origin as compared to word marks), this recent UK trend appears to treat word marks with the more negative approach previously applied only to non-standard marks.

Office for Harmonisation in the Internal Market

The position is no different at the Office for Harmonisation in the Internal Market (OHIM). To illustrate that the bar relating to distinctive character is being raised, I have chosen the recent decision relating to US footwear company K-Swiss.

K-SWISS (K-Swiss, Inc v OHIM (T-85/13)) concerned a Community trademark registration for an illustration of the K-Swiss shoe (with no description) in relation to footwear. While this received no inherent objection from OHIM, the registration was successfully invalidated for lack of distinctive character. K-Swiss submitted evidence, but to no avail. The General Court upheld this on appeal.

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K-SWISS’s Community trademark registration for an illustration of the K-Swiss shoe (with no description) in relation to footwear (above left) was invalidated for lack of distinctive character. By contrast, Adidas managed to obtain Community trademark registrations in relation to footwear in exactly the same form as K-Swiss back in 2003/2006 (above middle), its application including a description. Adidas pointed out that OHIM had explicitly recognised the inherent distinctiveness of trademarks for shoes that apply design features such as lines or stripes on the shoe or inserted into their sole, such as in a 2002 decision (for the trademark shown above right)

While this rejection can be regarded as specific to a difficult non-standard mark, a comparison with earlier analysis is interesting. In particular, Adidas managed to obtain Community trademark registrations in relation to footwear in exactly the same form as K-Swiss back in 2003/2006, with the description: “The mark consists of three parallel equally spaced stripes applied to footwear, the stripes positioned on the footwear upper in the area between the laces and the sole.” Adidas overcame the initial 7(1)(b) refusal with pure inherent argument based on equivalent ‘simple’ marks that had been accepted by OHIM, plus reference to the same mark being registered in other EU member states. No market evidence or acquired distinctiveness evidence was provided. This should not be simply discarded as a low-level OHIM decision, as it was based on anlaysis on the same point undertaken by the Board of Appeal.

Adidas pointed out that OHIM had

explicitly recognised the inherent distinctiveness of trade marks for shoes that apply design features such as lines or stripes on the shoe or inserted into their sole. In Decision R 938/2000-1 [STRIPES ON SHOE] of 7 May 2002, the First Board of Appeal was asked to rule on an appeal in relation to the following trademark… [the mark is reproduced on page 42]:

The First Board of Appeal stated (at paragraph 21): In the view of the Board, it is entirely customary today – and indeed this is clear from the evidence submitted by the appellant – for manufacturers of sports and leisure shoes always to display the same pattern on their goods, which may be a pattern of lines or stripes or a combination thereof. The consumer is accustomed to such patterns and can in principle be guided by them when buying sports and leisure shoes.

This analysis seems to be much more in line with my explanation of the modern savvy consumer. If you asked your friends about this type of branding, I think most would have no problem in understanding that in this type of industry, the look and feel of a product is an important part of the brand and is recognised as such. So why, when the world of branding appears to be becoming more sophisticated and consumers are continually exposed to different and more subtle approaches to branding, does case law appear to be moving in the opposite direction?

As with the UK position outlined above, this trend does not only apply to difficult non-standard marks. From my point of view (and many colleagues whom I have spoken to in the trademark world agree), there has been a trend at OHIM to reject marks on grounds of distinctiveness, even though two or three years ago they would probably have been accepted. This seems to apply not only to word marks which are arguably only allusive (where OHIM does not tend to acknowledge the consumer’s ability to identify subtle differences as compared to normal descriptive use of words), but also in relation to visual additions (eg, those in NOW discussed above) which would previously have stood a good chance of being regarded as distinctive.

80%

Contribution of intellectual property to overall corporate value in 2010

 

Is this trend correct?

I do not think that anyone would seriously argue against the proposition that modern-day consumers are more brand aware and savvy than ever before. It is clear that marketing techniques are changing and developing, with brand owners using a wider range of types of brands to differentiate their offerings and communicate with their consumers. Consumers understand this. The increased use of ‘look for’ advertising (ie, advertising that directs the consumer to look for a particular graphic element on packaging or a particular design feature of a product) and unusual brands has helped consumers to understand distinctive character in a more subtle way than may have been the case in the past.

The current trend in case law does not seem to give consumers enough credit and fails to acknowledge increased consumer sophistication. Courts are deciding what is distinctive, rather than consumers.

However, I acknowledge that, as trademark practitioners, we cannot have it both ways. The same logic that would suggest that the current trend in case law relating to distinctive character is incorrect would also suggest that, if registered, these marks should have a narrow scope of protection. If consumers are savvy and can understand subtlety in relation to the existence of distinctive character, they can also recognise more subtle differences between the distinctive character of competitive marks and businesses. This would suggest that while more marks should be registered, the courts should be careful not to grant too wide a monopoly when enforcing them.

Whether I am correct in this regard, the fact remains that this trend with regard to distinctive character is the current position of the courts and tribunals, and we must work within this framework. This means that brand owners will have to work harder to obtain their rights. In a system where there is doubt about consumer understanding of trademarks, brand owners need to focus on educating consumers (especially in relation to borderline distinctive marks) and leaving them in no doubt as to whether the sign in question is being used in a trademark sense. Proper collaboration with creative marketing and clear identification of signs in a trademark sense – including use of signs in a prominent way (eg, in a ‘look for’ sense) – will be increasingly important. In addition, legal practitioners will need to be more and more creative about utilising all of the potential tools available to them, not just trademark registrations.

Julius Stobbs ([email protected]) is principal of Stobbs IP 

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