Hungarian Curia puts trademark law into equilibrium

When the so-called Gömböc object (in colloquial language, this term refers to a short and chubby person) was developed in 2006 by two Hungarian scientists, Gábor Domokos and Péter Várkonyi, it had a significant effect on various fields from mathematics to pharmaceutical research.

The Gömböc is the first convex, homogeneous, mono-monostatic object. Although it was common knowledge among mathematicians – a Russian mathematician, Vladimir Igorevics Arnold, presented it in 1995 – that such an object was possible in theory, Domokos and Várkonyi were the first to produce a physical version of it.

The Gömböc has one unstable and one stable equilibrium. If placed on a horizontal surface in an arbitrary position, the Gömböc returns to the stable equilibrium point. The single unstable equilibrium point of the Gömböc is on the opposite side. It is possible to balance the body in this position, although the slightest disturbance makes it fall, similar to a pencil balanced on its tip.

It is easily understandable that Domokos and Várkonyi – who worked for decades on the Gömböc – wanted to afford the fullest IP protection to their product.

Registration

The applicants’ first step was to obtain a registered Community design in 2007 for the whole European Union (000677091-0001). However, they wanted to expand the scope of their IP rights, and so they applied for a three-dimensional (3D) trademark at the Hungarian Intellectual Property Office (HIPO). The application was filed for:

  • Class 14 – decorative objects;
  • Class 21 – decorative objects made of glass and ceramics; and
  • Class 28 – toys.

Refusal

The HIPO, in Decision No. M1500325/11, refused their application based on Section 2 of the Hungarian Trademark Act.

The section referred by the HIPO, and the subparagraphs therein, are in line with the EU Trademark Regulation. The relevant section of the Trademark Act states that the following cannot be registered:

Signs which consist exclusively of: […] (ii) the shape, or another characteristic, of goods which is necessary to obtain a technical result; (iii) the shape, or another characteristic, which gives substantial value to the goods.

Regarding the first ground for refusal, the HIPO found that the Gömböc can only function as a toy because of its shape, as the shape allows it to turn to its stable balanced position. Therefore, the technical content determines the shape. All the essential elements of the sign at issue were designed to obtain that technical result. Therefore, the informed and reasonable consumer is going to consider the sign as a shape necessary to obtain the technical result, instead of a sign marking the origin of the product. The HIPO thought that the registration would unfairly limit competitors.

Regarding the second grounds for refusal, the HIPO refused the application because the 3D shape represented in the sign possessed a striking and attractive shape, which is an essential element in the marketing of the goods. Consumers purchase decorative objects because of the special design. In theory, it cannot be ruled out that 3D decorative objects can obtain trademark protection, but where it is the upfront style of such objects that determines their formal appearance, the value of the product resides in that shape. In both cases, the HIPO found that the function, shape and characteristic was well known to the public as there were webpages, various instances of press coverage and public events available prior to the filing date of the 3D trademark.

Appeals

The applicants then filed a petition for revision at the Metropolitan Court (MC) asking the MC to alter the HIPO’s decision because the HIPO failed to examine several attributes that were not visible in the 3D shape. The actual relation between function and shape should be considered, and not the perception of the consumers. The MC rejected the petition for revision, but gave different grounds for refusal. In the case of the toy in question, it stated that it is impossible to consider the public’s perception of the link between the shape of the good and the technical result. The presence of such a link is an objective and a technical fact. As a decorative object, the MC held, in Decision No. 3 Pk 22,729/2016/7, that the substantial value of the Gömböc lies not merely in its aesthetic qualities, but in the underlying discovery – the “tangible mathematics” – embodied in the shape that gives it substantial value. Consumers would like to own the Gömböc not as a nicely designed object, but as a representation of such tangible mathematics.

The applicants appealed the decision, but the Metropolitan Court of Appeal (MCA) upheld the first instance court decision and agreed with the rejection of the application, but its reasoning also differed. The MCA stated that the single photograph attached to the application was not enough to determine the question of functionality and shape, and therefore confirmed only the second ground of rejection that the trademark application consist of a shape or other characteristic that gives the goods substantial value.

Review

The applicants asked for the review of the decision from the Curia, Hungary’s supreme court. The Curia considered that the HIPO and the first and second instance courts had different reasons and the relevant case law were also not clear, therefore the Curia requested a preliminary ruling before the Court of Justice of the European Union (CJEU).

The following questions were asked:

  1. Must Article 3(1)(e)(ii) of Directive 2008/95, in the case of a sign consisting exclusively of the shape of the product, be interpreted as meaning that:
    1. it is, on the basis of the graphic representation contained in the register alone, that it may be determined whether the shape is necessary to obtain the technical result sought; or
    2. may the perception of the relevant public also be taken into account?
  2. Must Article 3(1)(e)(iii) of Directive 2008/95 be interpreted as meaning that that ground for refusal is applicable to a sign that consists exclusively of the shape of the product where it is only by taking into account the perception or knowledge of the buyer as regards the product that is graphically represented that it is possible to establish that the shape gives substantial value to the product?
  3. Must Article 3(1)(e)(iii) of Directive 2008/95 be interpreted as meaning that that ground for refusal is applicable to a sign, consisting exclusively of the shape of a product
    1. which, by virtue of its individual character, already enjoys the protection conferred on designs; or
    2. the aesthetic appearance of which gives the product a certain value?

In Judgment No. C-237/19 of 23 April 2020, the CJEU examined and answered the questions as follows.

Question 1

In response to the first question, the CJEU stated that the correct application of the ground for refusal of the registration set out in Article 3(1)(e)(ii) of Directive (EU) 2008/95 required the referring court to carry out a two-step analysis: first, the competent authority must identify the essential characteristics of the 3D shape; and second, it must establish whether they perform a technical function of the product concerned.

The Curia’s first question was aimed at the issue of whether it is enough to perform a simple virtual analysis of the sign or the applicable public’s perception should also be examined. The CJEU adduced its earlier decisions, such as the red LEGO brick (Case No. C 48/09 P). This decision, in paragraph 52, stated that:

the presence of one or more minor arbitrary elements in a three-dimensional sign, all of whose essential characteristics are dictated by the technical solution to which that sign gives effect, does not alter the conclusion that the sign consists exclusively of the shape of goods which is necessary to obtain a technical result.

The same decision, in paragraph 45, also stated that:

the prohibition on registration as a trade mark of any sign consisting of the shape of goods which is necessary to obtain a technical result ensures that undertakings may not use trade mark law in order to perpetuate, indefinitely, exclusive rights relating to technical solutions.

The correct application of that ground for refusal requires that the authority deciding on the application for registration of the sign must:

  • first, properly identify the essential characteristics of the 3D sign at issue; and
  • second, establish whether they perform a technical function of the product concerned.

During the first step, the competent authority can perform the assessment directly on the overall impression produced by the sign or examine, in turn, each of the components of the sign.

During every assessment and examination by the competent authorities, the perception of the relevant public and other necessary information can be used, but such information must originate from a reliable source.

Question 2

The second question was in relation to Article 3(1)(e)(iii) of Directive (EU) 2008/95, which concerns shapes the characteristics of which influence the attractiveness of the product, such that it adds substantial value to the goods and a trademark in that shape would distort competition in the relevant market. Here, the technical functionality of the shape is irrelevant. The CJEU stated that:

the application of this ground for refusal is based therefore on an objective analysis, intended to demonstrate that the shape in question, on account of its characteristics, has such a great influence on the attractiveness of the product that restricting the benefit of the shape to a single undertaking would distort the conditions of competition on the market concerned.

In the cases of Class 14 and Class 21, the MC considered the fact that the tangible mathematical characteristic provides substantial value. The perception or knowledge of the relevant public can be referred to in a refusal decision but there must be an objective and reliable piece of evidence asserting that the consumer’s decision to purchase the product in question is, to a large extent, determined by that characteristic.

Question 3

The final question of the Curia concerned the interaction between Article 3(1)(e)(iii) of Directive (EU) 2008/95 and the protection afforded under European design law, as well as the application of Article 3(1)(e)(iii) where the relevant sign consists exclusively of the shape of a decorative item. The CJEU found that design law differs from trademark law and the existence of a design protection cannot automatically exclude a trademark protection, provided that the conditions for registration of that sign as a trademark are met. Regarding the second part, the competent authority should examine whether the sign at issue consists exclusively of the shape that gives substantial value to the goods.

Source: photograph of a Gömböc statue taken by Kicsinyul, distributed under a CC licence.

Observation

The applicants stated that the HIPO and the courts did not use evidence from objective origins, as the CJEU required in its decision. Therefore, the HIPO must perform a technical analysis to determine whether the sign consists of substantial elements that achieve the function of the goods. The considered consumers’ knowledge (the shape is necessary to achieve the mechanical effect, the standing up) was false. For the Gömböc, the scientific breakthrough was to eliminate the more than one unstable equilibrium position and the standing up is a side effect. Regarding the question of whether the sign consists of a shape or other characteristic that gives the goods substantial value, the applicants stated that, in this case, the value of the Gömböc consists of elements that are not derivable from the shape, such as the history of its development and its developers.

Decision

The Curia reasoned that it is obvious that the public can identify from the trademark application that it concerns the Gömböc, a mono-monostatic object of a particular shape, which is convex, homogeneous and always returns to its stable equilibrium. These features cannot be established from the trademark application, therefore other factors should be considered, such as the knowledge of the relevant public.

Regarding the technical function of the shape, objective sources were necessary to determine if the shape and material of the Gömböc were solely intended to ensure that the Gömböc always returns to its stable equilibrium. This does not have to be the opinions of experts as there are numerous other possibilities given by the HIPO, such as descriptions, publications, websites and promotional materials. It was clear from the case files that the characteristics of the Gömböc were designed to achieve the intended technical result.

The Gömböc can function as a toy due to the technical result achieved by the shape and therefore the shape is excluded from trademark protection under Class 28.

Regarding the issue of substantial value of the shape, the first step of the examination is similar to the one above. The sign applied for is the shape of the Gömböc and its essential characteristics are known by the relevant public. However, it is not obvious for the Gömböc what gives it its essential value. There were differing opinions offered during the HIPO procedure and by the first and second instance court about the substantial value. The HIPO and second instance court saw it in the design, while the first instance court saw it in the tangible mathematics. The Curia had the same reasoning as the latter. According to the Curia, the public would purchase these objects based on the symbolic scientific value. Therefore, the unique shape of the Gömböc cannot be protected as a trademark for decorative objects in Classes 14 and 21.

Conclusion

The Curia, by following the CJEU’s answers, set out that, to establish functionality, not only information from the trademark application itself can be taken into account but also information that is available before the filing date of the application, such press coverage, websites and online shops from which a link between the form and function can be objectively deducted.

While it was clear from the CJEU’s decision that the existence of a registered design per se does not exclude the shape from trademark registration, the Curia also made it clear that it is not the design of the product or the fact that shape as such is ornamental that renders substantial value to the product, but other objectively available information, such as the mathematical discovery that triggers consumers to purchase or hold the product.

The CJEU and Curia decisions firmly set the guidance that the functionality and substantial value exclusion clauses of European trademark laws are to be interpreted in such a way that objective and reliable information on the shape or the sign must be taken into account when determining the registrability of the trademark. In the present case, objective and reliable third party and own sources were available long before filing date of the trademark application. It is yet to be determined whether information or documents available to the public after the filing date may be taken into account. In our view, such documents that were made available after the priority date cannot be taken into account during the application’s absolute grounds check. The same would apply in the case of an ex tunc invalidity action, as the relevant point in time of the assessment is the priority date of the contested trademark.

One thing seems to be clear: it is crucial to file applications for a registered design and a trademark for the same product or shape with the same priority (on the same day), while keeping all information concerning the product confidential until this time. It is yet to be seen if a shape such as the Gömböc can be registered and whether its registration may be cancelled based on other legal grounds, such as loss of distinctiveness due to its scientific value.

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