A break for Kit Kat?
The Court of Justice of the European Union (CJEU) has ruled on a reference from the English High Court concerning whether shapes, specifically the 3D shape of the four-finger Kit Kat chocolate bar, can be registered as trademarks.
In Nestlé v Cadbury, C-215/14 the CJEU has given owners of products with well-known shapes some encouragement, as it said that such shapes can be registered as trademarks and held to be distinctive on the basis of public perception of the shape, separate to any brand name or logo applied to it. This may prove to be a powerful tool in the race to protect shapes from brand dilution.
The main area of complexity was the discussion of how the exclusions to registrability were to be applied to the shape—should each element of the shape be considered separately and have to fulfil each exclusion criterion, or could the shape be assessed as a whole?
The CJEU found 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—that is, each individual essential feature, which is a much easier requirement to avoid than a compilation approach (where at least one feature fails each criterion).
Background
In January 2014, Mr Justice Arnold handed down a judgment in an appeal by Nestlé against the UK Intellectual Property Office’s (IPO) decision to reject the registration of its four-finger product shape as a trademark in relation to most of the goods applied for (Nestlé v Cadbury, 2013, EWHC). The IPO allowed the application for “cakes” and “pastries” on the grounds that the shape had acquired distinctiveness for these goods, but Arnold disagreed in the English High Court. Cadbury had objected to the shape trademark application at the IPO.
The Kit Kat bar was held to have 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, agreeing with the hearing officer, found that the first feature resulted from the nature of goods themselves—thereby contravening article 3(1)(e)(i) of Directive 2008/95/EC (the trademark directive) and that the second and third features were necessary to obtain a technical result (thereby contravening the article 3(1)(e)(ii) exclusion of registration of shape marks).
Registrations for product shapes have generally had a tough time before IP offices and judges, since both are concerned not to allow a monopoly for shape, which intellectual property law has in the past protected for a time-limited period under design (or even copyright) law by granting it trademark protection or by limiting the breadth of protection on enforcement (see Whirlpool v Kenwood, 2008, EWHC).
As the CJEU itself said in the current case: “The rationale of the grounds for refusal of registration laid down in article 3(1)(e) of Directive 2008/95 is to prevent trademark protection from granting its proprietor a monopoly on technical solutions or functional characteristics of goods which a user is likely to seek in the goods of competitors … The aim is to prevent the exclusive and permanent right conferred by a trademark from serving to extend indefinitely the life of other rights which the EU legislature has sought to make subject to limited periods.”
Assessment of individual ‘essential features’
Article 3(1)(e) of the trademark directive, or article 7(1)(e) of Regulation (EC) No. 207/2009 (the Community trademark (CTM) regulation), precludes registration of signs which consist exclusively of:
(i) The shape which results from the nature of the goods themselves;
(ii) The shape of goods which is necessary to obtain a technical result; and
(iii) The shape of the goods which gives substantial value to the goods.
These grounds of refusal must be applied independently of each other. It is irrelevant whether the sign in question could be denied registration on the basis of a number of grounds for refusal as long as any one of those grounds is fully applicable to that sign. Therefore, even if the essential features of a sign may be covered by one or more grounds of refusal set out under article 3(1)(e), registration may be refused only where at least one of those grounds is fully applicable to all the essential features of the sign at issue.
The CJEU held that the “public interest objective underlying the application of the three grounds for refusal of registration set out in article 3(1)(e) of Directive 2008/95 precludes refusal of registration where none of those three grounds is fully applicable”.
Does article 3(1)(e)(ii) apply to the manner in which the goods function or the method of manufacture?
Arnold’s referred questions included one asking whether article 3(1)(e)(ii) should be interpreted as precluding registration of shapes which are necessary to obtain a technical result regarding the manner in which the goods are manufactured, as opposed to the manner in which the goods function?
“Careful design of surveys will be needed by any business wishing to prove shape alone is perceived as an indication of origin in any future applications.”
The hearing officer had held that article 3(1)(e)(ii) embraced both kinds of technical result and that there was nothing in the wording of the trademark directive which limited it to the function of the goods.
However, the CJEU held that this requirement applied to the function. This is the position that Nestlé had maintained throughout: the technical result exclusion applied only where the shape is necessary to achieve a technical result, not where it was merely necessary to obtain a technical result regarding the manner in which the goods were manufactured.
Distinctiveness—perception or reliance?
In relation to the distinctiveness of shape marks, in order to satisfy the acquired distinctiveness test,
the CJEU, despite being asked whether the public should “rely on” the mark as indicating origin, held that the relevant public must “perceive” the shape as exclusively designating origin as opposed to any other mark which might also be present. These words do not carry the same meaning—perception appears to be less onerous than reliance.
As the CJEU stated: “Regardless of whether the sign is used as part of a registered trademark or in conjunction with the registered trademark, the fundamental condition is that, as a consequence of that use, the sign for which registration as a trademark is sought may serve to identify, in the minds of the relevant class of persons, the goods to which it relates as originating from a particular undertaking.”
If a brand owner’s goods display any other trademarks (such as the brand name or logo stamped on the shape—as it is on a Kit Kat), it may be more difficult for the company to prove that the relevant public perceives the shape of the goods alone as identifying the origin of the goods. However, the CJEU’s decision considers that this can be possible as long as that sign alone, as opposed to any other trademark which may also be present, identifies the particular undertaking from which the goods originate.
Thorough survey evidence will be needed to prove this vital element. 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.
Nestlé has already offered evidence that more than 50% of respondents to a survey (as assessed by the IPO hearing officer) recognised the shape of the bars without any logo or branding as a Kit Kat, but the High Court may wish to revisit the evidence in the light of this decision. Careful design of surveys will be needed by any business wishing to prove shape alone is perceived as an indication of origin in any future applications.
Comfort for owners of 3D brands
Although it remains to be seen how this CJEU decision will be applied by Arnold in the case from which it was referred, brand owners should generally take comfort that shape marks are being supported in principle in this CJEU decision and will still be registerable, even if some of their individual essential features are precluded from registration in their own right.
Many current shape brand owners that have registered the shape with their logo or brand name on it may now consider applying for the shape alone if they can provide sufficient evidence of public perception of the shape’s independent role as an indicator of origin.
However, shape trademarks are notoriously hard to register since there is always a risk that the grant of the mark will give the proprietor a monopoly that is too broad (bearing in mind that trademarks can last indefinitely provided that renewal fees are paid). The CJEU 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).
If the mark is ultimately refused, it is notable that Nestlé will continue to have protection for the shape of its Kit Kat bars through its CTM for the same shape, although the CTM does not cover chocolate. Therefore, the issue is not whether Nestlé should be granted a monopoly for the shape of four-finger chocolate bars but whether it can extend its existing monopoly by adding a UK national mark.
Nevertheless, 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.
Impact of European trademark reform
This more encouraging position for businesses which use distinctively shaped goods or shapes in their branding may be at risk from the upcoming revisions to the CTM regulation and trademark directive which may well raise the threshold for registration of 3D marks on a European level. These reforms exclude registration of CTMs (soon to be known as EU trademarks) not just in relation to shapes but also any other ‘characteristic’ resulting from the nature of the goods themselves or necessary to obtain a technical result or which gives substantial value to the goods.
Rachel Montagnon is a professional support consultant at Herbert Smith Freehills. She can be contacted at: rachel.montagnon@hsf.com
Sarah Burke is a senior associate at Herbert Smith Freehills. She can be contacted at: sarah.burke@hsf.com
Joel Smith is a partner at Herbert Smith Freehills. He can be contacted at: joel.smith@hsf.com
