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26 July 2018Trademarks

KitKat ruling creates high barrier for acquired distinctiveness: lawyers

The Court of Justice of the European Union’s (CJEU) judgment on Nestlé’s KitKat trademark has demonstrated the difficulty of proving acquired distinctiveness, lawyers have told WIPR.

Yesterday, July 25,  the CJEU said that the European Union Intellectual Property Office (EUIPO) has to reconsider whether  Nestlé’s 3D four-finger KitKat shape can be registered as an EU trademark (EUTM).

According to the CJEU, the EU General Court was right to say the acquisition of distinctive character by a mark that was initially devoid of inherent distinctive character must be shown throughout the EU, “not only in a substantial part of the EU”.

But the CJEU said that in registering a mark that was formerly devoid of distinctive character, it is not necessary to submit evidence of the mark having acquired distinctive character through use in each individual member state.

Paul Tjiam, managing associate at  Simmons & Simmons, told WIPR that this decision could make it difficult for brands to provide relevant evidence of their trademarks’ distinctiveness.

“The CJEU raises the bar for acquiring distinctiveness to, in my opinion, an unhealthily high level, which makes it a very costly and difficult endeavour for trademark owners to prove acquired distinctiveness of an EUTM,” said Tjiam.

He added that the judgment is “contrary to the unitary character of the EU” and is not in line with the thresholds that apply to prove genuine use and reputation.

Tjiam said he is unsure whether Nestlé will be allowed to provide new evidence of acquired distinctiveness for the remaining countries.

“I would say it ends here for these proceedings, as the CJEU ruled that the General Court was correct in its decision to annul the judgment of the EUIPO’s Board of Appeal,” he said.

Before the annulment, the EUIPO’s Second Board of Appeal had argued that Nestlé had demonstrated that the mark had acquired distinctive character in relation to the goods it offered.

Joel Smith, head of IP at  Herbert Smith Freehills, agreed that yesterday’s ruling will enforce a “tough hurdle” for EU brand owners to overcome when providing evidence of a 3D mark’s distinctive character.

He added that “given the tough approach the court took to Nestlé’s attempts to submit late submissions and reopen oral submissions before ruling, it seems difficult to see that the EUIPO would permit the admission of new evidence at this stage”.

With that in mind, “it seems likely that Nestlé’s 3D EUTM will be declared invalid without a further ‘break’”, he added.

According to Alex Borthwick, of counsel at Powell Gilbert, it is difficult to demonstrate the acquired distinctiveness for a shape mark because consumers do not view the product shape as a “badge of origin”.

“In this case, Nestlé had overcome this hurdle in the EU case for many member states including the UK,” he said.

However, he said that Nestlé’s difficulty arose from the CJEU’s requirement that acquired distinctiveness is demonstrated across the EU.

Wider implications

Michał Ziółkowski, senior associate at  K&L Gates, explained to WIPR that this judgment reflects a wider trend.

“My view is that it is becoming harder to convince the courts regarding the distinctiveness of basic shapes, even if huge amounts of money are being paid for promotion,” he said. “Well-built acquired distinctiveness for shape marks is a must nowadays.”

Ziółkowski said it is important that demonstrating acquired distinctive character must be "geographically representative" as well as "quantitatively sufficient".

Putting up a fight

However, the ruling may not necessarily have a negative impact on Nestlé, according to Richard Haigh, managing director of  Brand Finance.

He said that protecting a product design is an “essential part of creating an iconic brand, but there if a fine line between protecting the distinctiveness of a brand versus solidifying the monopoly that a company may have on a common idea”.

“As a hugely popular and well-loved chocolate bar, it will take more to damage KitKat and Nestlé’s brand values than losing this case, however Nestlé is right to put up a fight,” said Haigh.

A spokesperson for Nestlé told WIPR that it believes the distinctive shape of the company’s four-finger KitKat deserves protection.

“The judgment is not the end of the case and concludes that the distinctiveness of a trademark does not need to be established in each and every EU country but rather across the EU as a whole using a variety of evidence,” the spokesperson told WIPR.

“We think the evidence proves that the familiar shape of our iconic four-finger KitKat is distinctive enough to be registered as an EUTM.”

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Trademarks
25 July 2018   The Court of Justice of the European Union today ordered the European Union Intellectual Property Office to reconsider whether Nestlé’s 3D four-finger KitKat shape can be registered as an EU trademark.