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Monday, 6 March 2017

The KitKat shape mark – no merging of territories for proof of acquired distinctiveness

So much paper for this shape
The disputes around the shape of the KitKat chocolate bar just do not seem to end. The fight between Nestlé and Cadbury has already led to a judgment by the ECJ (yes), the High Court of England and Wales, the Singapore Court of Appeal and now (well, kind of now) the General Court (T-112/13). And the saga will continue – Arnold J’s judgment is under appeal [EDIT: decision expected by April 2017], and the decision by the General Court will most likely end up with the ECJ, given the stakes.

To recap briefly – and I emphasize briefly – after the referreal to the ECJ which had answered the questions posed by Arnold J somewhat cryptically, Arnold J found that the shape of the KitKat bar was not barred from registration by   by section 3(2)(b) of the 1994 UK Trade Mark Act corresponding to Article 3(1)(e)(ii) of the Trade Mark Directive. However, according to Arnold J, Nestlé failed to prove acquired distinctiveness, as it was not sufficient to show that a considerable part of the relevant public "recognized and associated" the shape with the applicant. Rather, it had to be shown that the public relied on the mark as indicating the origin of the goods. The Singapore Court of Appeal, in a decision of 24 November 2016, applied a similar logic and refused registration of the KitKat shape in Singapore (see para. 36 of the decision; IPKat post).

Note the opaque packaging
All this time, a cancellation action brought by Mondelez (as Cadbury calls itself these days, a bit like Ashley who wants to be called Tiffany now) was making its way up the (too many) instances of the European court system. The EUIPO’s Cancellation Division had sided with Cad… Mondelez and cancelled Nestlé’s EU trade mark. The Board of Appeal overturned this decision and found that the shape of the KitKat bar was not precluded from registration by Article 7(1)(e)(i) and (ii) EU Trade Mark Regulation. The Board agreed with Nestlé that the populations of Germany, France, the UK, Italy and Spain together made up 79.2 per cent of the total population of the EU as composed by the fifteen Member States to be considered in the proceedings, as supported by population figures in 2007 published by Eurostat. Not only that, but add the Netherlands, Austria and other Member States into the mix, and it was possible for the Board to conclude that:
'the contested mark has been used in almost the totality of the EU's territory, covering the market of fourteen of the fifteen Member States that formed the EU at the relevant point in time; that as a consequence of such use, it can be determined that almost 50 per cent of the general public of the EU taken as a whole (or, said in another way, around 50 per cent of the general public of the  Member States representing around 90 per cent of the EU's population), identifies as first option the Nestlé as the business origin of a product with the shape of the contested mark (which belongs to the categories of 'sweets, bakery products, pastries, biscuits, cakes and waffles')' (at [88])
As such, the evidence was sufficient to establish that the trade mark had become distinctive through use in the relevant parts of the EU territory (R-513/2011 ; IPKat post).

But the tides have turned again – the General Court, on appeal by Ashl…, I mean Tiffany, overturned the Board’s decision and found that Nestlé had failed to prove acquired distinctiveness throughout the territory of the European Union. In a rather long decision, the Court made some important and potentially far reaching statements regarding the requirements to prove acquired distinctiveness. The Court first stated, rather uncontroversially, that in order to be accepted for registration, a sign must have distinctive character, whether inherent or acquired through use, throughout the European Union. If a sign lacked inherent distinctiveness, acquired distinctiveness needed to be shown for the entire EU. The Court then summarized the case law regarding the required proof:
In addition, according to case-law, although it must be proved that a mark has acquired distinctive character through use throughout the European Union, the same types of evidence do not have to be provided in respect of each Member State (...).
Furthermore, the Court has repeatedly held that there was insufficient proof of distinctive character acquired through use of a mark throughout the European Union where evidence was missing for certain Member States (...).
In particular, in the judgment of 21 April 2015, Louis Vuitton Malletier v OHIM — Nanu-Nana (Representation of a grey chequerboard pattern) (T360/12, not published, EU:T:2015:214), while relying on the case-law developed in the judgment of 24 May 2012, Chocoladefabriken Lindt  & Sprüngli v OHIM (C98/11 P, EU:C:2012:307), according to which it would be unreasonable to require proof of acquisition of distinctive character through use for each Member State, the Court considered that, since such acquisition had not been established for 12 of the 27 Member States constituting the European Union at the date of filing the application for registration of the mark in question, that mark could not be regarded as having acquired distinctive character through use throughout the European Union (...). 
The Board of Appeal had found that in the present case, because Nestlé had submitted survey evidence for the largest Member States proving acquired distinctiveness, and a Table with market shares for all Member States (which is not reproduced in the judgment, hence it is not possible to say whether the market share is similar for those countries for which no survey evidence was produced), that acquired distinctiveness had been proven throughout the territory of the Union. However, the Court disagrees – such a “merging” of territories is not permissible:

The Board of Appeal considered, in essence, that it was sufficient to show that a significant proportion of the relevant public throughout the European Union, merging all the Member States and regions, perceived a mark as an indication of the commercial origin of the goods designated by that mark.
However, that criterion is incorrect: the relevant question is not whether it was shown that a substantial proportion of the public in the European Union, merging all the Member States and regions, perceived a mark as an indication of the commercial origin of the goods designated by that mark, but whether, throughout the European Union, it was proved that a significant proportion of the relevant public perceived a mark as an indication of the commercial origin of the goods designated by that mark. A lack of recognition of the sign as an indication of commercial origin in one part of the territory of the European Union cannot be offset by a higher level of awareness in another part of the European Union.
Do I smell trade mark infringement?
The Court then continued to assess the evidence, and concluded that the shape of the KitKat chocolate bar had acquired distinctive character through use in Denmark, Germany, Spain, France, Italy, the Netherlands, Austria, Finland, Sweden and the United Kingdom, but that the Board of Appeal could not validly conclude its examination of the distinctive character acquired by the contested trade mark throughout the European Union on the basis of the percentage of the public recognising that mark in those Member States, even if the population of those states represented almost 90% of the population of the European Union, without coming to a conclusion regarding the perception of the mark by the relevant public in, inter alia, Belgium, Ireland, Greece and Portugal and without analysing the evidence adduced in respect of those Member States. The decision of the Board was therefore annulled.

Interestingly, the Court found that in the territory of the UK, the shape had acquired distinctiveness through use. This is contrary to Arnold J’s finding in his judgment of January 2016, and it puts the Court of Appeal in a difficult position: the General Court showed no inclination to apply a “reliance” test for proof of acquired distinctiveness and was content with recognition and association. Its interpretation of C-215/14 is clearly different from that of Arnold J (see T-112/13, paras. 97-101). While the decision of the General Court is obviously not binding upon a UK court in a proceeding concerning a UK trade mark, the Court’s decision supports the view that Arnold read into the ECJ’s decision what he clearly considers the correct answer to his question.

3 comments:

Roland Mallinson said...

The appeal was heard last month by judges Kitchen, Voss and Floyd and the decision is likely to come within the next month or so. Whilst the General Court's pronouncement that the evidence was good enough to show distinctiveness in the UK is not binding on the Court of Appeal, it ought to be persuasive at least. If not, it will reveal some (even more?) absurdities in our trade mark systems to have senior EU courts ruling one way and senior national courts rule another on exactly the same facts and evidence. Brexit just adds another extra dimension and potential for future legal divergence.

The situation is analogous, but in reverse, to the pending CJEU appeal in the Neuschwanstein case (C-488/16 P). In that case, the German Supreme Court has already conclusively ruled in 2012 that the registration for this word, the name of Ludwig II's famous 'fantasy' castle, was invalid. It concluded that the word is non-distinctive for German consumers and descriptive for souvenirs relating to the castle. In contrast, in a parallel cancellation action, the Board of Appeal and then the General Court in June 2016 chose to ignore the most senior court in Germany and both ruled that the EUTM for the same mark is valid.

One might presume the German Supreme Court may better know how their compatriots perceive a brand better than those based in Alicante or Luxembourg - but seemingly not.

If the CJEU upholds the GC decision, the German courts will face an interesting dilemma when asked to enforce the EUTM against alleged infringers in Germany. Are they forced to recognise the validity of the EUTM as determined by the CJEU and enforce it, or should they follow their Supreme Court? Or perhaps they do both but give the EUTM such narrow protection in Germany (with a broad Article 12 defence) as to render it ineffective there.

To have such matters left open in the legislation even after the recent amendments and, in particular, to have them only now flushed through the CJEU - after 20 years of having dual EU and national trade marks - seems rather surprising. It is no doubt extremely frustrating for those incurring the legal costs that will hopefully resolve the issue for the benefit of all of us, but it will be useful when/if they do.

Anonymous said...

Oh this is messy. What is EUIPO playing at? This is not what the Court held in C-215/14 on the relevant test.

Anonymous said...

It is surprising that it went that way around with the German case. Everything I seem to see out of EUIPO can be described as:

Your mark has two words.. each word has a meaning.. if we squidge the meanings together and think very hard there is a minor but speculative meaning... THUS IT IS A DESCRIPTIVE MARK in English.

Yours faithfully,

Mr Non-English Speaker


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