- 15 days to the Textilis decision: “The shape, or another characteristic, which gives substantial value to the goods”

"The shape or another characteristic, which gives substantial value to the goods": this complex formulation is the third indent of Article 7(1)(e) of Regulation 2017/1001 (EUTMR)/Article 4(1)(e) of Directive 2015/2436. But what does this absolute ground for refusal mean and what has been said about it until now?

As a starter, one should consider that the analysis of this absolute ground involves, at least, two main issues:

• The interpretation of the formulation "which gives substantial value to the good";

• The interpretation of the "new" formulation "or another characteristic";

Background

As readers might remember, the formulation of this ground for refusal has been considered unclear and has been deemed to create a contradiction between the necessity to assess the distinctive character of a product shape in order to be registered as trade mark (according to the case law: "only a mark which departs significantly from the norm or customs of the sector is not devoid of any distinctive character") and the risk for the shape to fall within the absolute ground for refusal (a mark which departs significantly from the norm risks to have a shape which gives substantial value to the good).

 

The following decisions and opinions provide indication on the analysed absolute ground:

In Benetton, the CJEU stated that the ground for refusal is to be interpreted as meaning that the shape of a product which gives substantial value to it cannot be registered as a trademark as if it had acquired distinctiveness through use, where it acquired attractiveness as a result of its recognition as a distinctive sign following advertising campaigns.

Instead, in Hauck, the CJEU held that the absolute ground for refusal cannot be limited to the shape of products having only artistic or ornamental value, otherwise products which have essential functional characteristics as well as a significant aesthetic elements would not be covered. In his opinion in this case, AG Szpunar, considered that, to decide if a shape of a product gives that product “substantial value”, the perception of the sign by the average consumer may be a relevant criterion of assessment for the competent authority, together with other criteria such as, e.g., the nature of the category of goods under consideration, the artistic value of the shape and its dissimilarity from other shapes used in the market, a substantial price difference and the presence of a promotion strategy emphasizing principally the aesthetic characteristics of the goods concerned.

In Beo-Lab case, the CJEU stated that, if one of the criteria mentioned in Article 7(1)(e) EUTMR is met, this results in a release from examination of the sign under Article 7(3) EUTMR, since registration of the sign in such circumstances is clearly impossible Moreover, if the fame of the designer of a specific product or the marketing efforts regarding that product are the reasons for the appeal of the shape or another characteristic of the good then the absolute ground for refusal does not apply.

Attention, attention,
fundamental decision around the corner

In his opinion in Louboutin case, AG Szpunar considered that to assess the value of the shape the attractiveness of the goods steaming from the proprietor's reputation must be taken into account. The application of the provision is not justified when the advantage results from the intrinsic characteristic of the shape but from the reputation of the mark or its proprietor as the possibility of acquiring such a reputation is an important aspect of the system on competition to which also trademark law contributes. 

In his additional opinion in that case, the AG stated that to guarantee that shapes which are attractive to the public remain available to market participants it is necessary to take into account both the perception of the sign at issue by the relevant public and the economic effects which result from reserving that sign to a single undertaking. Giving importance to the public's perception favour of a teleological interpretation of the absolute ground. Consequently more flexible interpretation of the concept of "shape" would have to be taken into consideration. The AG stated that "a trademark can be refused or declared invalid on the basis of Article 3(1)(e)(iii) of Directive 2008/95 where its characteristics give substantial value to the goods. Consequently that characteristic remain available for all market participants over the period during which that characteristic give substantial value to the goods. From the point at which that is no longer sought and valued by the public, the trademark at issue would no longer potentially be caught by the prohibition laid down in Article 3(1)(e)(iii) of Directive 2008/95". The absolute ground for refusal at issue is therefore related to characteristics that are dependent on external factors. As readers might remember in that case the CJEU decided to state that a sign at issue (a colour applied to the sole of a high-heeled shoe) does not consist exclusively of a "shape" and consequently the judgement does not involve any further clarification concerning the absolute ground at issue.

Concerning the interpretation of the new expression "or another characteristic" in his opinion in the Louboutin case AG Szpunar, considering the absence of transitional disposition relating to this provision holds that the expression "or another characteristic" does not introduce substantial changes in fact the "other characteristics" were already caught by the absolute ground of refusal. On the contrary a recent judgement of the General Court, dealing with the second indent of the absolute ground for refusal, statesd that from the terms, objectives or general scheme of the EUTMR as reformed should apply to situations existing before its entry into force. Appeal against the decision have been recently lodged.

Comment

Considering the function of the absolute ground at issue, the need to avoid the creation of a monopoly on shapes and consequently guarantee market’s competition, the interpretation of the absolute ground at issue according to which: 

• the ground is based on extrinsic characteristic of the good; 
• the perception of the shape by the relevant public may change in time and consequently the absolute ground for refusal has a temporary nature; 
• the assessment of the substantial value of the goods cannot be based on the reputation of the trademark and its proprietor;

will allow to narrow down the scope of the absolute ground and consequently avoid the contradiction between the necessity to assess the distinctive character of the shape and the risk for the shape to fall within the absolute ground for refusal.     

Further developments on the subjects are awaited on 14 March 2019, after that on 11 January 2018, a new request for a preliminary ruling [IPKat post here] regarding the interpretation of the absolute ground for refusal at issue was made the CJEU. In this request, the referring court asked, among other things, if Article 7(1)(e)(iii) EUTMR is to be interpreted as meaning that its scope covers a sign which consists of the two-dimensional representation of a two-dimensional product, for example fabric decorated with the sign in question.