[Guest post] Swedish Patent and Market Court of Appeal applies C-21/18 Textilis in long-running pillow fight

Following the Court of Justice of the European Union’s (CJEU) judgment in Textilis C-21/18 (commented on The IPKat here and here), readers will be happy to discover that the referring court, the Swedish Patent and Market Court of Appeal, has now decided the case further to the guidance received from the Luxembourg judges.

The question referred to the CJEU was whether the wording of Article 7(1)(e)(iii) of Regulation 2017/1001 (EU Trade Mark Regulation (EUTMR)), ie “shape, or another characteristic, which gives substantial value to the goods", applies to a trade mark registered before the entry into force of the reformed language and, if so, prohibits the Manhattan design (see further below) from being protected as an EU trade mark for inter alia tissues and textiles.

Kat friend Hans Eriksson examines the Swedish Patent and Market Court of Appeal’s findings in this guest post. Here’s what Hans writes:

The Swedish Patent and Market Court of Appeal recently decided the long-running dispute between Swedish design company Svenskt Tenn and now-defunct UK textile seller Textilis and its owner.

For context, Swedes love works of applied textile art (goes well with that IKEA decorative pillow you were not allowed to use to build a fort with when you were a kid) and this is not the first time Swedish rightsholders have sued British companies for large scale infringement in textiles and furniture, see for instance the Swedish Patent and Market Court of Appeal’s decision in Designers Revolt (B 9635-16), that ended with stiff prison sentences.

The Textilis case presented a veritable cornucopia of trade mark and copyright questions. This post will focus on the trade mark questions which, in 2018, led the court to make a CJEU referral. After seven years of litigation, the court dispensed with the pillow talk and found convincingly for the plaintiff on all counts.

Article 7 (1) (e) (iii) EUTMR

The defendants argued that the plaintiff’s trademark, depicting Austrian architect and father of the Swedish Modern school of design Josef Frank’s 1940’s textile print Manhattan (below), consisted exclusively of a “shape which gives substantial value to the goods” according to Article 7 (1) (e) (iii) EUTMR and therefore should not have been registered as an EU trade mark.

The Patent and Market Court of Appeal questioned whether Article 7 (1) (e) (iii) should be applied in its original form as of Regulation No 207/2009 (“shape”), or in its amended form as in Regulation (EU) 2015/2424 (”shape, or other characteristic”), and sought CJEU’s guidance on the amended article’s retroactive application.

C-21/18 Textilis

The CJEU unsurprisingly found that it follows from settled case law that the principles of legal certainty and protection of legitimate expectations dictate that a regulation can only be granted retroactive effect if this clearly follows from the wording of the regulation, or from the regulation’s objectives or general scheme (i.e. a systematic interpretation). The amendments to Article 7 EUTMR introduced through Regulation (EU) 2015/2424 do not have retroactive effect and therefore not applicable to trade marks registered before the entry into force of that regulation in 2016.

The CJEU also reiterated that the meaning of the nebulous concept of “shape” in Article 7 (1) (e) (iii) EUTMR should be determined by considering its usual meaning in everyday language, while also taking into account the context in which it occurs and the purposes of the rules of which it is part. With reference to C‑163/16 Louboutin, the court found that in the context of trade mark law, shape is usually understood as a set of lines or contours that outline the product concerned.

The trade mark in this case clearly included “lines or contours” according to the common understanding of shape. But the trade mark did not “exclusively” consist of a shape within the meaning of Article 7 (1) (e) (iii) since the trademark also included decorative elements, placed both inside and outside the outlines of the shape, and notably highlighted the word Manhattan and other geographical names. According to the CJEU (at para 42) “In any event, it cannot be held that a sign consisting of two-dimensional decorative motifs is indissociable from the shape of the goods where that sign is affixed to goods, such as fabric or paper, the form of which differs from those decorative motifs”.

The product development department at Svenskt Tenn should thus refrain from marketing what would likely by the worst ever map of New York City based on this trade mark – that is applying the decorative Manhattan motif to goods with a form that is identical to the decorative motif – and instead focus on tea trays and fancy drapes which has proved a successful strategy for the last 70 years.

The fact that the plaintiff also asserted copyright in the depiction that constituted the trade mark had no bearing on whether the trade mark consisted exclusively of a shape within the meaning of Article 7(1)(e)(iii), a line of argument which though unsurprising is currently in vogue (see C‑237/19 Gömböc third question [commented on The IPKat here and here] and C‑833/18 Brompton Bicycle) [IPKat here].

The Patent and Market Court of Appeal noted the clarity and unambiguity of the CJEU’s answers (there is a first for everything!) and found that the depicted trade mark did not consist exclusively of a shape in accordance with the absolute ground for refusal in Article 7 (1) (e) (iii) EUTMR. The court also rejected a number of additional trade mark objections raised by the defendants.

Copyright

The Patent and Market Court of Appeal also found the defendants’ liable for copyright infringement after having completed a veritable copyright litigation 101-obstacle course. The court found among other things:

• that Swedish substantive law should be applied in the case (Rome II);
• that the Swedish Copyright Act should be applied to the Austrian national’s works (Berne convention);
• that a number of fanciful decorative motifs, like the motif depicted in the trade mark, enjoyed copyright protection;
• that the copyright had been assigned to Svenskt Tenn through a dizzying number of twists and turns over decades;
• that the defendants’ goods infringed this copyright;
• that the defendants’ marketing had targeted the Swedish market according to C-5/11 Donner and C-516/13 Dimensione; and
• that the plaintiff should be awarded damages, albeit limited damages since the case only concerned sales of the infringing products in Sweden, due to the plaintiff’s decision to sue in its domicile instead of in the defendant’s domicile.

Having completed the obstacle course, albeit perhaps not in record time, the court issued a prohibition against the defendants on penalty of a fine and awarded Svenskt Tenn a measly SEK 60,000 (approx EUR 6,000) in damages but ten times that in litigation costs at first and second instance (more or less full actual litigation costs as is often the practice in Sweden).

Comment

Connoisseurs of fancy pillow cases will have to wait for future litigation to clarify whether Article 7 (1) (e) (iii) EUTMR in its current amended form - “shape, or another characteristic” – constitutes an absolute ground for refusal of registration for this kind of non-traditional trademark.

But this commentator believes it can at least be said that the CJEU’s decision in Textilis signals a fairly restrictive interpretation of Article 7 (1) (e) (iii). Trade marks similar to the one in this case are likely to survive also a challenge that theyconsists “exclusively of … another characteristic, which gives substantial value to the goods” since the CJEU and Swedish Patent and Market Court both emphasized that the trade mark at issue in Textilis included several additional decorative elements and therefore did not consist “exclusively” of a shape or another characteristic.