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Nestlé KitKat not ‘dead in the water’ following CJEU decision

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Japan, United Kingdom

Nestlé bid to trademark the shape of its KitKat bar has been rejected by the Court of Justice of the European Union.

This article was first published on Intellectual Property Magazine's website on 16/09/2015.  Hastings Guise was quoted.

Swiss food and beverage company Nestlé cannot catch a break, after the Court of Justice of the European Union (CJEU) rejected its bid to trademark the shape of its KitKat bar due to lack of distinctiveness.

Handing down its eagerly awaited decision in Société des Produits Nestlé v Cadbury UK Ltd, the Luxembourg-based court’s First Chamber bounced the case back to the High Court of Justice of England & Wales for a final verdict. However, the confection company may not be down and out just yet.

The wrangle focuses on Nestlé’s five-year attempt to trademark the shape of KitKat’s four finger chocolate-coated wafer, which has remained almost entirely unchanged since 1935, and whether it is possible to secure a permanent monopoly by registering a 3D sign as a mark.

The court said that in order for a trademark applicant to obtain registration, it must prove that the mark alone, as opposed to any other trademark which may also be present, “identifies the particular undertaking from which the goods originate”.

Offering guidance on registration approval, the chamber held that a brand owner which has acquired a distinctive character, regardless of whether that use is part of another registered trademark or in conjunction with such a mark, “must prove that the relevant class of persons perceive the goods or services designated exclusively by the mark applied for, as opposed to any other mark which might also be present, as originating from a particular company.”

Examining Article 3 of Directive 2008/95, ‘grounds for refusal or invalidity’, the court highlighted that a mark shall not be registered if the sign exclusively consists of the shape which results from the nature of the goods themselves; the shape of goods which is necessary to obtain a technical result; or the shape of goods give substantial value to the goods.

“The court has therefore concluded that if any one of the criteria listed in [the] provision is satisfied, a sign consisting exclusively of the shape of goods cannot be registered as a trademark… at least one of the grounds for refusal of registration set out in that provision is fully applicable to the shape at issue,” the chamber added.

Herbert Smith Freehills’ lawyer Joel Smith said today's judgment was “good news” for brand owners whose product shapes are very distinctive.
But, he warned, it sends a “warning shot to other manufacturers wanting to produce a product that is the same shape”.

“Shape marks may be easier to register without the main brand logo attached to them in future, which will be more powerful in protecting against brand shape dilution," said Smith.

Fieldfisher partner Hastings Guise said that the test for inherent registrability asks whether a mark can be perceived as an indication of origin and not, obviously, whether it is currently being relied upon as an indication of origin.

“Distinctiveness, in a trademark sense, therefore means the potential to distinguish the trade origin of goods. So the acquired distinctiveness test must address whether, through use, a mark now has that potential.
“This is not the same as asking whether the mark has already been relied on by consumers as an exclusive indication of origin, which would be a tougher test,” he stated.

He said there was a “significant glimmer of hope” for Nestlé, as the court has pulled the test back towards consumer perception as a key factor, “which is a point that had been lost both in AG Wathelet's [June] opinion and in the UK decisions (which focused on historical consumer behaviour rather than perception),” he stated.

“As a result, this is a fairly pro brand owner ruling as the court offers reassuring criteria.”

Guise added that Nestlé’s case is not “dead in the water” and the company is “in better shape” as the test of consumer perception has been reformulated.

“It seems to me that Nestlé, by showing that over 90% of their survey sample identified the KitKat shape as originating from them, with 50% having a high degree of confidence, have already shown that consumers perceive the shape, independent of other factors, as indicating origin, even if those consumers have not yet had to rely on it in this way due to the additional branded packaging et cetera. This would arguably satisfy the court of CJEU's formulation of the test,” he concluded.

Background

Nestlé sought to register its 3D sign as a mark in the UK in July 2010, but rival Cadbury filed a notice of opposition in January 2011, based inter alia on the provisions of the Trade Marks Act 1994, claiming lack of inherent distinctive character.

The UK Intellectual Property Office, in June 2013, found the mark was “devoid of inherent distinctive character” and Nestlé had “not acquired such a character following the use which had been made of it”.

The company appealed the ruling in July 2013 to the High Court, which referred three questions to the CJEU for preliminary ruling.

In a June opinion, Advocate General (AG) Wathelet said the registration should be rejected, concluding that Nestlé’s application does not comply with EU law.

Guise said that trademark holders should “always be cautious” when applying for 3D marks as there is “no such thing as a simple run”.
“Brand owners must ensure they receive good advice and understand the hurdles they face or evidence needed to support their application in order to prove how a shape is used historically,” he stated.

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