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Another break in the Kit Kat saga – Court of Appeal ruling

25/05/2017
The latest decision in the Kit Kat saga was delivered last week, when the Court of Appeal confirmed that the four-finger bar had not acquired distinctiveness and could not therefore be registered as a UK trade mark. This follows the EU General Court's decision concerning the corresponding EU trade mark in December 2016, which we blogged about at the time.

The latest decision in the Kit Kat saga was delivered last week, when the Court of Appeal confirmed that the four-finger bar had not acquired distinctiveness and could not therefore be registered as a UK trade mark. This follows the EU General Court's decision concerning the corresponding EU trade mark in December 2016 which we blogged about at the time (see here).

Brief recap of the case so far

Nestlé applied to register as a UK trade mark the shape of the four-finger Kit Kat bar for class 30 goods. The shape mark did not contain the KIT KAT logo which is usually embossed on each bar.

Cadbury argued that the mark lacked distinctiveness, and as a result, the mark should be precluded from registration. Nestlé argued that the mark had acquired distinctiveness, which the UKIPO hearing officer agreed with, but only in relation to cakes and pastries (see here). Nestlé appealed to the High Court in relation to the remaining class 30 goods covered by the application, which in turn referred a number of questions to the CJEU for a preliminary ruling (see our blog on the ruling here).

When the case returned to the High Court it dismissed Nestlé's appeal on the basis that the hearing officer had applied reasoning to his decision which was consistent with the CJEU's decision (see here). Nestlé appealed to the Court of the Appeal on the grounds set out and discussed further below.

Meanwhile, the EU trade mark equivalent of the UK shape mark was considered by the EU General Court in December 2016 (see here). The EU General Court concluded that the Board of Appeal had been wrong to conclude that the mark had acquired distinctiveness throughout the EU, but accepted that the mark had acquired distinctiveness in the UK.

Court of Appeal decision

The Court of Appeal, dismissing Nestlé's appeal, focused on two main points:

  1. Whether the CJEU's judgment had been interpreted correctly by the High Court; and

  2. Whether the hearing officer and High Court had taken the correct approach.

CJEU judgment

Kitchin LJ (who gave the main judgment in the Court of Appeal) referred to the CJEU's test for assessing whether an inherently non-distinctive mark had acquired distinctive character. This was whether the applicant had proved that a significant proportion of the relevant class of persons perceived 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 undertaking. He said that in short this meant that "the mark itself must be seen as a badge of origin".

Nestlé submitted that it was not necessary to show that the mark has played or will play any part in consumers' purchasing or post-transactional behaviour. Kitchin LJ rejected Nestlé's arguments and considered that the CJEU's judgment had been interpreted correctly by the High Court. He explained that whilst the CJEU did not use the term 'reliance', the essential function of a trade mark is to act as a guarantee of origin of the goods or services by enabling consumers to distinguish those goods or services from others which have a different origin. Perception by consumers that goods or services designated by the mark originate from a particular undertaking means they can rely upon such mark in making or confirming transaction decisions. In this context, reliance is a behavioural consequence of perception.

Approach of the hearing officer and High Court

Nestlé criticised the approach of the hearing officer, arguing that he had applied a reliance test, and that had he applied the correct test, he would have found the mark had become distinctive. In Nestlé's submission, the correct approach would have been for the hearing officer to ask himself whether a significant proportion of relevant consumers had come to perceive four-fingered chocolate products as originating from Nestlé; if he had done so, then the hearing officer would have found that the trade mark had acquired distinctiveness.

Kitchin LJ rejected these submissions and held that the hearing officer had taken the correct approach. It was not enough for Nestlé to show that the mark had merely come to be associated with Kit Kat; it had to show that it had used the mark as a trade mark for the purposes of identification by consumers of the product as originating from the makers of Kit Kat and that as a result of this, consumers had come to perceive the shape as indicative of origin.

Kitchin LJ added that where a mark has been used in conjunction with a registered trade mark such as KIT KAT, it is not necessary to show that the public has actually relied upon it as an indicator of origin in the course of their transactional behaviour. It is only necessary to show that the public have come to perceive goods designated by the mark as originating from a particular undertaking. However, Nestlé had failed to show that consumers did anything more than associate the four-fingered bar with Kit Kat.

Kitchin LJ found that the hearing officer had properly relied on the evidence taking account of the following:

  • Nestlé had produced no evidence that the shape of the product had featured any promotional or advertising material;

  • The product had only been sold in opaque packaging; and

  • The shape had not been shown on the packaging (except for a limited time).

Kitchin LJ went further and said that the hearing officer could potentially also have relied on the fact that the product had always been embossed with the KIT KAT logo.

Comment

This decision provides further confirmation for trade mark owners that it is more difficult to register non-traditional marks, such as shape marks, particularly when seeking to rely on acquired distinctiveness. The Court of Appeal has confirmed that the bar is high, which in reality, trade mark owners and advisers have always suspected.

It is interesting that, although the General Court found that the EU trade mark had acquired distinctiveness through use in the UK, the Court of Appeal chose to ignore this decision on the grounds that the General Court had not made any decision on a point of law (which would have been binding on it). Kitchin LJ went so far as to suggest that the General Court had erred in its approach to assessing distinctiveness and had not followed the CJEU.

All three appeal judges emphasised that they were not were applying a test of reliance. However, it seems that in reality to show that consumers perceive the trade mark as an indicator of the origin of a particular product, trade mark owners may also need to show that consumers relied upon that mark alone to identify the product as coming from a particular business. This is in contradiction to the findings of the General Court, who accepted that the mark had acquired distinctiveness in the UK, suggesting that, in the General Court's opinion at least, mere "recognition and association of the mark with Kit Kat" is sufficient to establish distinctiveness.

This decision indicates an inconsistency of approach by the UK and EU courts, and we wonder if this is just the first of many potential divergences of interpretation of CJEU rulings as we head closer to Brexit. However, in the meantime the General Court's decision is under appeal and, according to press reports, Nestlé is considering whether to appeal this decision of the Court of Appeal to the Supreme Court.

With thanks to Sam Woodley for her contribution to this blog

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