Have a break, have a... CJEU Reference: Société Des Produits Nestlé SA v Cadbury UK LTD

30 January 2014

In this alert, we examine the background to the dispute between two of the world's biggest chocolate makers and why the court has considered it necessary to ask the CJEU to clarify these points.

In the course of Nestlé's battle for a trademark for the shape of its four finger Kit Kat chocolate biscuit, Mr Justice Arnold has asked the Court of Justice for the European Union (CJEU) to clarify when:

  1. a trademark can be said to have acquired distinctive character; and
  2. the shape of a product is capable of registration as a trademark.

The answers to these important questions will have implications for the type of signs which can be registered as trademarks in the future.

Background

In July 2010, Nestlé applied to register a three dimensional mark for the shape of its four fingered Kit Kat chocolate biscuit in relation to goods including chocolate confectionary, chocolate products and chocolate coated wafer biscuits. Nestlé's application was initially accepted by the UK Trade Marks registry but was opposed by Cadbury on the basis that the sign lacked any distinctive character and the shape which Nestlé was seeking to register was no more than a shape which resulted from the nature of the goods and/or was necessary to achieve a technical result.

The hearing officer largely upheld both grounds of opposition, although allowed the UK trademark in respect of 'cakes' and 'pastries'. Both Nestlé and Cadbury appealed to the High Court.

High Court decision and reference to CJEU

Distinctive character

Under section 3(1)(b) of the Trade Marks Act 1994 (implementing Paragraph 3 of the Trade Marks Directive 2008/95 (the Directive)), trademarks can be registered if they either have inherent distinctive character or it can be shown that they have acquired distinctive character through use.

The hearing officer found that the shape of the Kit Kat only possessed inherent distinctive character in relation to 'cakes' and 'pastries' because, unlike the other products covered by the application, it fell outside the "norms and customs" of those sectors and would be capable of distinguishing the origin of such goods. Arnold J upheld Cadbury's appeal on this point on the basis that just because a product fell outside the "norms and customs" of a sector, did not mean that it had inherent distinctive character. The hearing officer should therefore have concluded that the trademark was devoid of any inherent distinctive character.

In relation to acquired distinctive character, the hearing officer held that while survey evidence showed that a significant proportion of the relevant public recognised the shape mark and associated it with Nestlé's Kit Kat product, it had not acquired distinctive character. This was because Nestlé could not show that consumers relied on the shape (and only the shape) to identify the origin of the goods.

Arnold J agreed with the hearing officer's factual conclusions. There was no evidence that Nestlé's marketing resulted in the relevant public relying on the shape of the product alone to identify its trade origin. He also thought that it was "inherently unlikely" that the public used the shape to confirm the authenticity of the goods, and instead relied on the fact that each of the Kit Kat fingers is embossed with the trademark KIT KAT. As such, there was no reliance on the shape.

However, Arnold J noted that, despite repeated attempts to clarify the matter, the circumstances in which a trademark can acquire distinctive character remains unclear. While it is clear that the mark must be used to identify goods as originating from a particular undertaking, and that this must be as a result of the use of the mark as a trademark, it was unclear what 'use of the mark as a trademark' meant. Was it sufficient for an applicant to establish that the public recognised and associated the mark with the goods of a particular undertaking, or did the public have to rely on the mark as a trademark (which is the approach the English courts have adopted)?

Arnold J stated that, in his view, the correct interpretation is that a significant proportion of the relevant class of persons must rely on the mark itself to identify the trade origin of the goods or services. However, as a result of the uncertainty he referred the issue to the CJEU.

Shape marks

Shapes can be registered as trademarks when they are capable of distinguishing the goods or services of one undertaking from those of other undertakings. However, signs which consist exclusively of a shape which results from the nature of the goods, or which are necessary to achieve a technical result, cannot be registered as trademarks pursuant to sections 3(2)(a) and (b) of the Trade Marks Act 1994 (implementing Articles 3(1)(e)(i) and (ii) of the Directive) respectively. These exclusions are intended to ensure that a trademark owner cannot use a trademark to obtain a perpetual monopoly over a technical solution and prevent competitors from supplying products which perform similar technical functions.

The hearing officer found that the rectangular 'slab' forming the base of the Kit Kat product, and the relative dimensions of that feature, resulted from the nature of the goods contrary to Article 3(1)(e)(i) of the Directive.

The hearing officer also held that the existence, number, position and dimensions of the grooves which divide the product into 'fingers' were features which were necessary to obtain the technical result of breaking the chocolate into pieces, including the need to consider the portion size and manufacturing constraints such as the depth and angle of the grooves. As such, they were contrary to Article 3(1)(e)(ii) of the Directive.

Arnold J largely upheld the hearing officer's reasoning and conclusion on the facts (only overturning his conclusion that his reasoning did not apply to 'cakes' and 'pastries'). However, Arnold J considered the interpretation of Articles 3(1)(i) and (ii) to be unclear.

First, it is unclear whether all of the essential features of a product have to fall within one of the two exclusions set out in the Directive in order to preclude registration. For example, in the present case one of the essential features was found to result from the nature of the goods while the others were necessary to obtain a technical result. Nestlé submitted that because neither exclusion covered all of the essential features of the product, the mark was capable of registration. The issue has been referred to the CJEU.

Secondly, Nestlé submitted that a mark should only be excluded on the basis that the shape is necessary to obtain a technical result where it was a technical result with regard to the function of the goods rather than the manner in which the goods were manufactured. Once again, while Arnold J appeared to agree with Cadbury's submissions that such an interpretation was contrary to the underlying policy of the Directive, he considered the Directive to be sufficiently unclear to refer the issue to the CJEU.

Conclusion

The upshot of the above is that until the CJEU provides its answer to the questions posed (likely to be some time in 2015) trademark applicants will continue to face some uncertainty in relation to applications based on acquired distinctive character or for shape marks. Arnold J made his opinion as to the correct outcome clear in the judgment and, if the CJEU agrees with his interpretation, it is unlikely to be welcome news for Nestlé. We await the court's decision with interest. In the meantime, Arnold J can 'have a break...'.


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