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Nestle and Cadbury Shape up for Round Two in KitKat 3D Opposition

As regular readers will remember, in the Autumn 2013 edition of Make Your Mark (see “Snippets”), we reported Cadbury’s successful opposition to Nestlé’s UK trade mark application no. 2552692 for the shape of its four finger KitKat bar in respect of chocolate coated wafer biscuits.

​To recap, the KitKat four finger shape was refused by the UK Trade Mark Office for all of the Class 30 goods claimed except for “cakes and pastries” on the grounds that:

(i)    It was non-distinctive under Section 3(1)(b) of the Trade Marks Act 1994, on the basis that although Nestlé had filed significant amounts of evidence of use, including survey evidence, this did not prove that the consumer had come to rely on the shape to identify the origin of these goods; and
(ii)    The shape fell foul of Section
3(2)(b) of the Act. In this case, the shape was said to be functional, the essential features being necessary to obtain a technical result, rather than being arbitrary, decorative or imaginative.

Not surprisingly, Nestlé appealed this decision to the English High Court, disputing both grounds of rejection relied on by the Trade Mark Office. Cadbury cross-appealed the Hearing Officer’s decision to allow the application to proceed for registration in respect of “cakes and pastries”.

The appeal came before Mr Justice Arnold in January 2014 ([2014] EWHC 16 (Ch)). In his judgment, Arnold J. leaned towards Cadbury, although he accepted that the law on acquired distinctiveness and technical function was unclear. In view of this, he referred three questions to the CJEU, which we discuss in more detail below.

Arnold J. also held that the Hearing Officer, Mr Allan James, should have concluded that the KitKat shape was devoid of inherent distinctiveness for “cakes and pastries” and he accepted Cadbury’s argument that the fact that a shape is outside the norms and customs of a sector is not sufficient to endow it with distinctive character.

Turning to the issue of acquired distinctiveness, Arnold J. agreed with Mr James that consumers had not come to rely on the KitKat shape to confirm the authenticity of the goods. The Judge went on to state that the fact that Nestlé embossed each finger with KitKat amounted to a clear recognition that consumers do not rely on the shape but on the trade mark KitKat to identify the product. However, he agreed with Nestlé that the law on acquired distinctiveness was unclear as regards use of the mark as a trade mark.
He commented:

“does it require the applicant to show that, as a result of the use of the mark, consumers rely on the mark as a trade mark, or is it sufficient that consumers recognise the mark and associate it with the applicant’s goods?”

He therefore referred the following question to the European Court of Justice (CJEU) for a ruling:

“In order to establish that a trade mark has acquired distinctive character following the use that had been made of it within the meaning of Article 3(3) of Directive 2008/95/EC, is it sufficient for the applicant for registration to prove that at the relevant date a significant proportion of the relevant class of persons recognise the mark and associate it with the applicant’s goods in the sense that, if they were to be asked who marketed goods bearing that mark, they would identify the applicant; or must the applicant prove that a significant proportion of the relevant class of persons rely upon the mark (as opposed to any other trade marks which may also be present) as indicating the origin of the goods?”.

Arnold J. then moved on to the question of technical function and was again in Cadbury’s corner on this ground of appeal. The relevant paragraphs of Section 3(2) of the Trade Marks Act 1994 which were under discussion are reproduced below:

3(2) A sign shall not be registered as a trade mark if it consists exclusively of -
(a)    the shape which results from the nature of the goods themselves,
(b)    the shape of goods which is necessary to obtain a technical result,

Sections 3(2)(a) and (b) mirror Articles 3(1)(e)(i) and (ii) of The Trade Marks Harmonisation Directive (2008/95/EC).
Cadbury argued that

“ would be bizarre if a shape, one of the essential features of which resulted from the nature of goods themselves…. and the other two essential features of which were necessary to achieve a technical result…, could be registered simply because neither objection applied to all three essential features”.

Arnold J. thought this argument had “much to commend it, but I do not feel able to say that this interpretation of the Directive is clearly correct”. He therefore referred this second question to the CJEU:

“Where a shape consists of three essential features, one of which results from the nature of the goods themselves and two of which are necessary to obtain a technical result, is registration of that shape as a trade mark precluded by Article 3(1)(e)(i) and/or (ii) of Directive 2008/95/EC?”.

Nestlé also argued that the Hearing Officer’s decision to reject the shape under Section 3(2)(b), because some of its features related to the manner in which the goods were manufactured, was wrong. Again, Arnold J. concluded that the law in this area was not clear and referred the following third and final question to the CJEU:

“Should Article 3(1)(e)(ii) of Directive 2008/95/EC be interpreted as precluding registration of shapes which are necessary to obtain a technical result with regard to the manner in which the goods are manufactured as opposed to the manner in which the goods function?”

In the writer’s view, if the CJEU accepts Arnold J.’s position that, before a mark may proceed on the basis of acquired distinctiveness, an applicant must prove that it is both recognised and relied on by the average consumer as an indication of origin, shape marks, and other non-traditional marks, such as colour marks, will become virtually impossible to protect by registration in the EU. Whilst this may be good for competition, it is not so pleasing for brand owners, especially those who are targeted by counterfeiters.

In the present case, Mr James, at first instance, accepted that Nestlé’s survey evidence proved that the KitKat shape was recognised and associated with Nestlé by over 50% of respondents in the UK. Surely this level of recognition should be enough to prove acquired distinctiveness?

Shape marks are often used with other branding or are not seen until after the goods are purchased and unwrapped. In such circumstances, how will brand owners be able to demonstrate that consumers rely on the shape as an indication of origin? Would this see the English Courts having a road to Damascus moment regarding their reluctance to permit reliance on survey evidence?
Nestlé’s cause has not been helped by the fact that they had never shown the KitKat shape on the packaging of the goods until a few months before filing the application in dispute. Further, there was no evidence of any KitKat advertising showing the shape of the product later than 1964. The lesson to be learned from this is that, if a brand holder wants to register a shape mark, they should promote it as a trade mark. A lot. The shape should be prominently shown on the packaging and emphasised in advertising. They must educate the public to recognise and rely on the shape as an indication of origin.

As regards the technical function objection, the Trade Marks Act and the Harmonisation Directive clearly state that only shapes “exclusively” dictated by technical function should be refused. If a shape is now to be refused because “some” of its features are functional, we wonder how any shape would overcome this hurdle.

Shape marks ought not to be refused because of manufacturing considerations. Logic says that the manufacturing process must influence the shape of any mass produced product. If this becomes yet another factor to consider when assessing a shape’s distinctiveness under the “technical function” criterion, we doubt any shape will be accepted for registration. Should manufacturing concerns really matter? This KitKat lover did not realise or care that certain of its features were dictated by manufacturing restraints.

If the CJEU agrees with Arnold J., it will be a dark day for those brand owners who wish to protect their famous shape marks and Cadbury (whose parent, Mondelez, manufactures the famous triangular shaped, Toblerone chocolate bar) may then be seen to have scored a spectacular own goal.