Nestlé loses Kit Kat appeal in EU General Court
We have blogged extensively about the various KIT KAT cases in the UK (see here and here and here). In December 2016, the EU General Court also annulled the EUIPO Board of Appeal’s decision, which had found the 3D shape of the four finger KIT KAT valid. The EU General Court held that the board had been wrong to conclude that the mark had acquired distinctiveness through use across the EU, when the evidence only showed such distinctiveness in a substantial part of the EU. The General Court further held that the board had been wrong in its conclusion that the evidence showed use of the mark for all of the goods listed the specification.
Summary of the background
In July 2006, Société des Produits Nestlé SA (“Nestlé”) successfully registered the 3D mark shown below as an EU trade mark; Nestlé had applied for it in March 2002. It was registered for goods in Class 30: “Sweets; bakery products, pastries, biscuits; cakes, waffles”. In 2007, Cadbury Schweppes plc (“Cadbury”) (now Mondelez UK Holdings & Services Ltd) filed an application for a declaration of invalidity. In 2011, the Cancellation Division declared the mark was invalid for lack of distinctive character, which was subsequently appealed in December 2012.
The Board of Appeal found that the mark had acquired distinctive character through use and was therefore registrable (Article 7(1)(b), EU Trade Mark Regulation (“EUTMR”)). It found that almost 50% of the population of 14 out of 15 Member States (forming the EU at the time of the application) identified the mark as indicating the commercial origin of a product having the shape of the mark for the goods in question. The board further held that the mark was not prohibited from registration (by Article 7(1)(e)(ii), EUTMR), which prevents registration of shapes which are necessary to obtain a technical result.
Cadbury appealed the points relating to acquired distinctiveness to the EU General Court. The General Court annulled the Board of Appeal’s decision on the basis that the board had failed to apply the correct test to determine acquired distinctiveness across the EU.
The General Court considered a number of issues in coming to its decision, which are summarised below.
1. Lack of use of the mark for the goods in question
Cadbury argued that the mark had only been used for some of the Class 30 goods, namely “chocolate, chocolate products and confectionary”. The Board of Appeal took into account advertising which showed the inside wafer of one of the four bars, and described it as either "four wafers" or "crunchy biscuits". Survey evidence further demonstrated that respondents recognised the product when it was presented as a "sweet, candy or biscuit".
The General Court noted that it was possible to have sub-categories of confectionary products sold in specific sections of shops. However, these categories are commonly broken down into sub-categories which may be viewed independently.
The General Court held that the Board of Appeal had erred in law - the Kit-Kat bar only fell within the categories of sweets and biscuits, and not under the categories of bakery products, pastries, cakes and waffles.
2. Lack of use of the mark in the form as registered
Cadbury argued that the Board of Appeal had failed to examine whether the mark had been used in the form in which it had been registered (as shown above). Cadbury's argument was that any distinctive character was a result of use of the mark in conjunction with the word mark KIT KAT. The Board of Appeal had found that the mark had acquired distinctive character through use of the mark in conjunction with KIT KAT.
The General Court confirmed that such approach was consistent with case law. Case law confirms that "the fact the shape of a product or the appearance of its packaging has always been used in conjunction with a word element does not mean that that shape or appearance may not be perceived as an indication of commercial origin".
3. Lack of evidence of use of the mark as an indicator of origin
Cadbury claimed that the Board of Appeal failed to question or verify the evidence submitted by Nestlé to demonstrate acquired distinctiveness. Cadbury argued that the board had incorrectly presumed that the recognition of the Kit-Kat by the survey respondents was equivalent to the mark acquiring distinctive character, and being recognised as an indicator of origin. Furthermore, Cadbury submitted that the surveys themselves had led to misleading results, and had been rejected in one of the UKIPO's decisions relating to the UK trade mark ("UKIPO Decision").
The General Court found that the surveys were conducted by specialist companies and that Cadbury had not explained why the questions were biased. The General Court found the use of surveys carried out on dates subsequent to the application was acceptable. It explained that the Board of Appeal was "entitled to take the results into consideration, in so far as they enabled it to draw conclusions regarding the use of the contested trade mark prior to those dates".
The General Court concluded by noting that the survey evidence, when assessed globally, was capable of establishing the mark as an indicator of commercial origin.
4. Acquired distinctiveness of the mark
The General Court noted that "the fact that the relevant public has recognised the contested trade mark by referring to another mark which designates the same goods and is used in conjunction with the contested trade mark does not mean that the contested trade mark is not used as a means of identification in itself".
The General Court referred to the CJEU judgment in Société de Produits Nestlé SA v Cadbury UK Ltd (C-215/14) which confirmed that "it was necessary to show whether the mark representing the shape of the product, when used independently of its packaging or of any reference to the word mark KIT KAT, serves to identify the product in question as being, without any possibility of confusion, the product known as 'Kit Kat 4 fingers'".
The Board of Appeal's approach was upheld by the General Court, which noted that it was not necessary for the shape to appear on the packaging of the product or to be visible at the time of sale. Acquired distinctiveness may be achieved through use of the mark visible in advertisements or when the product is consumed.
The General Court rejected the relevance of the UKIPO's Decision (in which it was not established the mark had acquired distinctiveness in the UK) on the basis that it is not binding and was adopted after the contested Board of Appeal decision.
5. Territorial scope for acquired distinctiveness
Cadbury argued that the Board of Appeal had failed to correctly assess the territorial scope of the mark's distinctive character. The General Court referred to case law which confirmed that a sign must have acquired distinctive character through use throughout the EU.
At the date of filing the application, the EU consisted of 15 member states. As such, the Board of Appeal had stated that the evidence of use must only be produced for such states. The board had erred in its approach to assessing the extent of territory required to establish acquired distinctiveness. If evidence of use does not cover even only one member state, it cannot be concluded that the mark has acquired distinctive character throughout the EU.
The relevant question is not whether it was shown that a substantial proportion of the public in the EU, merging all member states, recognised the mark as an indicator of commercial origin, but whether, throughout the EU, it was proved that a significant proportion of the relevant public perceived the mark as an indication of the commercial origin of the goods designated by the mark.
The General Court further confirmed, "a lack of recognition of the sign as an indication of commercial origin in one part of the territory of the European Union cannot be offset by a high level of awareness in another part of the European Union".
The board had concluded the populations of 10 countries (forming nearly 90% of the population of the EU) had a rate of recognition, of the origin of the shape as Nestlé, of almost 50%. Survey evidence was not submitted in respect of Belgium, Ireland, Greece and Portugal.
The General Court found that the Board of Appeal had erred in concluding that the mark had acquired distinctiveness in the EU, on the basis that while it had shown such distinctiveness in a substantial part of the territory, it had not done so throughout the territory. The board had failed to assess whether acquired distinctiveness had been established in Belgium, Ireland, Greece and Portugal and for this reason the appeal was allowed and Nestlé's mark declared invalid.
This case demonstrates the high threshold needed for evidence to demonstrate acquired distinctiveness, including whether distinctiveness must be proved in every member state. It further highlights that it is not sufficient to show a significant proportion of the relevant public throughout the EU perceives the marks as an indication of commercial origin of goods. For EU trade marks, the evidence must address each and every member state where the mark is inherently non-distinctive.
The decision of the General Court is also very interesting for UK practitioners because it shows the General Court taking a much more liberal interpretation of the CJEU KIT KAT decision than was taken by Arnold J in the UK proceedings. While Arnold J found that the very high recognition among UK consumers did not necessarily show that the mark in isolation was understood as an indication of trade origin, the General Court seems to have been far more comfortable finding that acquired distinctiveness could be inferred from high levels of recognition, even when a mark has not been used in isolation or on the exterior of packaging.
In the UK, we await the Court of Appeal's decision concerning the registration of the same shape mark as a UK trade mark. It will be interesting to see whether the Court of Appeal leans towards the more restrictive interpretation favoured by Arnold J or the more liberal one favoured by the General Court.