Nestlé’s 3D trade mark hopes melting away?

In a unanimous decision, the Court of Appeal has upheld the High Court’s ruling involving Nestlé’s attempt to register a four-finger bar shape as a trade mark in the United Kingdom, meaning – at least for now – it remains unregistered.

Background

A summary of the facts can be found in our previous briefings on 3D Marksrose, Kit Kat and Tough Break for Nestle, which track the case from the initial decision of the hearing officer at the UK Intellectual Property Office, through the High Court’s referral to the Court of Justice of the European Union (CJEU) and back to the High Court in January 2016. Nestlé appealed the decision of the High Court, in which it was that held that the hearing officer was correct in concluding that the shape of the four-finger chocolate bar had not acquired the distinctive character required under section 3(1) of the Trade Marks Act 1994 (the Act), which gives effect to Article 3(3) of Directive 2008/95/EC, in order to register an inherently non-distinctive three dimensional shape mark.

Court of Appeal Decision

In the Court of Appeal case, Nestlé ran the argument that a substantial proportion of relevant customers identify the three dimensional shape of the chocolate bar as a KIT KAT bar, meaning that the consumers identify it as a specific product from a single source and therefore the shape as a trade mark is distinctive. In order to demonstrate this, Nestlé relied upon survey evidence from consumers. Nestlé also asserted that there was no basis in law for the further requirement for Nestlé to show that consumers had come to rely on the mark, either when purchasing the goods or afterwards when checking their purchases, as had been imposed by the hearing officer and the High Court judge.

Cadbury opposed the appeal on the basis that the correct question to ask is whether consumers had come to perceive the mark as an indication of origin, arguing that mere association of the three dimensional shape mark with Nestlé was not enough so as to amount to acquired distinctiveness.

The Court of Appeal upheld the decision of the High Court, concluding that the public’s recognition and association of the three dimensional shape of the four-finger chocolate bar with KIT KAT or Nestlé was insufficient for the registration of the inherently non-distinctive shape mark.

The main theme running throughout the Court of Appeal decision was the distinction between public association of the trade mark with the proprietor and public perception as to trade origin. On this distinction, Floyd LJ remarked that:

for there to be acquired distinctiveness, the consumer must perceive these goods as being Kit Kats, or as originating from the people who make Kit Kats, and not from others. A perception that they looked like Kit Kats is not enough.

The case therefore turned on whether Nestlé had proved that a significant proportion of the relevant class of persons perceived the four-finger bar designated exclusively by its three dimensional shape, as opposed to any other trade mark, as originating from Nestlé. The Court concluded that it was not sufficient, and therefore fatal to the application, for Nestlé to merely show that the mark had come to be associated with KIT KAT.

The Court noted that, where a shape has become very well-known, through the sale of products of that shape under a highly distinctive brand name, that does not necessarily mean that the public perceive that shape as a badge of origin to the extent that they would rely upon the shape alone to identify the product as coming from a specific source. The average consumer may find that the three dimensional shape of a product brings to mind a familiar brand name, however the Court held that such recognition and association does not amount to distinctiveness.

In addressing Nestlé’s assertion that there was no basis in law for the further requirement to show that consumers had come to rely on the mark, Floyd LJ attempted to clarify the position, seeming to withdraw from the High Court’s position on reliance. He stated that, where it can be proved that consumers have come to rely on a particular shape as an indicator of trade origin, this is sufficient evidence to satisfy the acquired distinctiveness test under section 3(1) of the Act. However, he then went on to explain that reliance is not a precondition and as such there are a number of ways in which a trade mark applicant can show that a particular mark has acquired distinctiveness and therefore demonstrate exclusive origin.

In respect of the survey evidence put forward by Nestlé, Sir Geoffrey Vos, the Chancellor of the High Court, addressed the overwhelmingly high number of respondents to the second survey who “either before or immediately after being asked any question, [said] words to the effect of ‘It’s a Kit Kat‘”. He held that this only demonstrated an association and did not show that the consumers perceived the chocolate bars as originating from Nestlé. The judge concluded that there is a need to show that “consumers’ perception of the mark, taken alone, as designating the proprietor’s product arose in consequence of the use of the mark…”. Again, the Court appeared to err on the side of caution and refused to grant trade mark protection to the three dimensional shape on the basis that Nestlé could not prove that through use of the shape alone (without the presence of the KIT KAT trade mark and branding) consumers perceive the product to originate from Nestlé.

The Court also commented on Nestlé’s marketing of the four-finger KIT KAT bar. Kitchin LJ agreed with the hearing officer, in that: the shape of the product had not featured in Nestlé’s advertising; the product was sold in an opaque wrapper; and the shape had not been shown on the packaging. He then went on to add that the chocolate bar was in reality always embossed with the KIT KAT logo.

Comment

There are a number of potential issues to consider regarding the Court of Appeal’s decision in this case, although it may be difficult for Nestlé to establish any ground of appeal.

What constitutes a trade mark?

The decision appears to expose a stark disconnect between the legislature and the judiciary in terms of the question as to  ‘what is capable of being registered as a trade mark?’.

Section 1(1) of the Act specifically states that a trade mark can be made up of words, designs, letters, numerals or shapes. The European Trade Mark Regulation also expressly mentions colours and sounds. The key qualification is that it should be capable of distinguishing the goods and services of one undertaking from those of other undertakings, i.e. capable of performing the origin function of a trade mark.

However, it seems that the Court is in fact reluctant to apply the same test across the board to all kinds of trade marks. In relation to shapes specifically, Kitchin LJ stated that:

• “it is not sufficient for the applicant to show that a significant proportion of the relevant class of persons recognise and associate the mark with the applicant’s goods“; and
• there has to be “a perception that the goods designated by the mark originate from a particular undertaking“.

This appears to create a higher threshold test for the registrability of shape marks. It only seems logical that holding applicants of shape marks (as opposed to more ‘traditional’ trade marks) to a higher standard means that (potentially substantially) more evidence will be required in order to reach the threshold for “acquired distinctiveness” of a shape mark. However, it is not apparent from the legislation that certain trade marks should be harder (or in the inverse easier) to register than others.

Why should shape marks be any different?

This issue may arise from a longer line of cases in which it has been held that consumers more readily rely on words and logos as trade marks, than any of the other possible types of trade mark (e.g. shape, colour, smell, sound). This may potentially be doing a disservice to the ‘average consumer’, holding them out to be entirely unsophisticated.

Kitchin LJ went on to remark that “[a] shape of this kind is not inherently such that members of the public are likely to take it as a badge of origin in the way they would a newly coined word or fancy name“.

By giving weight to the preconception that the average consumer will generally only rely on names and logos as indicators of origin, the Court has further widened the chasm between traditional and non-traditional trade marks, when no such division is apparent from the legislation.

Alternatively, it may be because the registration of shapes as trade marks sits uncomfortably with those who maintain that three dimensional shapes are better protected by other intellectual property regimes, such as registered or unregistered designs and/or copyright. A registered trade mark gives everlasting protection (subject to the payment of renewal fees and avoiding attacks), much longer than the period for either form of design protection and potentially longer than the copyright period.

Kitchin LJ hypothesized an infringement scenario whereby, had the three dimensional shape of the KIT KAT bar been afforded trade mark protection and a third party then used that same shape for the same product, “the proprietor would not need to show a likelihood of confusion about the origin of the product for…a likelihood of confusion would be presumed”. There are some flaws with this analysis, mainly as, although the Courts have expanded the two limb statutory test under section 10(1) of the Act to include the further hurdle for trade mark owners in proving that there is an ‘effect on the function of the trade mark’ (as in Interflora v M&S and L’Oreal v eBay), there is no need to prove a ‘likelihood of confusion’ whilst in the remit of double identity infringement.

However, what Kitchin LJ does appear to be leaning towards is the idea that the proprietor of a shape trade mark can absolutely prevent third parties from using the same shape for the same product forever (or at least whilst renewal fees are paid). This does not sit well with regimes such as design and copyright protection for three dimensional shapes where, at least after a finite amount of time, third parties can exploit the same shape in respect of the same products. Perhaps Kitchin LJ supports the argument that shapes do not comfortably fit within a regime which permits perpetual protection? Also, the Court might have been wary of the circumstances of this case which involved a legal contrivance in that in actual fact the trade mark owner had never sold a chocolate bar which did not have the KIT KAT name embossed in the fingers.

It has been reported in the press that Nestlé are disappointed in the judgment and are considering next steps. If Nestlé were to appeal to the Supreme Court, in the interim, it might be wise for Nestlé to consider adjusting their marketing strategy of the four-finger KIT KAT bar in order to address the concerns of the Court of Appeal judges. For example, they may consider marketing an un-embossed KIT KAT, which would disassociate the KIT KAT logo from the shape itself in order to promote the shape of the chocolate bar alone as a selling point. Alternatively, Nestlé may consider putting these measures in place and making a fresh application to the UK Intellectual Property Office.