Trade Marks - The KitKat Appeal: How does a Shape Mark acquire Distinctiveness?















Jane Lambert

Société Des Produits Nestlé SA v Cadbury UK Ltd [2017] EWCA Civ 358 (17 May 2017)

Unregistered design right subsists for no more than 15 years. A design registration for only 25. But a trade mark registration can last forever. That no doubt explains why La Société des Produits Nestlé S.A ("Nestlé") has persevered with this case despite losing to Cadbury UK Ltd ("Cadbury") in the Trade Marks Registry and on appeal.

The Issue

S.1 (1) of the Trade Marks Act 1994 provides that any sign can be a trade mark so long as it is "capable of being represented graphically" and "capable of distinguishing goods or services of one undertaking from those of other undertakings." The section gives some examples one of which is "the shape of goods or their packaging."

On 8 July 2010, Nestlé's trade mark agents applied to the Intellectual Property Office ("the IPO") to register the shape of the KitKat bar shown in the photo above as a UK trade mark for the following goods:

"Chocolate; chocolate confectionery; chocolate products; confectionery; chocolate-based preparations; bakery goods; pastries; biscuits; biscuits having a chocolate coating; chocolate coated wafer biscuits; cakes; cookies; wafers."

You can see the application for yourself on the IPO website if you type UK00002552692 in the "Trade mark number" slot on the "Trade mark search: by number" page of the IPO's website though you had better hurry as the application will be rejected unless the Supreme Court sides with Nestlé.

After the application was published, Cadbury opposed it on several grounds one of which was that the sign was "devoid of any distinctive character" and therefore precluded from registration by s.3 (1) (b) of the Trade Marks Act 1994. That subsection contains a proviso that

"a trade mark shall not be refused registration by virtue of paragraph (b) ...... above if, before the date of application for registration, it has in fact acquired a distinctive character as a result of the use made of it."

As Nestlé had been selling KitKats in great numbers in the UK since before the Second World War and spending millions on advertising, it had no trouble in showing that the public recognized the sign as a KitKat bar. However, Nestlé has never sold the bar without packaging so consumers only see the shape after they have bought the confection. The question for the IPO was whether recognition by consumers was enough to give the sign acquired distinctiveness.

The Hearing Officer

When an application to register a trade mark is opposed under s.38 (2) of the Trade Marks Act 1994 and the applicant and opponent cannot resolve their differences by direct negotiation, mediation or otherwise, the dispute goes before an official known as a "hearing officer". He or she decides the case on behalf of the Chief Executive of the IPO who is referred to as "the Registrar" in trade mark matters. I explained the procedure in Oppositions in the IPO's Trade Marks Registry on 12 Aug 2015 in NIPC London.  The hearing officer who heard the opposition was Mr Allan James who delivered his decision on 30 June 2013 (see Cadbury UK Ltd v Société des Produits Néstle SA  BL O/257/13 20 June 2013).

Mr James's Decision

Mr James upheld the opposition by Cadbury except for cakes and pastries.  At para 109 of his decision he said:

"In my view, the applicant has shown recognition of the mark amongst a significant proportion of the relevant public for chocolate confectionery (only), but not that consumers have come to rely on the shape to identify the origin of the goods. This is because:

i) there is no evidence that the shape of the product has featured in the applicant's promotions for the goods for many years prior to the date of the application;

ii) the product is sold in an opaque wrapper and (until a few months before the filing of the application – and then only for a subset of the goods placed on the market), the wrapper did not show the shape of the goods;

iii) there is no evidence – and it does not seem likely – that consumers use the shape of the goods post purchase in order to check that they have chosen the product from their intended trade source.

In these circumstances it seems likely that consumers rely only on the word mark KIT KAT and the other word and the pictorial marks used in relation to the goods in order to identify the trade origin of the products. They associate the shape with KIT KAT (and therefore with Néstle), but no more than that. Therefore, if it is necessary to show that consumers have come to rely on the shape mark in order to distinguish the trade source of the goods at issue, the claim of acquired distinctiveness fails."

As I said in my 2015 article, an unsuccessful party has the choice of appealing either to the Appointed Person or the Chancery Division of the High Court of Justice in England and Wales. Nestlé opted for the latter and the case came on before Mr Justice Arnold.  Cadbury challenged Mr James's finding in respect of cakes and pastries.

Mr Justice Arnold's Question
Nestlé submitted that:

  • the findings of fact by Mr James showed that a significant portion of consumers did rely upon the Trade Mark as indicating the origin of the products; and
  • Mr James had erred in law by not holding that recognition and association were sufficient to demonstrate the acquisition of distinctive character.
In his judgment, Mr Justice Arnold rejected the first contention but decided that he needed some guidance from the Court of Justice of the European Communities ("the CJEU") to deal with the second. The reason he thought he needed such guidance is that the Trade Marks Act 1994 is supposed to the Trade Marks Directive (Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks  OJ L 299, 8.11.2008, p. 25–33). The proviso in s.3 (1) of the Act is derived from art 3 (3) which provides:

"A trade mark shall not be refused registration or be declared invalid in accordance with paragraph 1(b), (c) or (d) if, before the date of application for registration and following the use which has been made of it, it has acquired a distinctive character."

In Mr Justice Arnold's view, the second point turned on what was meant by the words "use which has been made of it" in the article. He, therefore, asked the CJEU:

"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 ..., 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 consider 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?"

Mr Justice Arnold's decision is at Société Des Produits Nestlé SA v Cadbury UK Ltd [2014] EWHC 16 (Ch) (17 Jan 2014) [2014] ETMR 17, [2014] EWHC 16 (Ch), [2014] FSR 28.

The Court of Justice's Answer

At para [58] of its judgment in C-215/14 Société des Produits Nestlé SA v Cadbury UK Ltd, (16 Sept 2015) ECLI:EU:C:2015:604, [2015] EUECJ C-215/14, [2015] WLR(D) 386, EU:C:2015:604, [2015] Bus LR 1034, [2015] ETMR 50, the CJEU reformulated Mr Justice Arnold's question as follows:

"By its first question the referring court asks, in essence, whether an applicant to register a trade mark which has acquired a distinctive character following the use which has been made of it within the meaning of Article 3(3) of Directive 2008/95 must prove that the relevant class of persons perceive the goods or services designated exclusively by that mark, as opposed to any other mark which might also be present, as originating from a particular company, or whether it is sufficient for that applicant to prove that a significant proportion of the relevant class of persons recognise that mark and associate it with the applicant's goods."

Its reply appeared at para [67]:

"Having regard to those considerations, the answer to the first question is that, in order to obtain registration of a trade mark which has acquired a distinctive character following the use which has been made of it within the meaning of Article 3(3) of Directive 2008/95, regardless of whether that use is as part of another registered trade mark or in conjunction with such a mark, the trade mark applicant must prove that the relevant class of persons perceive 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 company."

Mr Justce Arnold's Judgment

In Société Des Produits Nestlé SA v Cadbury UK Ltd [2016] EWHC 50 (Ch) (20 Jan 2016) [2016] EWHC 50 (Ch), [2016] WLR(D) 23, [2016] Bus LR 354), did his best to apply the CJEU's answer. He analysed the submissions that had been made to the Court, the opinion of the Advocate-General and the answer to his question. He concluded at para [64] that it was plain from the CJEU's answer that Nestlé's submission that association was sufficient to demonstrate the acquisition of a distinctive character was wrong. He, therefore, upheld Mr James's decision except in respect of cakes and pastries and allowed Cadbury's cross-appeal in respect of those goods.

The Appeal

Nestlé appealed to the Court of Appeal (Sir Geoffrey Vos and Lord Justices Kitchin and Floyd) on the following grounds:

(1) There was nothing in the CJEU's answer to Mr Justice Arnold's question that required any finding that consumers have, in the past, placed any reliance upon the mark in their transactional behaviour.

(2) Both the hearing officer and the judge had applied the wrong test. They should have asked whether a significant proportion of relevant consumers had come to perceive chocolate products designated exclusively by the sign in the above photo as originating from Nestlé.

(3) Had they applied the right test they would have found that the sign had become distinctive by the date of the trade mark application.

(4)  The judge had made a number of errors such as criticizing the methodology of a market survey without any basis for doing so and by making conclusions which were not supported by the fact. Nestlé complained that the cumulative effect of those alleged errors made it impossible to register shapes as a trade marks.

(5)  The Court of Appeal is bound by the decision of the General Court in Case T-112/13 Mondelez UK Holdings & Services Ltd (formerly Cadbury) v European Union Intellectual Property Office (EUIPO), Société des Produits Nestlé S.A. intervening [2017] ETMR 13 which was on all fours with this case.

Lord Justice Kitchin had no trouble in rejecting the first ground. Even though the Court of Justice had not used the term "reliance" in its guidance, the whole point of a trade mark is to guarantee the origin of goods or services to consumers. As he put it at para [82] of his judgment

"Perception by consumers that goods or services designated by the mark originate from a particular undertaking means they can rely upon the mark in making or confirming their transactional decisions. In this context, reliance is a behavioural consequence of perception."

That conclusion effectively disposed of the second and third grounds. As for the fourth, Lord Justice Kitchin could find no flaws in the reasoning of the hearing officer or the judge. As for Mondelez, the evidence before the General Court was different from that before the Court of Appeal.

Lord Justice Floyd added helpfully at para [109]:

"I have found it helpful to have in mind a basket of unwrapped and otherwise unmarked chocolate bars, in the shape of the mark applied for, available for selection in a shop or supermarket. 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. Acquired distinctiveness carries with it an indication of exclusive trade origin."

He concluded that Mr James had been right to conclude that the market survey evidence did not of itself establish acquired distinctiveness.

However, at para [108], Lord Justice Floyd seemed to distance himself from Lord Justice Kitchin's finding that  "reliance is a behavioural consequence of perception." He said:

"If it is the case that consumers have in fact come to rely on the shape as an indicator or trade origin, that would certainly be sufficient for acquired distinctiveness. It is, however, not a necessary precondition that consumers should have in fact so relied, and regarding it as such a precondition could conceivably lead to error. The ultimate question is whether the mark, used on its own, has acquired the ability to demonstrate exclusive origin. It would be unwise to attempt a list of the ways in which this can be demonstrated."

In other words, there may be all sorts of ways other than "reliance" of showing that an inherently undistinguished shape sign has in fact acquired distinctiveness through use but his lordship did not speculate as to what those other ways could be.

The Chancellor agreed with both Lord Justice Kitchin and Lord Justice Vos.  He reminded himself of the function of a trade mark and directed himself that any acquired distinctiveness must result from the use of the sign as a trade mark. He analysed the decisions of the hearing officer and the judge below and could find no fault in them.

Having reached those conclusions, the Court dismissed Nestlé's appeal against Mr Justice Arnold's decision.

Conclusion

Although this case was concerned with the registration of shapes as trade marks this case has wider relevance. The proviso in s.3 (1) applies not only to signs that are devoid of any distinctive character but also "signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services, or other characteristics of goods or services" and "signs or indications which have become customary in the current language or in the bona fide and established practices of the trade." The evidence that an applicant will have to adduce to show acquired distinctiveness must be evidence of use as a trade mark.

Anyone wants to discuss this case note or trade marks generally should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

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