EU Trade Marks - No Break for KitKat: Société des produits Nestlé SA v Mondelez UK Holdings & Services Ltd.
Jane Lambert
Court of Justice of the European Union (Judges L. Bay Larsen (President of the Chamber), J. Malenovský, M. Safjan, D. Šváby and M. Vilaras (Rapporteur)) Joined appeals C‑84/17 P, C‑85/17 P and C‑95/17 P, Société des produits Nestlé SA v Mondelez UK Holdings & Services Ltd. [2018] EUECJ C-84/17P, ECLI:EU:C:2018:596 25 July 2018
The issue before the Court of Justice of the European Union was whether it is necessary for a mark that is devoid of distinctive character to have acquired distinctiveness through use in each and every member state of the European Union in order to be registered as an EU trade mark, or whether it is enough to show that it has acquired distinctiveness through use in the EU as a whole.
The Mark
The mark that is the subject of this discussion is the 3-dimensional shape in the above photograph. It was registered by the Société des produits Nestlé SA ("Nestlé") as an EU trade mark for sweets, bakery products, pastries, biscuits; cakes and waffles in class 30 under registration number EU 2632529 with effect from 21 March 2002.
Terminology
When the mark was first registered the entity now known as the European Union was called the European Community and consisted of 15 members. The Council had adopted Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark which established the Office for Harmonization in the Internal Market ("OHIM") to grant trade marks for the whole EC known as Community trade marks ("CTM"). Regulation (EC) 40/94 was replaced by Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark and that regulation was replaced in turn by Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark ("the EU trade mark regulation"). OHIM has changed its name to the European Union Intellectual Property Office ("EUIPO") and the trade marks that EUIPO registers are now known as EU trade marks ("EUTM").
The Legislation
The purpose of a trade mark is to distinguish the goods or services of one undertaking from those of all others. For that reason, art 4 of Regulation 40/94 provided that a sign could be registered as a CTM only if it was capable of distinguishing the goods or services of one undertaking from those of other undertakings. Accordingly, art 7 (1) of that regulation excluded from registration trade marks that:
- were devoid of any distinctive character under paragraph (b);
- consisted exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service under paragraph (c);
- consisted exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade under paragraph (d); or
- consisted exclusively of the shape of goods which is necessary to obtain a technical result under paragraph (e) (ii).
However, there was an exception. The prohibition against the registration of trade marks under art 7 (1) (b), (c) and (d) did not apply if the trade mark had become distinctive in relation to the goods or services for which registration was requested in consequence of the use which had been made of the mark by virtue of art 7 (3). Art 1 (2) of the regulation required a CTM to have "unitary character" and "equal effect throughout the Community". Similar provisions subsequently appeared in Regulation 207/2009 and the EU trade mark regulation.
History of the Litigation
History of the Litigation
OHIM registered the above mark on 28 July 2006. The registration was challenged by Nestlé's great rival, Cadbury Schweppes Plc ("Cadbury") (now known as Mondelez UK Holdings & Services Ltd.) on 23 March 2007. Cadbury applied to OHIM for the registration to be declared invalid under under art 7 (1) (b), (c), (d), and (e) (ii) of Regulation 40/94. OHIM granted the declaration on 11 Jan 2011. Nestlé appealed against the invalidity decision to the Second Board of Appeal. The Board allowed the appeal and restored the registration on 11 Dec 2012. Cadbury applied to the General Court for the annulment of the Board of Appeal's decision. That Court granted Cadbury's application in Case T‑112/13, Mondelez UK Holdings & Services Ltd. v EU Intellectual Property Office [2016] EUECJ T-112/13 on 15 Dec 2016. Nestlé, Cadbury and EUIPO all appealed to the Court of Justice of the European Union against the General Court's decision. Nestlé and EUIPO appealed against the substantive decision. Cadbury did not appeal against that decision as it was in its favour but against the reasoning by which the General Court had reached its decision. The Court of Justice of the European Union delivered its judgment on 25 July 2018.
Cadbury's Appeal
The Court decided that Cadbury's appeal was inadmissible. Art 169 (1) of the Rules of Procedure requires that an appeal should seek to have set aside, in whole or in part, the decision of the General Court as set out in the operative part of that decision. The Court had previously held in C-539/10 Council of the European Union, v European Commission [2012] EUECJ C-539/10, ECLI:EU:C:2012:711, EU:C:2012:711 that an appeal that does not seek to have the judgment under appeal, that is to say the operative part thereof, set aside, even in part, but merely to amend some of the grounds of that judgment, is inadmissible. Cadbury had argued that it would be unable to raise the arguments that has been rejected by the General Curt in other tribunals unless it challenged them on appeal. The Court disagreed. The doctrine of res judicata applied only to the operative parts of decisions (that is to say judgments and orders) and not to the judges' reasoning.
The Board of Appeal's Decision
The Board of Appeal agreed with OHIM that the mark was devoid of distinctive character but held that Nestlé had shown that it had been used in almost all of the relevant territory of the EU covering 14 of the 15 member states. As a consequence of such use, almost 50% of the public in those states, representing almost 90% of the EC's population, identified the contested mark as indicating the commercial origin of a product having the shape of that mark which was part of the category of goods in question, namely sweets, bakery products, pastries, biscuits, cakes and waffles. It concluded that the contested trade mark had acquired distinctive character through use within the EC. The Board also held that the essential characteristics of the mark, namely 4 identical trapezoidal bars aligned together on a rectangular base, did not consist exclusively of the shape of the product, technically causal of, and sufficient to obtain, the intended technical result. Consequently, it concluded that the contested trade mark was not caught by the prohibition laid down in art 7 (1) (e) (ii).
The General Court's Decision
Cadbury challenged the Board's decision on three grounds only one of which was considered by the Court. The ground that the Court did consider was that the Board had not correctly assessed the distinctive character acquired through use for the goods in respect of which the mark had been registered. That argument broke down into 4 parts. First, Cadbury contended that that the mark had not been used at all in the form in which it had been registered. Secondly, the mark had not been used for all the goods in respect of which it had been registered. Thirdly, the mark had not been used as an indicator of origin and the evidence was insufficient in that regard. Fourthly, the mark has not acquired distinctive character throughout the EU.
The General Court agreed that the mark had not been used for bakery products, pastries, cakes and waffles. Only for sweets and biscuits. However, it rejected Cadbury's first and third contentions. As to the fourth, the Court found that the mark had acquired distinctive character through use in Denmark, Germany, Spain, France, Italy, the Netherlands, Austria, Finland, Sweden and the United Kingdom, but not in Belgium, Ireland, Greece and Portugal. Even though the populations of the 11 states in which acquired distinctiveness had been proved constituted 90% of the population of the EC, the Board of Appeal could not validly conclude its examination of the distinctive character acquired by the contested trade mark throughout the EC without first coming to a conclusion regarding the perception of the mark by the relevant public in, inter alia, Belgium, Ireland, Greece and Portugal and, secondly, without analysing the evidence adduced in respect of those member states. It therefor annulled the decision of the Board of Appeal.
Nestlé's Request to reopen the Oral Procedure
Nestlé applied to the Court of Justice for permission to reopen the oral procedure in order to answer certain points that had been raised by the Advocate-General. The Court refused the application. It found nothing in the Rules of Procedure to enable parties to respond to an Advocate-General. The Court had a general power under art 83 to reopen the oral procedure at any time where it needed more information or wished to consider new matter that was likely to be decisive. That was not the case here. The Court had all the information that it needed to reach a decision. The information on which Nestlé relied was in documents that were already before the Court. There was no need to reopen the oral procedure.
The Arguments
Nestlé and the EUIPO argued that the General Court's decision was inconsistent with the decision of the Court of Justice of the European Union in C-98/11_P Chocoladefabriken Lindt & Sprungli v OHIM [2012] EUECJ C-98/11_P which I discussed in Rabbits - Chocoladefabriken Lindt & Sprungli v OHIM on 28 May 2012. By focusing on individual national markets, the General Court’s decision was incompatible with the unitary character of the EU trade mark and the very existence of a single market. The unitary character of the EU trade mark implies that territorial borders within the European Union are to be disregarded for the purposes of assessing the acquisition of distinctive character through use. For that proposition Nestlé and the EUIPO relied on paragraph [44] of the judgment in Case C-149/11 Leno Merken BV v Hagelkruis Beheer BV [2013] BUS LR 928, [2013] Bus LR 928, EU:C:2012:816, ECLI:EU:C:2012:816, [2013] ETMR 16, [2012] EUECJ C-149/11 [2012] WLR(D) 388:
"It follows from the foregoing considerations that the territorial borders of the Member States should be disregarded in the assessment of genuine use in the Community within the meaning of Article 15 (1) of Regulation No 207/2009."
Cadbury contended that the General Court had interpreted art 7 (3) of the regulation and applied the Court's judgment in Lindt & Sprungli correctly. It argued that a different decision would lead to the paradox whereby a trade mark which must be refused registration for lack of distinctive character in one member state, could nevertheless be registered as an EU trade mark, with the result that it could be relied upon before the courts of that member state.
The Judgment
The Court of Justice upheld the General Court's decision and dismissed the appeal by Nestlé and the EUIPO.
The decision in Leno Merken on which Nestlé and the EUIPO relied was on genuine use for the purposes of art 15 (1) of the regulation. Different criteria apply to that provision and it is not necessary to prove that the mark has been used in every country to satisfy the requirements of that article.
The Court agreed with the General Court that it follows from the unitary character of the EU trade mark that a sign must be distinctive in every part of the European Union on order to be registered. That is because art 7 (2) of the regulation makes clear that art 7 (1) should apply notwithstanding that the grounds of non-registrability obtain in only part of the EU. It follows that a mark cannot be registered if it is devoid of distinctive character anywhere in the EU. Accordingly, acquired distinctiveness must be proved wherever the mark would not otherwise be registrable.
At paragraph [79] the Court drew a distinction between what has to be proved - "namely the acquisition of distinctive character through use by a sign that is devoid of inherent distinctive character" - and the means of proving it. It stressed that nothing in the regulation requires the acquisition of distinctive character through use to be established by separate evidence in each individual member state. It was not inconceivable that the evidence provided to establish that a particular sign has acquired distinctive character through use is relevant with regard to several countries, or even to the whole EU. For instance, acquisition by use in several states could be proved where several member states were served from a single distribution point or where several states are in close geographic, linguistic or cultural proximity. It is up to the EUIPO to consider the evidence in each particular case.
With regard to the present case, the Court concluded at [87]:
"......... first, it follows from the findings above that the General Court did not err in law when it found, in paragraph 139 of the judgment under appeal, that, for the purposes of applying Article 7(3) of Regulation No 207/2009, in the case of a mark that does not have inherent distinctive character throughout the European Union, the distinctive character acquired through use of that mark must be shown throughout that territory, and not only in a substantial part or the majority of the territory of the European Union, and consequently, although such proof may be produced globally for all the Member States concerned or separately for different Member States or groups of Member States, it is not, however, sufficient that the party with the burden of providing such evidence merely produces evidence of such acquisition that does not cover part of the European Union, even a part consisting of only one Member State.
[88] Second, in light of those same findings, the General Court was right to hold, in paragraphs 170 to 178 of the judgment under appeal, that the decision at issue was vitiated by an error in law, in so far as the Board of Appeal found that the mark at issue had acquired distinctive character through use, thereby justifying the application to that mark of Article 7 (3) of Regulation No 207/2009, without adjudicating on whether that mark had acquired such distinctive character in Belgium, Ireland, Greece and Portugal."
Cadbury's Appeal
The Court decided that Cadbury's appeal was inadmissible. Art 169 (1) of the Rules of Procedure requires that an appeal should seek to have set aside, in whole or in part, the decision of the General Court as set out in the operative part of that decision. The Court had previously held in C-539/10 Council of the European Union, v European Commission [2012] EUECJ C-539/10, ECLI:EU:C:2012:711, EU:C:2012:711 that an appeal that does not seek to have the judgment under appeal, that is to say the operative part thereof, set aside, even in part, but merely to amend some of the grounds of that judgment, is inadmissible. Cadbury had argued that it would be unable to raise the arguments that has been rejected by the General Curt in other tribunals unless it challenged them on appeal. The Court disagreed. The doctrine of res judicata applied only to the operative parts of decisions (that is to say judgments and orders) and not to the judges' reasoning.
The Board of Appeal's Decision
The Board of Appeal agreed with OHIM that the mark was devoid of distinctive character but held that Nestlé had shown that it had been used in almost all of the relevant territory of the EU covering 14 of the 15 member states. As a consequence of such use, almost 50% of the public in those states, representing almost 90% of the EC's population, identified the contested mark as indicating the commercial origin of a product having the shape of that mark which was part of the category of goods in question, namely sweets, bakery products, pastries, biscuits, cakes and waffles. It concluded that the contested trade mark had acquired distinctive character through use within the EC. The Board also held that the essential characteristics of the mark, namely 4 identical trapezoidal bars aligned together on a rectangular base, did not consist exclusively of the shape of the product, technically causal of, and sufficient to obtain, the intended technical result. Consequently, it concluded that the contested trade mark was not caught by the prohibition laid down in art 7 (1) (e) (ii).
The General Court's Decision
Cadbury challenged the Board's decision on three grounds only one of which was considered by the Court. The ground that the Court did consider was that the Board had not correctly assessed the distinctive character acquired through use for the goods in respect of which the mark had been registered. That argument broke down into 4 parts. First, Cadbury contended that that the mark had not been used at all in the form in which it had been registered. Secondly, the mark had not been used for all the goods in respect of which it had been registered. Thirdly, the mark had not been used as an indicator of origin and the evidence was insufficient in that regard. Fourthly, the mark has not acquired distinctive character throughout the EU.
The General Court agreed that the mark had not been used for bakery products, pastries, cakes and waffles. Only for sweets and biscuits. However, it rejected Cadbury's first and third contentions. As to the fourth, the Court found that the mark had acquired distinctive character through use in Denmark, Germany, Spain, France, Italy, the Netherlands, Austria, Finland, Sweden and the United Kingdom, but not in Belgium, Ireland, Greece and Portugal. Even though the populations of the 11 states in which acquired distinctiveness had been proved constituted 90% of the population of the EC, the Board of Appeal could not validly conclude its examination of the distinctive character acquired by the contested trade mark throughout the EC without first coming to a conclusion regarding the perception of the mark by the relevant public in, inter alia, Belgium, Ireland, Greece and Portugal and, secondly, without analysing the evidence adduced in respect of those member states. It therefor annulled the decision of the Board of Appeal.
Nestlé's Request to reopen the Oral Procedure
Nestlé applied to the Court of Justice for permission to reopen the oral procedure in order to answer certain points that had been raised by the Advocate-General. The Court refused the application. It found nothing in the Rules of Procedure to enable parties to respond to an Advocate-General. The Court had a general power under art 83 to reopen the oral procedure at any time where it needed more information or wished to consider new matter that was likely to be decisive. That was not the case here. The Court had all the information that it needed to reach a decision. The information on which Nestlé relied was in documents that were already before the Court. There was no need to reopen the oral procedure.
The Arguments
Nestlé and the EUIPO argued that the General Court's decision was inconsistent with the decision of the Court of Justice of the European Union in C-98/11_P Chocoladefabriken Lindt & Sprungli v OHIM [2012] EUECJ C-98/11_P which I discussed in Rabbits - Chocoladefabriken Lindt & Sprungli v OHIM on 28 May 2012. By focusing on individual national markets, the General Court’s decision was incompatible with the unitary character of the EU trade mark and the very existence of a single market. The unitary character of the EU trade mark implies that territorial borders within the European Union are to be disregarded for the purposes of assessing the acquisition of distinctive character through use. For that proposition Nestlé and the EUIPO relied on paragraph [44] of the judgment in Case C-149/11 Leno Merken BV v Hagelkruis Beheer BV [2013] BUS LR 928, [2013] Bus LR 928, EU:C:2012:816, ECLI:EU:C:2012:816, [2013] ETMR 16, [2012] EUECJ C-149/11 [2012] WLR(D) 388:
"It follows from the foregoing considerations that the territorial borders of the Member States should be disregarded in the assessment of genuine use in the Community within the meaning of Article 15 (1) of Regulation No 207/2009."
Cadbury contended that the General Court had interpreted art 7 (3) of the regulation and applied the Court's judgment in Lindt & Sprungli correctly. It argued that a different decision would lead to the paradox whereby a trade mark which must be refused registration for lack of distinctive character in one member state, could nevertheless be registered as an EU trade mark, with the result that it could be relied upon before the courts of that member state.
The Judgment
The Court of Justice upheld the General Court's decision and dismissed the appeal by Nestlé and the EUIPO.
The decision in Leno Merken on which Nestlé and the EUIPO relied was on genuine use for the purposes of art 15 (1) of the regulation. Different criteria apply to that provision and it is not necessary to prove that the mark has been used in every country to satisfy the requirements of that article.
The Court agreed with the General Court that it follows from the unitary character of the EU trade mark that a sign must be distinctive in every part of the European Union on order to be registered. That is because art 7 (2) of the regulation makes clear that art 7 (1) should apply notwithstanding that the grounds of non-registrability obtain in only part of the EU. It follows that a mark cannot be registered if it is devoid of distinctive character anywhere in the EU. Accordingly, acquired distinctiveness must be proved wherever the mark would not otherwise be registrable.
At paragraph [79] the Court drew a distinction between what has to be proved - "namely the acquisition of distinctive character through use by a sign that is devoid of inherent distinctive character" - and the means of proving it. It stressed that nothing in the regulation requires the acquisition of distinctive character through use to be established by separate evidence in each individual member state. It was not inconceivable that the evidence provided to establish that a particular sign has acquired distinctive character through use is relevant with regard to several countries, or even to the whole EU. For instance, acquisition by use in several states could be proved where several member states were served from a single distribution point or where several states are in close geographic, linguistic or cultural proximity. It is up to the EUIPO to consider the evidence in each particular case.
With regard to the present case, the Court concluded at [87]:
"......... first, it follows from the findings above that the General Court did not err in law when it found, in paragraph 139 of the judgment under appeal, that, for the purposes of applying Article 7(3) of Regulation No 207/2009, in the case of a mark that does not have inherent distinctive character throughout the European Union, the distinctive character acquired through use of that mark must be shown throughout that territory, and not only in a substantial part or the majority of the territory of the European Union, and consequently, although such proof may be produced globally for all the Member States concerned or separately for different Member States or groups of Member States, it is not, however, sufficient that the party with the burden of providing such evidence merely produces evidence of such acquisition that does not cover part of the European Union, even a part consisting of only one Member State.
[88] Second, in light of those same findings, the General Court was right to hold, in paragraphs 170 to 178 of the judgment under appeal, that the decision at issue was vitiated by an error in law, in so far as the Board of Appeal found that the mark at issue had acquired distinctive character through use, thereby justifying the application to that mark of Article 7 (3) of Regulation No 207/2009, without adjudicating on whether that mark had acquired such distinctive character in Belgium, Ireland, Greece and Portugal."
Order
The Court dismissed all the appeals before it and ordered Cadbury, Nestlé and the EUIPO to bear their own costs.
Conclusion
The Court's decision on the substantive issue is unsurprising. As Cadbury argued, it would be anomalous for a sign that could not be registered as a national mark for want of distinctiveness to be registered and enforceable as a EUTM. When read with art 7 (2) the Court's interpretation of arts 7 (1) (b) and (3) makes perfect sense. Proving acquired distinctiveness in every member state could be more problematic. The Court gave some examples for EUIPO to follow but no concrete guidance.
The appeal is likely to be referred to for the rulings on the two procedural issues, namely the inadmissibility of appeals against the Court's reasoning rather than its judgment or order and the refusal of permission to reopen the oral procedure. Although it was entirely a matter within the Court's discretion it is hard not to feel a little bit of sympathy for Nestlé. It seems reasonable to allow parties to respond to an Advocate-General's findings. It is not impossible that evidence of acquired distinctiveness in Belgium, Ireland, Greece and Portugal was before the Court but required some explanation by counsel to be evaluated properly.
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