A premature requiem? Proving acquired distinctiveness of shape marks

Tibby tries to get to the
bottom of this problem

The fate of the Kit Kat chocolate wafer biscuit finger shape in Europe remains in the balance, as the judges in the Court of Justice of the European Union (CJEU) chew over its legal nature: is it merely a generic product shape or is it, by virtue of its long relationship with generations of consumers, a distinctive sign that is entitled to be registered as a trade mark?  Conventional wisdom has it that the product shape has no prospect of registration in light of the advice given to the CJEU by the Advocate General, but trade mark enthusiast and seasoned practitioner Roland Mallinson (Taylor Wessing LLP) wonders whether this view is wrong. Has the obituary for this trade mark application been written too early, or have supporters of the case for registrability bitten off more than they can chew? This is what Roland has to say:

In June, CJEU Advocate General Wathelet issued his opinion in Nestlé v Cadbury (Case C-215/14 [noted by the IPKat here].The perceived wisdom has since been that Nestlé's Kit Kat shape (left) must necessarily be unregistrable as a trade mark.  Indeed, some predict that the CJEU's decision has sounded the death knell for shape marks generally.  Here we have a shape that has been used for over 70 years and is widely recognised.  More than 50% of UK consumers surveyed, when shown an image of the shape, thought it depicted a Kit Kat, i.e. they recognised and exclusively associated it with Nestlé's brand.  Many have been quietly asking whether, if that shape cannot be registered on the basis of acquired distinctiveness, what shape can be?  However, such conclusions seem premature.  For reasons discussed below, Cadbury may want to keep the champagne corked just for the moment. 

Is reliance needed? 

We still do not know -- and this was the referring court's first, and crucial, question.  Arnold J framed his first question so as to present the CJEU with two mutually exclusive thresholds of what the evidence of acquired distinctiveness needed to prove. Was it either

Option 1: that consumers recognised and associated that shape exclusively with the applicant or its goods/services, i.e. if asked who marketed the goods they would identify the applicant or its related brand names just from seeing the shape; or 

Option 2: as per Option 1 but also that consumers rely [emphasis added] on the shape on its own as indicating trade origin (the precise meaning of "rely" is unclear but Arnold J used the term in the context of consumer using the shape to "confirm the authenticity of" the goods)? 

The word "rely" was the key operator of Option 2. Its relevance and meaning has been central to the dispute between the parties, to significant parts of Arnold J's judgment and also to the underlying registry decision he was considering on appeal.   

The courts of England and Wales have long thought this question needs answering and have asked it in two previous referrals.  In the first, again involving Nestlé (who were opposing registration of Unilever's Viennetta ice cream shape, Case C-7/03), the case was settled and the referral withdrawn. In that case, Jacob J had concluded there was no reliance in fact and that, at most, consumers faced with the shape only would "suppose" the ice cream was a Viennetta. In the second case (Dyson, Case C-321/03), the question was again not answered: since the transparent dust-collecting bin of a Dyson vacuum cleaner was deemed incapable of being a trade mark, acquired distinctiveness ceased to be in issue.  

Given this persistence over a 12 year period to establish if reliance is a relevant criteria, it seems all the more surprising that AG Wathelet did not once use the "rely" word in his reasoned opinion (other than when restating or re-formulating the referred question).  This omission is glaring. If the CJEU merely adopts AG Wathelet's proposed answer, we will all be none the wiser.  If it adopts a "reliance" test (whether Arnold J's Option 2 or as reformulated), it is hoped that the court will also clarify whether its intention is to set a higher threshold for shapes than previously and how this is squared with the wording of the Trade Marks Directive (2008/95) and Trade Mark Regulation (207/2009) -- which set no such test.   

Has AG Wathelet come up with a middle option? 

According to AG Wathelet, we only know that Option 1 does not apply, i.e. "mere" recognition and association is not enough.  However, we do not know if Option 2 is now to set the threshold.  All he says is that the evidence needs to go beyond Option 1 and must show that only the shape - and not any other marks on the goods/packaging - "indicates without any possibility of confusion" the exclusive origin of the goods or services concerned.  That largely just repeats the formulation used to explain what the essential function of a trade mark is (Philips, CJEU Case C-299/99).  As such, it is arguably just restating the test in Philips that the shape must be used "as a trade mark". 

So is AG Wathelet's formulation a halfway house between Option 1 and Option 2?  If it is, it suggests the notion of reliance is not part of the test, otherwise he would have said so.  Since adopting this notion would appear to introduce a new higher threshold, it seems appropriate to require the CJEU to make its intentions in this regard expressly clear.  Without that, it is hard to see how Arnold J can still apply the reliance test favoured by the English courts.  

Ignoring other branding components 

AG Wathelet devoted 12 paragraphs of his opinion to a point that was seemingly not really in issue.  The CJEU has already confirmed, in yet another Nestlé case ("Have a Break…", C-353/03), that acquired distinctiveness can be proven even though the mark is always used with other marks (in that case with "…have a Kit Kat").  

This part of his opinion is based on a false premise. He stated, at paragraph 43 of his opinion, that Nestlé was arguing that its shape was registrable because consumers identified the trade origin of their product in consequence of its shape when used "in conjunction with another component" (i.e. another brand feature, such as the name Kit Kat).  But Nestlé has clearly not been arguing that.  Its survey results were secured with an image of the shape that did not feature any other branding.    

This diversion in AG Wathelet's opinion led him to include the words "as opposed to any other trade marks which may also be present" in his answer to the first question. However, that proposes no change to the law. Bearing in mind the evidence submitted, it also arguably has no impact on the considerations in this Nestlé case.  

So can the Kit Kat shape still qualify? 

W is for Wafer, Waffle
and Wathelet

 If the CJEU follows this opinion, then potentially yes.  Nestlé's evidence arguably may prove what AG Wathelet says is required.  Arnold J acknowledged that it passed the Option 1 threshold but not that of Option 2.  In fact, the percentage of respondents recognising and identifying Kit Kat was about 90% but this was reduced by the hearing officer to just over 50%, once those who expressed doubt were filtered out. Presumably the remaining 50% or so were sure about the trade origin just on seeing the shape.  If so, that would suggest that the shape alone indeed "indicates without any possibility of confusion" the exclusive origin of the Kit Kat.  On that basis, it is hard to see why it does not qualify under AG Wathelet's test. 

This would seem also to accord with the general test of acquired distinctiveness as formulated by the CJEU in Oberbank (Joined Cases C-217/13 and C-218/13) [noted by the IPKat here].  That required the evidence to prove that “the relevant class of persons, or at least a significant proportion thereof, identifies goods or services as originating from a particular undertaking because of the trade mark in question” [emphases added].  Nestlé's survey evidence again arguably does just that. 

Perceived deficiencies in Nestlé's evidence 

According to the registry hearing officer, and as further noted by Arnold J, Nestlé's evidence had three notable omissions.  First, it did not show promotion by reference to the Kit Kat shape only. Secondly, it did not show the shape featuring on the packaging and the shape is not visible until the wrapper is opened after purchase (this was a hindrance for the Viennetta application too). Thirdly, there was no evidence "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".  

The third deficiency is the reliance point, but applied post-sale. It is paraphrased by Arnold J's requirement that the shape needs to have been used by consumers to "confirm the authenticity of" the goods.  If the CJEU chooses not to adopt Arnold J's Option 2 formulation, then it ceases to be a deficiency.  As regards the first two deficiencies, the CJEU in Storck (regarding the shape of a Werther's Original sweet, Case C-24/05) said that such evidence is not determinative.  It ruled that having the consumer see the shape at the time of purchase can be of particular importance, but account can and should be taken of the pre-purchase time (e.g. from advertising) and post-purchase time (i.e. when the product is consumed without the wrapping).   

What more could Nestlé do or have done? 

If the threshold is set so high that Nestlé's current evidence is found by Arnold J still to fall short, one option is for Nestlé to file for a new application after having addressed the alleged deficiencies identified above.  That would mean large-scale and widespread promotion in the interim by reference to the shape, with the shape shown on the packaging (as it has been occasionally in the past).  Then the question is how to improve on the current impressive survey evidence.  The context of Nestlé's desire to protect its shape as a trade mark can possibly feed into this.  

A few third parties in some countries have clearly been using the same or very similar shapes but with different branding.  Examples that are publicly known about include those shown here. These relate, in order, to Singapore (a pending case under appeal), Norway and South Africa.  The other chocolate bars seem to bear some other branding on their face (much as Nestlé has Kit Kat embossed on its product).  

While surveys may well have been done in those countries to support a case locally, samples from those cases could be put to good use in the UK.  One cannot help believing that, if UK consumers were asked in a survey who is responsible for making the products shown above -- once they have been removed from their wrappers –-the percentage referring to Kit Kat will be the same or very similar to those for the image of the unbranded bar.  That is notwithstanding the presence of any other branding on the chocolate itself.  Much as consumers tend to presume with own-label cereals, it seems highly likely UK consumers will at least think that the makers of Kit Kat (i.e. Nestlé) will have made the products for these other people.  

If a survey conducted as above yielded a "recognition and association" figure of more than 50%, does this then meet AG Wathelet's threshold?  Or even one based around reliance?   If it also established a high level of actual confusion as anticipated above, that would be strongly indicative that the shape -- and only the shape –- is the source of that confusion which goes to trade origin.  On that basis, the shape must be functioning as a trade mark and should be registrable. 

 A final word on functionality 

 This argument is subject to the separate issue of functionality, which was the focus of the second and third questions referred in this case.  It is important since, if the functionality objections prevail, all the debate about acquired distinctiveness is academic.  Evidence of acquired distinctiveness cannot overcome such objections.
 This commentary does not seek to address AG Wathelet's opinion on these points substantively, save to make two observations: 

(i) The second question. This asks whether a shape with three essential elements is unregistrable if one element results from the nature of the goods (contrary to Article 7(1)(e)(i) CTMR) and the other two are necessary to obtain a technical result (contrary to Article 7(1)(e)(ii)).  It arose because the UK registry and court had concluded that the three key elements to the Kit Kat shape did just that, i.e. each element contravened either (i) or (ii).  So, in essence, it asked whether you can 'mix and match' the Article 7(1)(e) sub-paragraphs to parts of the shape to make an objection to the whole.  Many thought that the CJEU had pre-judged this with a clear "No" in Hauck (regarding the Tripp-Trapp chair, C-205/13), which was issued after the questions in this case had been referred.  AG Wathelet thought not.  However, if the CJEU were to follow his opinion, it would be very helpful to have a clearer reconciliation of the two decisions.  In particular, his distinction between the words "cumulative" and "in combination" could benefit from further justification and clarification.  In reality, the other CJEU judges could well struggle with that and may see merit in following Hauck.  

(ii) The third question.  This asks whether the technical result objection (Article 7(1)(e)(ii)) applies to the manufacturing process and not just to when a consumer perceives the goods.  AG Wathelet thinks it should.  In reality, his answer is academic if the CJEU follows Hauck for the second question.  This is because it becomes immaterial to the overall registrability of the Kit Kat shape that just one part is objectionable by reason of being a functional requirement in the manufacturing process.  As it is, if the CJEU chooses to adopt AG Wathelet's opinion, we could all benefit from a clearer justification of his conclusion.  In particular, he applies a very specific interpretation to a disjunctive passage in the Philips CJEU decision which is hard to justify.  In his view the following words "or at least limit their freedom of choice in regard to the technical solution they wish to adopt in order to incorporate such a function in their product" clearly [emphasis added] refers to the process of manufacturing a product.  It may be that the rest of the CJEU judges will not see this quite so clearly.  

Thanks, Roland, says this Kat, wondering how many readers will follow his reasoning and accept his conclusion. Do let us know!