European Union: The (Kit)Kat Is Out Of The Bag: CJEU Issues Its Anticipated Ruling In Long-Running Trade Mark Saga

Last Updated: 9 August 2018
Article by Alexandra Nott

After a number of setbacks (not least in the United Kingdom) in its ambition to hold a valid EU trade mark registration for the shape of its four-finger Kit Kat chocolate bar, Nestlé must have been keeping all four of its fingers crossed last Wednesday when the Court of Justice of the European Union (CJEU) ruled on the validity of its registered trade mark in the EU.

Sadly for Nestlé, and owners of shape marks more broadly, the Court did not find in its favour, casting some uncertainty on the future of its four-finger chocolate bar trade mark and reminding us once again of the difficulties of obtaining and maintaining inherently non-distinctive trade marks.

Legal Context

For a trade mark to be valid, irrespective of whether it is a word mark, logo, shape, colour or so on, it must meet certain legal criteria. In the EU, Article 7(1)(b) of the EU Trade Mark Regulation states that a trade mark is not registrable if it is devoid of any distinctive character. What it means by this is that the consumer should be able, when presented with goods bearing the trade mark or services being offered thereunder, to identify the commercial source from which those goods/services emanate by virtue of that trade mark alone. If a sign cannot perform this essential function, then it is not protectable under trade mark law.

Kit Kat's Nine Lives

Over a decade ago, back in 2006, Nestlé obtained a three-dimensional EU Trade Mark Registration (No. 002632529) for the shape of its four-finger Kit Kat chocolate bar for goods including sweets, biscuits and waffles, though it was rejected for chocolate based on a lack of distinctiveness (marking Nestlé's first unsuccessful attempt at filing evidence of acquired distinctiveness).

In 2007, Cadbury Schweppes (or Mondelez, as it is now known) filed a declaration of invalidity against the registration, arguing that Nestlé's trade mark was devoid of any distinctive character in view of similar-shaped products on the market and disputing Nestlé's counterclaim of acquired distinctiveness on the basis that the mark had not been used as registered, but instead sold wrapped in foil and with the 'KitKat' logo embossed on the bars. This action was successful and in 2011 the Cancellation Division of the EUIPO declared Nestlé's registration invalid.

Nestlé's fortunes appeared to turn, however, when its appeal to the EUIPO Second Board of Appeal resulted in the annulment of the earlier decision of the Cancellation Division. Whilst it agreed that the shape of the Kit Kat chocolate bar was inherently non-distinctive (as the elongated, aligned bars did not significantly depart from the norm and customs of the market sector in question), the Board of Appeal concluded in 2012 that the shape had acquired trade mark distinctiveness through use made of the mark in e.g. France, Italy, Germany, Spain, the UK and the Netherlands. Notably, the Board took the view that, to prove acquired distinctiveness in the EU, it is sufficient to show that a substantial proportion of consumers across the EU as a whole perceive the sign as a trade mark, rather than considering the issue in respect of each individual national market. As such, the Board found the evidence submitted to be sufficient – given the size of these markets – to prove acquired distinctiveness across the whole of the EU, despite a lack of evidence relating to territories such as Greece, Portugal and Belgium.

This good news for Nestlé was short-lived as Mondelez appealed to the General Court which, in 2016, annulled the decision of the Board of Appeal. Though the Board rejected Mondelez's pleas that the decision be annulled on the bases that Nestle had not used the trade mark in the form registered nor as an indicator of trade origin, it upheld the claim that the evidence submitted was not sufficient for finding that the trade mark had acquired distinctiveness in the EU. In particular, the General Court held that the Board erred in its approach of merging all the Member States into one bloc, and instead ruled that it was necessary to prove acquired distinctiveness in all Member States concerned.

Following the General Court's decision, all parties appealed to the CJEU, with Nestlé making a final bid to keep its trade mark registration alive.

Wednesday's Judgement

Nestlé (supported by the EUIPO) argued that the General Court was wrong to hold that distinctive character acquired through use had to be proven in all Member States. Specifically, they opined that the focus on individual national markets was incompatible with the idea of a single market and the unitary character of an EU trade mark.

As many suspected, the CJEU dismissed this appeal, upholding the decision of the General Court and maintaining the annulment of the decision of the Board of Appeal, thereby following the Opinion of Advocate General Wathelet in April 2018. The CJEU agreed with the General Court that, in cases where the trade mark in question is devoid of any distinctive character in all parts of the EU, proving acquired distinctiveness in a substantial part of the Union is insufficient. It further concluded that the Board of Appeal erred in finding that the shape of a Kit Kat chocolate bar had acquired trade mark distinctiveness in the EU through use, when it did not examine evidence pertaining to all Member States concerned.

The future of Nestlé's EU Trade Mark Registration No. 002632529 is now to be decided by the EUIPO, which is bound by the judgement of the CJEU.

This decision is a valuable reminder of the importance of establishing the distinctiveness of a trade mark, and illustrates the particular difficulties that may be faced by owners of 3D marks which consumers are less accustomed to perceiving as an indication of commercial origin. In light of the CJEU's position in this case, it's not getting any easier for trade mark owners, with the Court coming down strongly in favour of a high hurdle when it comes to proving that a mark has acquired distinctiveness in the EU.

Where does this leave Nestlé, and owners of similar 3D marks?

Whilst the fate of Nestlé's EU trade mark doesn't look particularly sweet, there is still hope for brand owners. In this judgement, the CJEU reconciled its decision with an earlier case involving the shape of Lindt's iconic chocolate rabbit – wherein it acknowledged that it is "unreasonable" to require proof of acquired distinctiveness in all Member States – by drawing a distinction between, on the one hand, the facts to be proved (i.e. that a sign has acquired trade mark distinctiveness in all Member States) and, on the other, the means by which these facts are proved. In other words, the same evidence may be relevant for multiple Member States as a consequence of e.g. cross-border markets or proximity. Regarding the latter, the General Court has previously noted (in another case involving a shape mark in the food and beverage industry – the shape of a Coca-Cola drinks bottle) that the extrapolation of evidence across Member States may be admissible. The Court in that case held that acquired distinctiveness could be inferred in Member States whose circumstances were comparable to those of another State in which acquired distinctiveness had been proven, as a result of cultural/linguistic proximity or homogenous markets.  It is notable that Nestlé did not run this line of argument.

Nevertheless, the evidential burden for the owner of a trade mark that is inherently non-distinctive throughout the EU (which necessarily will often comprise non-conventional trade marks such as 3D shapes or colours) remains high, and seems at odds with recent attempts by the EU to simplify the protection of non-conventional trade marks, such as through the removal of the 'graphical representation' requirement for trade mark registration. That being said, though such trade marks are more complicated and seeking legal advice is recommended, securing registration of the same is a valuable commercial asset and marketing tool.

Is the position any simpler in the UK?

Notably, the UK was a territory in which the General Court agreed that Nestlé had proven acquired distinctiveness of its four-finger Kit Kat chocolate bar, so it may seem surprising that Nestlé was also unsuccessful in proceedings before the England and Wales Court of Appeal (EWCA). However, unlike the EU, where the territorial scope of acquired distinctiveness was a determinative factor, in the UK the case turned on the meaning of acquired distinctiveness. Specifically, the EWCA did not consider that the evidence provided by Nestlé demonstrated that the public had come to see the shape of a Kit Kat bar as a badge of trade origin. A distinction was drawn between recognition of a product and perception as a trade mark, and the UK Court was not convinced (unlike the EU Court) that Nestlé had successfully proven the latter.

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