United States: U.S. Krispy Kreme Doughnuts Win 4-0 Over Spanish Donuts

Last Updated: March 29 2017
Article by Catherine Muyl

A decision rendered by the European Court of Justice (ECJ) on March 2, 2017, affirming a General Court ruling and potentially ending a nearly twenty-year legal battle, is a reminder to trademark owners that what is generic in one territory can be distinctive in another.

Doughnuts are well-known in the U.S. but, until recently, they were far less known in Europe. In 1962, a Spanish company called Donut Corporation Española (which later became Panrico SA, now a subsidiary of the Mexican Bimbo group) filed to register the DONUT trademark in Spain and developed a whole family range of pastries, which became quite popular. In 1988, they also filed to register in Spain the mark DOGHNUTS (not the correct English spelling; in the U.S., the pastry is of course referred to as a "donut" or "doughnut").

The Krispy Kreme Application and Opposition

On September 6, 1999, HDN Development Corp., parent company of the U.S. Krispy Kreme Doughnuts chain, filed a European Community trademark application for the word and design mark: KRISPY KREME DOUGHNUTS, which is a well-known mark in the U.S.

Krispy Kreme declared that it was not seeking to acquire any rights in the word "doughnuts" alone. Nevertheless, Panrico filed an opposition based on its prior Spanish DONUT and DOGHNUTS trademarks. Panrico's opposition was rejected on January 27, 2005, on the ground that there was no risk of confusion. That decision was confirmed by the First Board of Appeal. Panrico filed and later withdrew a further appeal, and the KRISPY KREME DOUGHNUTS mark was registered.

The Cancellation Action

Panrico then tried a different strategy, and filed a request to cancel the now-registered KRISPY KREME DOUGHNUTS mark. Panrico's cancellation request was based on the same two trademarks it had relied upon in the opposition, as well as a few additional trademarks, including an international DONUT word mark registered on April 30, 1969, and covering a number of European countries, including Portugal. Panrico argued that there was a risk of confusion between the trademarks, and that the KRISPY KREME DOUGHNUTS trademark would unduly benefit from the distinctive character and reputation of the DONUT and DOGHNUTS trademarks.

Krispy Kreme raised a res judicata defense and argued that, since the earlier opposition proceeding resulted in a ruling that there was no risk of confusion between the trademarks, Panrico could not raise that same argument again in the cancellation proceedings. This argument was rejected on the grounds that proceedings before the European Trademark Office are administrative in nature, not judicial, and that the res judicata rule applies only when one party has obtained a final court decision.

Krispy Kreme also failed to make the case that the "DONUT" and "DOGHNUTS" trademarks lacked distinctiveness, because the General Court had already held in an earlier case, Bimbo v. OHIM, that these trademarks were not devoid of distinctiveness.

Nevertheless, Krispy Kreme prevailed on the merits and Panrico's request for cancellation was rejected. The decision was confirmed by the Fourth Board of Appeal on July 25, 2013, and by the General Court on October 7, 2015.

Was there a risk of confusion?

The General Court compared the trademarks in question from three perspectives: visual, conceptual and phonetic. From a visual perspective, the Court noted that the marks had different appearances because the words "KRISPY KREME" appeared first and in bigger letters, and were thus more prominent than "DOUGHNUTS," the only word similar to Panrico's marks.

As to the conceptual perspective, since the words "doughnuts", "donut" and "donuts" do not belong to the common Spanish vocabulary, the Court held that Spaniards would not associate them with a particular concept, and it was therefore not possible to compare the trademarks from a conceptual point of view.

Finally, the Court considered phonetics. The Court found that it was not possible to determine with certainty how the word "doughnuts" is pronounced by the relevant public because the combination of letters "gh" is unknown in Spanish and "ou" is uncommon. As a consequence, it is not possible to predict with certainty how Spanish consumers will pronounce "doughnuts" but at least a portion will pronounce it differently from "donuts".

The General Court also found that, at least in certain respects, the goods were not similar. Panrico's trademarks covered various pastry products in class 30, whereas Krispy Kreme's trademark also covered "restaurant services specialized in doughnuts, tarts, cakes, brioches, bagels" in class 42. Panrico argued that these class 42 services were similar to its products, but the General Court disagreed. Panrico also argued that, pursuant to article 8 paragraph 5 of the 40/94 Regulation, trademarks that have developed a certain reputation should be given broader protection to cover non identical products and/or services. However, the Court found this regulation inapplicable because of the lack of similarity between the marks.

The General Court concluded that, taking into account all relevant factors, there was no risk of confusion, and the KRISPY KREME DOUGHNUTS mark was valid.

The ECJ Appeal

Panrico pursued a further appeal to the ECJ, but this appeal was rejected by the ECJ on March 2, 2017. The ECJ decision is a useful illustration of that Court's role. The ECJ does not review findings of fact unless a gross error is alleged, which was not the case here. As a consequence, the findings of the lower court as to the similarity between the trademarks, as well as findings regarding the nature of the products and services, could not be challenged.

The ECJ decides only whether the General Court has correctly applied the law and, in this case, the ECJ found no fault in the General Court's application. Panrico argued that the General Court failed to take into account the reputation of its trademarks and the fact that some of the products and services covered by Krispy Kreme's trademark belonged to the very same class (class 30) as those covered by Panrico's trademarks. However, the ECJ found that the General Court had, in fact, taken these factors into account.

This is the end of a long battle: Krispy Kreme has a strong and valuable trademark in the U.S., but it took them eight years to obtain the registration of a European Union Trademark, and then another ten years to obtain a final decision confirming its validity. But it was certainly worth it: after all, they did not end up with " donuts"!

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