The parties initially clashed about this more than 10 years ago before the German trade mark registry and the German courts. That skirmish was settled and the battle ground in the EU has shifted to the EUIPO and to the UK registry, with appeals from both their decisions. Until now, Nestlé has had the upper hand in the former but not the latter. However, its success in the EUIPO has been reversed with a decision of the EU General Court. Even so, the decision has potentially beneficial ramifications for Nestlé's parallel case pending before English Court of Appeal. The hearing for that is in the next few months.
The General Court's key decision related to the perceived geographic inadequacy of Nestlé's proof of acquired distinctiveness. When Nestlé filed its EU trade mark application there were only 15 EU Member States. The General Court disagreed with the EUIPO Board of Appeal that it was enough to prove acquired distinctiveness in 10 of those 15 countries. This was notwithstanding that those 10 represented 90% of the then EU's total population, of whom almost 50% immediately identified trade origin from the Kit Kat shape. However, because the Board of Appeal had not reached a conclusion on whether there was sufficient proof for Belgium, Ireland, Greece and Portugal (or Luxembourg but not mentioned by the General Court), distinctiveness had not been proven "throughout the EU."
The case now goes back to the EUIPO to review the evidence for those five countries again. There was no survey evidence of brand awareness or market share figures for some of them (and no figures relating to use in Luxembourg at all). That alone does not mean the proof there is inadequate but Nestlé's optimism may be tempered by the fact that the Cancellation Division's ruling, at first instance, was that the overall evidence was clearly not sufficient for those countries. Indeed, it even ruled that it was also inadequate in Finland, Sweden, Denmark and Austria but at least the Board of Appeal reversed those rulings.
This part of the decision sets a high threshold for marks used on a pan-EU basis. It is hard to reconcile with the seemingly more practical approach adopted by the CJEU in Chocoladefabriken Lindt (C-98/11). That had concluded that it was unreasonable to require such evidence for every single Member State where the mark was inherently non-distinctive. It was enough that acquired distinctiveness is "sufficiently" proved in quantitative terms (other cases had ruled that sufficient evidence for four or even 15 out of 27 Members States was definitely not enough). The General Court reminds us that the threshold is not applying to a substantial proportion of all EU citizens together but rather to a significant proportion of consumers "throughout the EU". It means a lack of recognition in one EU country cannot be offset by a higher level of awareness in others.
Other lessons to learn
The General Court's decision is helpful in clarifying a number of points relating to the gathering and submission of evidence of acquired distinctiveness:
- Just because a sign (e.g. the shape) has always been used with other branding elements (e.g. a name) does not mean the evidence of past use necessarily relates to both that sign and those other branding combined – there can still be trade mark use of just the sign despite the presence of other elements.
- Survey questions that depict the sign applied for without the other branding elements is good evidence to prove acquired distinctiveness of the sign alone (even if the historic use has never been in such an unbranded form) – it is not necessary to do a survey using a sign combined with some other (maybe invented) branding as an experimental control.
- The evidence that was most convincing in each country was survey evidence combined with market share information for that country, in both cases as obtained by independent market research specialists.
- Evidence of turnover and advertising spend, being internal data, is secondary evidence but does not, alone, prove acquired distinctive character – if relying on the latter, it helps to show the share of those costs relatively to the total advertising spend in that market.
- The fact that third parties may have other goods identical or similar in shape on the market is irrelevant if the evidence still nevertheless shows that there is acquired distinctiveness for that shape.
- It is not essential for proving acquired distinctiveness that a product's shape has been apparent at the time of sale or on its packaging – evidence of the shape featuring in advertisements or of being visible at the point of consumption can potentially suffice.
- Any decision of a national IPO about the sufficiency of evidence of acquired distinctiveness in that country is not binding on the EUIPO even if relating to the same evidence.
As part of its analysis, the General Court expressly ruled that Nestlé's evidence proved that the shape had acquired distinctiveness in the UK. This is contrary to the findings of the UKIPO and Arnold J in the English High Court. It also rejected Mondolez's submission that consumers only identify a Kit Kat because of the name on the packaging and the product, and that the mark registered merely represents the shape of the product known as "Kit Kat 4 fingers".
Whilst these findings of fact are not binding per se on the English Court of Appeal, they are highly pertinent to Nestlé's imminent appeal before it. This is especially so since the General Court also felt compelled to point out that the CJEU had not adopted Arnold J's formulation (in his referring question to the CJEU), whereby the relevant consumer must be shown to "rely" on the shape to identify the commercial origin of the goods. Despite this, when the case came back before him, Arnold J had ruled against Nestlé by effectively applying his reliance (a "because of") test nevertheless. He rejected Nestlé's UK evidence with that in mind. Since the English and the EUIPO cases have been considering largely the same evidence insofar as it relates to the UK, it is hard to see how the Court of Appeal can ignore the views of the General Court about that evidence and about the CJEU's rejection of Arnold J's reliance test.
So the General Court's decision would seem to bode well for Nestlé's UK registration. It could also pave the way for Nestlé, as a fall back, to convert its EU trade mark into national marks in each of the countries where the General Court ruled the evidence was sufficient, namely France, Italy, Spain, Germany, the Netherlands, Denmark, Sweden, Finland and Austria.
If this number of national rights could survive the fallout in any event, one might reasonably question why Mondolez would want to continue challenging the EU trade mark. The answer may lie in the expansion of the EU since Nestlé's application. Had Nestlé been able to show distinctiveness in just those five additional countries (the four listed and Luxembourg), it would now have a monopoly right in its shape in not 15 but 28 Member States. This is despite the fact that Nestlé had not proved acquired distinctiveness in 13 of these countries and, for all we know, had not even used the mark there. Those 13 new Member States represent an additional 125 million consumers (about 30% more than the original EU trade mark would have covered). This is likely to mean the Kit Kat saga will continue for a while yet.
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