Nestlé likely to lose bid to trade mark shape of Kit Kat bars in light of EU court ruling, says expert

Out-Law News | 16 Sep 2015 | 1:09 pm | 3 min. read

Nestlé is likely to lose its bid to win trade mark protection for the shape of its Kit Kat chocolate bars in light of a ruling from the EU's highest court, an expert has said.

Intellectual property law expert David Woods of Pinsent Masons, the law firm behind Out-Law.com, said a judgment issued by the Court of Justice of the EU (CJEU) on Wednesday morning would be welcomed by rival chocolate manufacturer Cadbury, which has opposed Nestlé's attempts to trade mark the Kit Kat bar shape.

"Although it will ultimately fall to the High Court in London to determine the outcome of this case, the CJEU's ruling outlines the framework legal principles that the High Court will need to consider when issuing its own judgment," Woods said. "The principles confirmed by the CJEU strongly support findings made by the UK's Intellectual Property Office previously when it denied Nestlé's attempt to register the shape of Kit Kat bars as a trade mark. Nestlé will find it difficult to show that Kit Kat bars are trade mark-able in light of the CJEU's ruling."

The EU's Trade Mark Directive recognises that shapes or other signs capable of being represented graphically can qualify for trade mark protection if they are "capable of distinguishing" one company's goods or services from those of its rivals. However, if a mark's shape is borne out of the nature of the product that it is, or takes on a form that is necessary to obtain a technical result, then applications for registering those marks as trade marks must be rejected.

In its ruling, the CJEU said those provisions in the Directive mean that shapes cannot be registered as trade marks "where that shape contains three essential features, one of which results from the nature of the goods themselves and two of which are necessary to obtain a technical result, provided, however, that at least one of the grounds for refusal of registration set out in that provision is fully applicable to the shape at issue".

The CJEU said that registration of shape marks should only be refused where the technical nature of the shape affects the way it the goods function. Shape marks should not be refused just because the technical nature of them relates to the way the goods are manufactured, it said.

In a decision that Nestlé appealed to the High Court in London, the Intellectual Property Office (IPO) determined that the shape of Kit Kat bars takes on three essential features. It said the shape is borne from the nature of the shape of moulded chocolate bars. It also determined that the shape is necessary to obtain two technical results, namely the breaking of the bars and determination of portion size.

"What was notable from the CJEU's judgment was that it changed the order of the questions that the High Court posed it," Woods said. "It said it was necessary to look at whether the shape of a product takes the form it does so as to perform a technical function before assessing whether the shape satisfies other criteria required to earn trade mark protection."

"This approach serves stated public policy which is to ensure that businesses cannot, through trade marks, win a monopoly right to exploit technical or functional features of goods that are likely to be present in the goods of rival companies," he said.

The IPO previously ruled that the shape of Kit Kat bars is not distinctive enough on its own to enable it to be associated with the Nestlé brand since there are similar products available on the UK market. Nestlé has challenged this finding and produced consumer survey evidence to support its argument.

The legal test for determining whether there is a sufficient link between marks and brands to merit trade mark protection involves evaluating what the 'average consumer' of a type of product perceives when they see a mark, such as a shape. The average consumer is deemed to be reasonably well informed and reasonably observant and circumspect.

The CJEU said that the onus is on the trade mark applicant to prove that the average consumer of their products "perceive the goods or services designated exclusively by the mark applied for, as opposed to any other mark which might also be present, as originating from a particular company".

Woods said the finding shows why it is rare for businesses to win trade mark protection for shapes.

"Most goods are not solely identifiable by their shape," Woods said. "In most cases, additional branding, whether the name of products, or colour or design of packaging, will help differentiate one product from another. It therefore requires greater creativity for shapes on their own to be held to be trade mark-able. The CJEU's ruling shows that the shape of some products will be inherently incapable of being protected due to their technical function, although it is arguably harsh to consider the breakability of a chocolate bar to be a necessary technical result."