Societe des Produits Nestle SA v Cadbury UK Limited
This UK Court of Appeal case is an appeal by Société des Produits Nestlé S.A. (“Nestlé”) from the judgment of Arnold J given in January 2016 and his consequential order dismissing its appeal against the decision of Mr Allan James, the hearing officer acting for the Registrar of Trade Marks, made in 2013.
This appeal concerns an application made by Nestlé in July 2010 to register as a UK trade mark the 3D sign shown below (the “3D Mark”) in respect of chocolate and various other goods in class 30. This is the same 3D sign applied for in the Mondelez case.
The 3D Mark corresponds to the shape of the well-known four-finger product sold by Nestlé under the name KitKat in the UK save that it lacks the KitKat logo which is embossed onto each of the fingers of the actual product.
The initial application was opposed by the respondent, Cadbury UK Ltd (“Cadbury”), on various grounds including that the 3D Mark lacked distinctive character and so registration was precluded by section 3(1)(b) of the Trade Marks Act 1994 (“TMA”). In response, Nestlé relied upon the proviso to section 3(1) of the TMA, and contended that the 3D Mark had acquired a distinctive character as a result of the use which it had made of it prior to the application date.
In the Windsurf Chiemsee Produktions case it laid down the following factors by which to assess acquired distinctiveness:
1. The market share held by the mark;
2. How intensive, geographically widespread and long-standing use of the mark has been;
3. The amount invested by the undertaking in promoting the mark;
4. The proportion of the relevant class of persons who, because of the mark, identify the goods as originating from a particular undertaking; and
5. Statements from chambers of commerce and industry or other trade and professional associations.
If, on the basis of those factors, the competent authority finds that the relevant class of persons, or at least a significant proportion thereof, identify goods as originating from a particular undertaking because of the trade mark, it must hold that the requirement for registering the mark laid down in Article 3(3) of the TM Directive is satisfied.
An inherently non-distinctive mark can only acquire a distinctive character if the maker or supplier of the product concerned uses the mark in such a way that it comes to guarantee to consumers that the product originates from a particular undertaking.
The CJEU has recognised that the relevant public’s perception is not necessarily the same in the case of a three-dimensional mark consisting of the shape of a product or its packaging as it is in the case of, for example, a word or figurative mark consisting of a sign which is independent from the appearance of the products it denotes. Specifically, average consumers are not in the habit of making assumptions about the origin of products on the basis of their shape or the shape of their packaging in the absence of any graphic or word element, and it may therefore prove more difficult to establish distinctiveness in relation to such a three-dimensional mark. It follows that the more closely the shape for which registration is sought resembles the shape most likely to be taken by the product in question, the greater the likelihood of the shape being devoid of distinctive character.
In assessing whether a mark has acquired distinctive character through use, a court or tribunal must make an overall assessment having regard to all of the relevant evidence and all of the circumstances in which the relevant public may have seen the mark, including, for example, in advertising before a purchasing decision is made, on the product and associated materials at the point a purchasing decision is made, and afterwards, when the product is consumed. Nevertheless, it must also be recognised that the degree of attention of the average consumer may vary from time to time, and that, at least in some cases, it is when making a choice between different products in the category concerned that the average consumer pays the highest degree of attention.
In his decision given on 20 June 2013, the hearing officer held that the 3D Mark was devoid of inherent distinctive character save for cakes and pastries and that it had not acquired a distinctive character in relation to any of the other goods in respect of which the registration was sought.
Nestlé had relied upon two market surveys. The hearing officer found that the first was flawed because the questions it contained were leading and invited speculation. Indeed, Nestlé almost acknowledged as much. The second was not and the hearing officer summarised it in these terms: it involved 500 respondents making up a broadly representative sample of the public were interviewed in 18 locations around the UK in March and April 2012.
In assessing the second survey, the hearing officer concluded that it is not possible to tell from a series of short answers exactly how many of the respondents were sure that the shape shown to them was a KitKat, but going through the answers he said it was safe to conclude that at least half the respondents gave answers which probably meant that they thought that the shape shown to them was the product known as a KitKat. He said this was not really surprising given that the product has been sold in the same shape in the UK in substantial volumes since the 1930s. Most people will therefore have eaten one at one time or another.
The hearing officer then concluded, in relation to acquired distinctiveness, that it seems likely that consumers rely only on the word mark “KIT KAT” and the pictorial marks used in relation to the goods in order to identify the trade origin of the products. They associate the shape with KitKat (and therefore with Néstle), but no more than that. Therefore, if it is necessary to show that consumers have come to rely on the shape mark in order to distinguish the trade source of the goods at issue, the claim of acquired distinctiveness fails. The hearing officer’s reasoning here is that it had been shown only that consumers recognised and associated the shape of the four-finger KitKat with Nestlé.
An appeal and cross-appeal against that decision were heard before Arnold J in December 2013. In his judgment given in January 2014 Arnold J held, that the hearing officer was wrong to find that the 3D Mark was inherently distinctive in relation to cakes and pastries, and that, in relation to acquired distinctiveness, it was necessary to seek a preliminary ruling from the CJEU in order to determine the appeals. Arnold J referred three questions for a preliminary ruling, only the first of which related to acquired distinctiveness. The other two concerned another ground of objection which had no bearing on the issues in this decision.
Nestlé had challenged the decision of the hearing officer that the 3D Mark had not acquired a distinctive character by the date of the application. It contended first, that the findings of fact by the hearing officer showed that a significant portion of consumers did rely upon the 3D Mark as indicating the origin of the products.
Arnold J rejected this submission. In his view, the hearing officer had only found that a significant proportion of consumers recognised the 3D Mark and associated it with Nestlé’s goods. Further, the hearing officer had rightly held that there was no evidence, and it was inherently unlikely, that consumers of four-finger KitKats relied upon the shape of the product to confirm its authenticity. The fact that Nestlé ensured that each finger was embossed with the KitKat logo amounted to a clear recognition that consumers did not rely upon the shape in that way, and that they relied upon the logo and word.
Nestlé’s second contention was that the hearing officer had erred in law and that the correct interpretation of Article 3(3) of the Trade Mark Directive was that recognition and association were sufficient to demonstrate the acquisition of distinctive character.
Arnold J concluded that the answer to this question was not clear and depended upon what was meant by “use of the mark as a trade mark”. Does it require the applicant to show that, as a result of the use of the mark, consumers rely on the mark as a trade mark, or is it sufficient that consumers recognise the mark and associate it with the applicant’s goods? Arnold J felt it was necessary to seek guidance from the CJEU in order to decide the appeal.
It is noteworthy that Arnold J offered his preliminary view to the CJEU that an applicant must show that a significant proportion of the relevant class of persons rely upon the trade mark (as opposed to any other trade marks which may also be present) as indicating the origin of the goods.
The CJEU delivered judgment in September 2015. In essence, the CJEU recasted Arnold J’s referred question and drew a distinction between:
1. An applicant proving that as a result of the use he has made of the mark, the relevant class of persons perceive the goods designated exclusively by that mark, as opposed to any other mark which might also be present, as originating from a particular source; and
2. An applicant proving only that a significant proportion of the relevant class of persons recognise the mark and associate it with the applicant’s goods.
In answering the question, the Court began by reiterating that the essential function of a trade mark is to guarantee the identity of the origin of the designated goods and to enable the consumer to distinguish the goods from those which have another origin without any possibility of confusion. There followed a restatement of how distinctive character must be assessed and that it may be intrinsic or acquired. Against this background, the CJEU turned to the acquisition of distinctive character and explained that it must be as a result of the use of the mark as a trade mark, for the purposes of the identification of the goods as originating from a particular undertaking.
The CJEU acknowledged that a mark may acquire distinctive character as a result of its use in conjunction with another mark but explained that the use must have been such that consumers actually perceive the goods, designated exclusively by the mark applied for, as originating from a particular undertaking.
The CJEU’s answer to the main question referred was that in order to obtain registration of a trade mark which has acquired a distinctive character following the use which has been made of it regardless of whether that use is as part of another registered trade mark or in conjunction with such a mark, the trade mark applicant must prove that the relevant class of persons 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.
The appeal was therefore restored for hearing before Arnold J in January 2016. In his judgment he held that the hearing officer had not erred as a matter of law in addressing the issue of acquired distinctiveness and that the conclusion he reached was not only open to him on the evidence before him but was also correct. He therefore dismissed the appeal.
Arnold J began his consideration of the judgment of the CJEU in relation to acquired distinctiveness by expressing concern that the CJEU had reformulated the question he had referred. He then explained that it was necessary to try to apply the answer the Court had given as best he could. He concluded that, in order to demonstrate that a sign has acquired distinctive character, the applicant or trade mark proprietor must prove that, at the relevant date, a significant proportion of the relevant class of persons perceives the relevant goods or services as originating from a particular undertaking because of the sign in question (as opposed to any other trade mark which may also be present).
Cadbury submitted that there was no inconsistency between the two tests: if the relevant class of persons perceives the relevant goods as originating from a particular undertaking because of the mark in question (as opposed to any other trade mark which may also be present), then those persons will rely upon that mark to differentiate those goods from the goods of other undertakings.
Nestlé contended that there is no need for a mark to have been used on its own to have acquired a distinctive character, and what matters is the perception of the relevant class of persons. Where the mark has been used with other marks then it is necessary to assess how those persons would perceive the mark if it were used on its own.
Arnold J reached the following conclusions in his second judgment:
1. It was not sufficient to show that a significant proportion of the relevant class of persons recognise the mark and associate it with the applicant’s goods;
2. It was clear from the reasoning of the hearing officer that he had evaluated the perception of consumers at the relevant date in a manner which was consistent with the legal test laid down by the CJEU;
3. The hearing officer had interpreted the survey correctly;
4. Overall, the hearing officer took all relevant matters into account and was entitled to reach the conclusion he did. Indeed, Arnold J said he agreed with it; and
5. It was likely that a number of similarly shaped products made by other undertakings were on the market in the years leading up to the application date; yet there was no evidence that consumers thought these products were KitKats. In the Arnold J’s view, this was inconsistent with the 3D Mark having acquired a distinctive character.
The matter was then appealed up to the Court of Appeal. Nestle argued that:
1. What must be shown is that a significant proportion of the relevant class of consumers perceives the goods designated exclusively by the mark in issue, as opposed to any other trade mark which might also be present, as originating from the applicant. This does not require any finding that consumers have, in the past, placed any reliance upon the mark in their transactional behaviour.
2. The hearing officer did not adopt the correct approach and the judge was wrong to hold otherwise. The hearing officer applied a reliance test which was incorrect. He ought instead to have asked himself whether a significant proportion of relevant consumers had come to perceive chocolate products designated exclusively by the Trade Mark as originating from Nestlé.
3. If the hearing officer and the judge had applied the correct test to the findings of fact he had made then he would or ought to have found that the 3D Mark had become distinctive by the date of the application.
4. The reasoning of the judge reveals a number of further errors. In particular, he criticised the methodology and probative value of the second survey without having any proper basis to do so; he wrongly took into account the presence on the market of similar products of third parties; his critical finding that the hearing officer properly evaluated the perception of consumers at the relevant date was unsupported and lacked any adequate reasoning or foundation; and his approach effectively renders three-dimensional shape marks unregistrable.
5. As covered in the Mondelez case above, the General Court made different findings on EU law that should be binding on the UK courts.
Cadbury argued that:
1. They agreed that the relevant test is that laid down by the CJEU in response to the question the judge referred but maintains that it is central to a finding of factual distinctiveness that consumers do or could use the mark in their transactional decisions because of the use that has been made of it, and that is so whether the mark has been used on its own, alongside another trade mark or as part of another trade mark. Without there being a connection in the mind of the average consumer between the shape and the origin of the goods, the shape is incapable of fulfilling its function as a trade mark.
2. It must be appreciated that the hearing officer did not have the benefit of the decision of the CJEU in this case. Nevertheless, he directed himself properly as to the relevant legal principles and in a manner entirely consistent with the guidance the Court subsequently gave. Moreover, the judge also directed himself properly in law as to the test to be applied and correctly found that hearing officer had not fallen into error in this regard.
3. The hearing officer, having properly directed himself in law, was entitled and right to find that the 3D Mark had not become distinctive by the relevant date.
4. The further criticisms of the reasoning of the judge are not justified. In particular, the judge approached the survey correctly; he was entitled to refer to the presence on the market of similar products of third parties; his finding that the hearing officer properly evaluated the perception of consumers at the relevant date was adequately reasoned; and it is simply not correct to say that the judge’s approach effectively renders three-dimensional shape marks unregistrable.
5. The decision of the General Court in Mondelez is of no assistance because that court misunderstood the decision of the CJEU in this case in a critical respect and proceeded to adopt an incorrect approach which involved assessing whether a significant proportion of the relevant class of persons recognised the Trade Mark and associated it with Kit Kat.
Kitchin LJ said that there is an important distinction between, on the one hand, recognition and association and, on the other hand, a perception that the goods designated by the mark originate from a particular undertaking.
The distinction is that a shape of this kind is not inherently such that members of the public are likely to take it as a badge of origin in the way they would a newly coined word or a fancy name. Products in that shape have been sold on a very large scale under and by reference to a brand name which is inherently highly distinctive. The shape has in that way become very well-known. That does not necessarily mean that the public have come to perceive the shape as a badge of origin such that they would rely upon it alone to identify the product as coming from a particular source. They might simply regard the shape as a characteristic of products of that kind or they might find it brings to mind the product and brand name with which they have become familiar. These kinds of recognition and association do not amount to distinctiveness for trade mark purposes, as the CJEU has now confirmed in its previous decision in this case.
The significance of the distinction lies in the considerable value of a registration of a three-dimensional shape as a trade mark. It confers upon the proprietor an exclusive right to use that shape in relation to the product concerned. But if consumers do not perceive the shape as denoting the origin of the product, no one would actually be confused and the protection afforded by the registration would not be justified.
The Court of Appeal made the following conclusions:
1. The CJEU had not used the term ‘reliance’ in giving its guidance. However, the essential function of a trade mark is to guarantee to consumers the origin of the goods or services in relation to which it is used by enabling them to distinguish those goods or services from others which have a different origin. Perception by consumers that goods or services designated by the mark originate from a particular undertaking means they can rely upon the mark in making or confirming their transactional decisions. In this context, reliance is a behavioural consequence of perception. If in any case it is shown that consumers have come to rely upon the mark as an indication of origin then this will establish that the mark has acquired distinctiveness.
2. In assessing whether a mark has acquired distinctive character, the court or tribunal must make an overall assessment of the evidence. Here the hearing officer properly took into account the following further matters, namely that there was no evidence that the shape of the product had featured in Nestlé’s promotional and advertising material; the product had only ever been sold in an opaque wrapper; and the shape had not been shown on the packaging, save for a short time and a limited subset of goods. The hearing officer rightly paid particular attention to the second survey and he considered for himself the responses to it and, in light of the other evidence before him, came to a reasoned conclusion as to what it established.
3. Kitchin LJ did not share the Arnold J’s critical view of the survey. The hearing officer was right to say that some of the questions were not leading and he did no more than necessary to give the survey a relevant context. The hearing officer was entitled to find that the results of the survey did not establish distinctiveness. The results of the survey must be considered along with all the other relevant factors. That is the course the hearing officer took, as the judge rightly held. Kitchin LJ also rejected the suggestion that the approach taken by the judge renders shape marks of the kind in issue effectively unregistrable as trade marks.
4. The General Court has not made any decision which is relevant to this appeal decision and therefore the Mondelez decision has no effect on this decision. The General Court has simply reiterated the principle established by the CJEU in Nestlé v Mars that where a mark has been used as part of or in conjunction with a registered trade mark, it must be shown that the relevant class of persons perceive the product, designated exclusively by the mark in issue, as originating from a particular undertaking. Neither of the parties disputed this in this appeal.
Floyd LJ added: “How one goes about establishing the relevant perception in an individual case will depend upon how the mark has in fact been used. If there has been use of the mark on its own, then it may be possible to show that the public have in fact come to perceive goods bearing the mark as originating from a particular undertaking by reference to the consequences of that use. Where the mark has been used in combination with other marks, the task inevitably becomes more difficult, because it is the perception of the mark applied for, and not other marks used in combination with it, which it is necessary to isolate and establish.”
Judgment Date: 17 May 2017
Court of Appeal Decision a Set Back for Nestle’s 3D KitKat Trade Mark Applications