KIT KAT Woe, Two in a Row

The Court of Justice of the European Union (CJEU) has indicated that Nestlé should not own an EU trade mark registration for its four-finger bar (KIT KAT). Previous blog posts on the KIT KAT saga can be found here.

Background

The decision is the culmination of decade-long dispute between Nestlé and Mondelez, owners of Cadbury and Kvikk Lunsj, a four-fingered Norwegian chocolate bar two years’ KIT KAT’s junior.

Mondelez applied to invalidate KIT KAT on the basis that it didn’t inherently function as a trade mark and put Nestlé to proof as to whether or not consumers in the EU had been educated through advertising and marketing to understand that KIT KAT was a trade mark in practice. If Nestlé could show that KIT KAT benefited from this ‘acquired distinctiveness’ throughout the EU, they could keep their trade mark.

In 2016, the General Court (GC) agreed with lower courts that KIT KAT didn’t inherently work as a trade mark, and also found that Nestlé had not proven acquired distinctiveness in Belgium, Greece, Ireland, Portugal and Luxembourg. Nestlé appealed this GC decision to the CJEU.

The Appeal

Nestlé argued that the GC was mistaken in finding that acquired distinctiveness in 10 out of 15 Member States (as there were then) was insufficient to show that consumers recognised its four-fingered bar as being a KIT KAT. Nestlé considered 10 out of 15 Member States to be a substantial enough part of the EU to meet the legal test of showing acquired distinctiveness throughout the EU.

Central to Nestlé’s argument was the principle of the single market in the EU and the unitary character of an EU trade mark that flowed from this. Nestlé also submitted that the threshold for invalidity proceedings (here, that KIT KAT didn’t function as a trade mark) should be the same as non-use attack proceedings (not applicable in this case, but essentially that KIT KAT had not been used widely enough across the EU 5+ years after registration). For non-use attack cases, showing use in a single Member State might suffice under established case law.

The CJEU rejected Nestlé’s argument that, just because parallels could be drawn between non-use and invalidity proceedings by virtue of the need to file evidence in Member States, that the threshold should be the same. The distinction drawn was that whilst one related to the preservation of rights (non-use), the other (invalidity) related to whether a right, and a monopoly therein, should be granted in the first place.

The CJEU then went on to stress that a trade mark owner could show acquired distinctiveness by only showing use in several Member States, and that it is not necessary to provide separate evidence to show that a sign has acquired distinctiveness in every Member State. Rather, it could be shown if:

Several Member States had been grouped together and treated as one national market e.g. distribution networks and marketing strategies pointed to a collective set of countries;
Geographic, cultural or linguistic proximity between Member States meant that Member State 2 knew about a sign because of its use in Member State 1, e.g. a product not available in Austria but available in Germany.

Nestlé had not filed evidence to show this kind of market extrapolation and so their appeal was rejected.

What Now?

The doom mongering of newspaper headlines aside, there are many positives to be taken from the decision. The CJEU has taken a pragmatic approach, which provides further clarification on acquired distinctiveness for ‘difficult’ marks such as 3D objects.

The case serves as a reminder of the importance of brands and their lawyers working proactively and collaboratively at the outset of a brand’s launch. Taking legal advice on how to make something ‘brand’ once it is released onto the market is not always the most obvious priority for brand owners, but building intellectual property into the product and ensuring marketing campaigns at the outset and throughout the life of the brand reinforce perception of the identified brand assets is clearly invaluable in building brand equity.

The case will now be sent back to the EUIPO, which will review Nestlé’s evidence again, in light of the CJEU’s decision. It seems likely that Nestlé will lose their EU-wide rights based on the CJEU's ruling. However, Nestlé will still have the option of 'converting' the EU-wide right into individual national trade mark applications in the countries where it is found that sufficient evidence was provided. Also, if Nestlé were to refile for the four-fingered shape, follow the CJEU's guidance, and get their evidence in order, it is conceivable that they could obtain a new EU trade mark registration. Whether or not we will see own-label four-fingered chocolate bars in the shops soon remains to be seen…

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