Source: https://www.jakemp.com/en/knowledge-centre/briefings/still-no-break-for-kitkat-cjeu-dismisses-nestl%C3%A9s-appeal-on-acquired-distinctiveness-of-the-kit-kat-bar
Timestamp: 2019-04-23 22:31:25+00:00

Document:
The ongoing struggle of Nestlé to register a three-dimensional trade mark for the shape of its KitKat bar has been dealt a yet further blow by the CJEU’s dismissal of its appeal on 25 July 2018. The Court has re-affirmed the principle that, for a mark to be registered on the basis of acquired distinctiveness through use, the acquisition of distinctive character needs to be shown in every Member State of the European Union in which it did not, ab initio, have such character. In the present case, the EUIPO had decided that the shape had acquired distinctiveness through use in a majority of the 15 Member States in question, but in relation to a minority of Member States had not expressly ruled whether such distinctiveness had been proved, or not. The EUIPO will now have to reconsider whether, on the basis of the evidence Nestlé previously filed, its registration of the shape as a trade mark is justified.
Advocate General Wathelet’s Opinion of 20 April 2018 had supported the conclusion of the General Court that proof of acquired distinctiveness in 10 of the relevant 15 EU Member States1 was not enough to establish acquired distinctive character in the relevant territory as a whole. The CJEU followed the Advocate General’s recommendation and dismissed Nestlé’s appeal.
For those unfamiliar with the lengthy saga, in 2002 Nestlé applied to register the shape of its four-finger KitKat bar as an EU trade mark. The application was accepted, but in 2007 Cadbury (now Mondelez) applied to invalidate Nestlé’s registration. Cadbury’s invalidity action was initially rejected by the EUIPO on the basis that Nestlé’s mark had acquired distinctiveness through use, but that decision was overturned in 2016 by the General Court.
Although the General Court found (in an approach to the nature of the evidence completely contrary to that of the English Court of Appeal) that Nestlé’s evidence was good enough to establish acquired distinctiveness in a majority (both by number of countries and population) of the relevant 15 Member States, it went on to hold that this was not enough to establish acquired distinctive character through use in the EU, given that such acquisition had been proven for only a part (albeit a substantial part) of the relevant territory. The States in which the General Court had found acquired distinctiveness to be established on the evidence were Denmark, Germany, Spain, France, Italy, Netherlands, Austria, Finland, Sweden and the United Kingdom. This left Belgium, Ireland, Greece, Luxembourg and Portugal.
In an appeal to the CJEU, Nestlé and the EUIPO, supported by Marques (as Intervenor), argued that the General Court had infringed Article 7(3) EUTMR in relation to acquired distinctiveness, and the interpretation given to it in the Lindt case (where the CJEU had held that “it would be unreasonable to require proof of such acquisition for each individual member state”). By focusing on individual national markets, they argued, the General Court’s interpretation was incompatible with the unitary character of an EUTM and the very existence of the single market. For its part, Cadbury argued that any other approach would lead to the paradox whereby a trade mark which would be refused registration for lack of distinctive character in one Member State, could nevertheless be registered as an EUTM and enforced in the courts of that Member State.
Where providers of certain goods or services had grouped several Member States together in the same distribution network and treated them, especially for marketing strategy purposes, as if they were one and the same national market. In such circumstances, evidence of use within such a cross-border market was likely to be relevant for all Member States concerned.
Accordingly, although there was no rule that evidence must be submitted in respect of each and every Member State, the evidence submitted had to be capable of establishing the acquisition of distinctive character in all Member States in question.
The CJEU held that in the present case, the General Court had been right to hold that the Board of Appeal had erred in finding that the mark had acquired the necessary distinctive character for the purposes of Article 7(3), without adjudicating on whether the mark had acquired such a character in Belgium, Ireland, Greece and Portugal.
The CJEU has therefore re-affirmed the principle that, for a mark to be registered on the basis of acquired distinctiveness through use, the acquisition of distinctive character needs to be shown in every Member State of the European Union in which it did not, ab initio, have such character. At the same time, it has indicated a degree of flexibility in approach to the evidence, by acknowledging that acquired distinctiveness may be extrapolated from evidence of use in one country to another in certain, albeit limited, circumstances.
This decision should put to rest any lingering doubts that in the case of (at least most) shape marks, acquired distinctiveness needs to be shown throughout the EU, as opposed to showing it in a substantial part, territorially and/or by population. In practice, this will be an unsurmountable hurdle for many marks which have not been used in every Member State. Whilst extrapolation may help to reduce the evidence burden in some cases, where it can be shown that for the goods or services in question, countries are treated as part of the same market, or where there are sufficiently close geographic, cultural or cultural links between particular Member States, this is unlikely to achieve registration in most cases if sales cannot be shown across all 27 Member States.
It therefore remains to be seen whether the CJEU decision signals the end for Nestlé’s trade mark registration, or is merely one decision in a series of appeals set to continue for some years to come.
1 Acquired distinctiveness needed to be shown only in the territory of the EU as it was at the time of the trade mark application in 2002, namely across the then 15 Member States.
2 Paragraphs 81-82 of the Judgment.
3 The same is true of Luxembourg, but the CJEU decision seems to ignore the absence of a finding in that case, perhaps assuming that Luxembourg is for the goods in question part of a larger cross-border market, a possibility noted by the Advocate General in paragraph 81 of his Opinion.
4 The application was for the oral part of the procedure before the CJEU to be re-opened and is addressed in paragraphs 27-36 of the Judgment.
5 The fact that Nestlé’s application to re-open the oral part of the procedure was rejected should not preclude Nestlé from taking this position. Nor is it clear why the (incorrect) answer given by its lawyer at the CJEU hearing should have that result.
6 The decision of the Board of Appeal indicates that the respective market shares were 4.8% compared with less than 1%, and that the product was launched in Greece in 1989 and Sweden in 1991.

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