Insights: Nestlé’s struggle to catch a break

On 17 May 2017, the Court of Appeal handed down its judgment in Nestlé’s appeal against Arnold J’s decision in the High Court that the shape of Nestlé’s four fingered Kit Kat bar is not registrable as a trade mark.

The Court of Appeal’s decision turned on whether Nestlé’s use of the shape mark had acquired distinctive character before the date of application for registration and following the use which has been made of it.

The High Court decision
Following Arnold J’s referral to the CJEU on the requirements for establishing whether a mark has acquired distinctive character, he concluded that recognition and association of the mark with the Applicant’s goods is not sufficient to establish acquired distinctiveness. Despite the ambiguity in the CJEU’s decision, Arnold J went on to hold that in order to benefit from the proviso under Article 3(3) of the EUTM Directive, it must be proven 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)’

In applying the CJEU’s guidance, Arnold J found that the Hearing Officer had reached the correct conclusion in rejecting Nestlé’s application and the decision was upheld.

Court of Appeal
Nestle appealed against Arnold J’s decision and argued that the Hearing Officer had applied a test of reliance rather than one of perception. Kitchin LJ rejected this contention and found that the Hearing Officer had adopted the correct approach in making an overall assessment in deciding whether the mark had acquired distinctive character. Several factors weighed against Nestlé’s claim that the shape, on its own, had the ability to indicate trade origin as there was no evidence that the shape featured in promotions of the product, the chocolate bar had almost exclusively been sold in an opaque wrapper, the four fingers had always been embossed with the Kit Kat logo and it did not seem likely that the shape was used by consumers to confirm that what they had purchased originated from the intended trade source.

Kitchin LJ highlighted that Nestlé had failed to demonstrate use of the shape mark in a manner which enables consumers to perceive it as a badge of origin; it was not sufficient for Nestlé to show that the mark had come to be associated with Kit Kats.

Floyd LJ reiterated that the test for determining if a trade mark that is not inherently distinctive has acquired distinctive character through use is whether a significant proportion of the relevant class of consumers perceive the goods designated by the mark as originating from a particular undertaking. It is not necessary that the mark has been used on its own; the mark applied for may be used in conjunction with other marks. In this latter scenario, which applies in this case as the four finger chocolate bar is embossed with the Kit Kat logo, it is more challenging to prove that the shape of the chocolate bar has acquired distinctive character on its own. Both Kitchin LJ and Floyd LJ acknowledged Nestlé’s decision to use a survey; however, Floyd LJ goes on to highlight the danger of taking the results of a survey as determinative. Both Floyd LJ and Kitchin LJ agreed with the Hearing Officer in holding that the results of the survey did not establish distinctiveness and that the survey results must be assessed together with all relevant factors. Floyd LJ held that on its own, the survey evidence was not sufficient to show that the shape of the Kit Kat bar had acquired distinctiveness. The survey results ‘did not establish any more than recognition’ and no further evidence was submitted to support the survey evidence.

Ultimately, a significant proportion of consumers should perceive the shape as designating the goods of a particular undertaking. According to Floyd LJ, this does not mean they must identify the undertaking, they simply must identify that the goods belong to ‘one undertaking and no other’…‘the ultimate question is whether the mark, used on its own, has acquired the ability to demonstrate exclusive origin’.

Counsel for Nestlé also argued that the decision of the General Court in Mondelez v EUIPO, which concerns the application of the shape of the four finger chocolate bar as a European Union Trade Mark, is binding on the Court of Appeal. It is of note that the General Court held that Nestlé had demonstrated it had acquired distinctive character in the UK. Despite this, the Court of Appeal held that it was not bound by this finding and Kitchin LJ explained that the General Court took into account the results of surveys which were deemed to be flawed and unreliable. In addition, he held that the General Court decision suggested that it regarded recognition and association of the mark with Kit Kat as sufficient to establish distinctiveness. Therefore this argument was also dismissed by the Court of Appeal.

This latest decision in Nestlé’s pursuit to register the shape of its four fingered chocolate bar as a trade mark highlights the difficulties in obtaining a monopoly right over a shape and the importance of providing significant evidence to demonstrate that the shape has acquired distinctive character. It remains to be seen whether a further appeal by Nestlé is on the cards.