Give me a break – Kit Kat reference setting the bar too high on factual distinctiveness for shape marks?

Before we hit the law-talking stuff, I’ll declare an interest: I’m a bit of a fan of the Kit Kat.

I would recognize one without its packaging, and I am quite confident that I would recognize one if I was blindfolded. Oh, and the branding around the humble Kit Kat has resulted in some of the most interesting and important trade mark battles of our time, so we’re combining a few of my passions here.

Add on to this the fact that CTM registrations for the Lego brick and Bounty shape marks have been invalidated in recent years, and anyone that knows me will know that this is personal.

So, what has happened this time? Well, a UK trade mark registration for the shape of Nestlé’s Kit Kat has been attacked by Cadbury. Loosely speaking, the 3D mark was accepted by the UK registry on the basis that the mark was in fact distinctive, so Cadbury appealed.

Before we go further, and while you would all be tainted if this was a witness gathering exercise, I’m going to ask one question: what thought first crosses your mind when you see the above “sign”? Keep that answer in mind …

Arnold J has now handed down his decision (Société Des Produits Nestlé SA v Cadbury UK Ltd [2014] EWHC 16 (Ch)). Perhaps the key issue that will interest brand owners in Australia is Arnold J’s consideration of exactly how much recognition a shape mark must have in order to be registered as a trade mark. [This is only relevant when the shape in question is not distinctive enough on a prima facie basis]

Our London IP team recently set out the legal niceties of the UK decision at length in its recent note here.

The gist is that Cadbury’s opposition to the Kit Kat shape mark was rejected by the Hearing Officer, on the basis that the mark had acquired distinctiveness among the relevant public. Arnold J has now referred questions to the Court of Justice around what exactly the test for factual distinctiveness is. Is it sufficient to prove (at the relevant date) recognition of the mark on the part of the relevant consumers, or must those consumers rely upon that mark alone (as opposed to any other marks that may also be present) as indicating origin? Arnold J considers that it should be the latter.

The concern on the part of brand owners will be that the bar is being set far too high in terms of Question 1 of the reference. This will of course be entirely dependent on how “rely on” is construed. Consumers can understand that adidas’ 3 stripes and Louboutin’s red sole function as trade marks without – in reality – ever needing to rely on those marks on their own in terms of making the decision to purchase. This is simply a function of the fact that many brands are often used at the same time (see our recent note on Coca-Cola v Pepsi in New Zealand for another example).

There have also been questions referred as to whether the three essential features of the mark (one of which results from the nature of the goods themselves and two of which are necessary to obtain a technical result) mean that the overall mark contravene the express provisions in the CTM Regulation dealing with shape marks. We will see in the not too distant future whether the Court of Justice considers that Arnold J’s mosaicking of the objectionable aspects that make up the mark is a permissible approach. If they agree with Arnold J, then factual distinctiveness will not assist Nestlé.

But in the meantime, what would happen down-under?

Factual distinctiveness in Australia and New Zealand

Australian law as encapsulated in s41(6) (and now the new s41(3)) is largely the same as the UK/EU equivalents discussed in Nestle (section 3(2) of the UK Act (Article 3(3) of the Directive) and Article 7(3) of the CTM Regulation). The requirement is that the mark in fact distinguished the goods as at the date of the application, through the use made of it.

However, unlike the European provisions, shape marks are not expressly dealt with in s41 of the Australian Act. Therefore, if a mark is factually distinctive, then s41(6) would on the face of it come into play regardless of whether the sign is functional (but see eg. Lindgren J’s dissent in Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks [2002] FCAFC 273, at 43).

Leaving aside Kenman Kandy (in which the shape of the “Millennium Bug” candy was held to be inherently distinctive by a majority of the Full Federal Court) sweets have not had the greatest run of luck in terms of decided cases where reliance was placed on factual distinctiveness. Guylian’s Seahorse shaped chocolates failed, as did Ferrero’s Tic Tac container. There are many more that could be added to that list. The verdict of the Court of Justice in Nestle may very well play a role in whether that trend continues.

The shape of the Toblerone (yum!), on the other hand, was accepted under s41(5):

Across the sea in New Zealand, the factual distinctiveness provision (s18(2)) is on the face of it broader than the Australian and European provisions. That provision allows for registration (notwithstanding an objection under eg. s18(1)(b) for lack of distinctiveness) on the basis that the mark has acquired a distinctive character as a result of the use of the mark “or of any other circumstances”.

So, what did you think of when you saw the “four finger” sign? Nestlé’s “two finger” and “four finger” marks were accepted in Australia under s41(6), which tends to suggest that you thought exactly the same thing that I did.