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KitKat trademark battle: Nestlé v Cadbury

Free-marketeers will be encouraged by the CJEU decision, others will say that the bar is too high for protection
Last week, Nestlé suffered a near terminal blow in its unrelenting attempt to register the four-fingered KitKat bar as a UK trademark. The High Court closed the door even though KitKat is one of the world’s best-known and best-selling chocolate bars.

Why have Nestlé tried so hard to get the trademark? Because registered trademarks provide brand owners such as Nestlé with a monopoly right and provide consumers with a guarantee of trade origin. This right can be used to prevent others (especially competitors such as Cadbury) from using a sign that is identical to or confusingly similar to the mark. Trademarks are a vital tool in the armoury of any brand owner when it comes to protecting market share, stamping out copycats and counterfeits and safeguarding brand equity.

In most jurisdictions, trademarks can only be registered either if a) they are “inherently distinctive” or b) have “acquired a distinctive character” by virtue of the way it has been used. When assessing whether a trademark has jumped over either of these hurdles, trademark registries have to strike a cautious balance between allowing a brand to benefit from protection and stifling competition.

When it comes to establishing “acquired distinctiveness”, the CJEU last year said that a trademark owner must prove that, due to the use of that mark alone, a significant proportion of the relevant consumer perceives the goods as originating from the trademark owner. In essence, that rather strict test has made it more difficult for companies to obtain monopolies over shapes. To do so, they would have to promote the product as a shape in its own right, probably stripping it of all other branding that may tell consumers where the product originates.

The case is particularly relevant for the food and drink sector, where brand owners often rely on distinctive shapes (bottles, packaging, containers etc) to make themselves stand out from the crowd. The answer is not straightforward but it boils down to investment and embedding the notion that a shape alone is an indicator of trade origin. In that sense, it is difficult to think of many things more recognisable than a KitKat bar.

While free-marketeers will be encouraged by the decision, others will say that the CJEU has set the bar too high in terms of what a brand owner has to do to benefit from trademark protection for shapes.

Nestlé has said that it will seek permission to appeal. While there are no guarantees that it will obtain such permission, we have probably not seen the end of this saga. While there is still scope for the concerns of brand protectionists to be addressed, the CJEU and the English court in this case (and in another recent case involving an unsuccessful attempt to retain the registration of the shape of the London taxi) are making the task more challenging than ever.

Source: - 28 January 2016