'What do you see?' This is a question most often associated with crystal balls, but it will now be asked by thousands of brand owners across the EU member states, whatever the shape of the goods they produce. On 16 September 2015 the Court of Justice of the European ('CJEU') handed down its preliminary ruling on the registration and validity of shape marks. This followed a referral from the High Court of Justice ('High Court') in the well-publicised case between Société des Produits Nestlé SA ('Nestle') and Cadbury UK Limited ('Cadbury'). This case, which began as a contested trade mark application back in 2010, concerns the Kit Kat, the shape of which Nestle wishes to register in class 30 (which includes chocolate coated wafer biscuits).
Although the specific outcome for Nestle and Cadbury is pending the High Court decision (which is anticipated to be heard in early 2016), this ruling from the CJEU has clear implications for the future of filing and enforcing shape marks more generally. Of foremost significance is the formulation of the test for acquired distinctiveness through use (Article 3(3) of Directive 2008/95 (the 'Trade Mark Directive')). The High Court asked the CJEU whether distinctive character can only be established through (i) reliance on the shape mark alone to identify the goods, or (ii) whether recognition of the mark and association with the goods is sufficient. The CJEU held that the former was the proper construction of the test, immediately raising the threshold for any aspiring shape mark owners out there.
For Nestle, this is good news. Back in 2013 they relied on survey evidence in the High Court which showed that over 90% of respondents mentioned 'Kit Kat' when shown the shape mark on its own. However, even if they are ultimately successful, their Kit Kat will likely be part of a distinguished few confectionary – or other – goods that will be capable of having their shape filed as a mark on this basis. In the class 30 category, others might be Kraft Food's Toblerone or Haribo's Gummy Bears. But for others, the shape alone is unlikely to be distinctive enough for a consumer to identify the goods. Most chocolate bars are just that: rectangular bars!
'Nature of goods' and 'technical result'
The two other key points arising from the CJEU's ruling concern the interpretation of Articles 3(1)(e)(i) and (ii) of the Trade Mark Directive, which state that (i) where a shape derives from the nature of the goods in question, or (ii) that shape is necessary to obtain a technical result, it cannot be validly registered as a trade mark.
The first question sought clarification on the independent operation of these provisions, and the CJEU confirmed that independence. This is helpful for Cadbury since, of the three key features of the Kit Kat shape, one derives from the nature of the products (its rectangular shape) and the two others are necessary to obtain a technical result (the grooves between the fingers, which enable the fingers to be consumed separately; and the number of grooves, which determine the size of the four-fingered bar). The fact that none of those features fulfils both criteria does nothing to lessen the likelihood of invalidity. More broadly, this interpretation dampens the chances of a shape mark ever clearing that hurdle: a key factor in the design of a product is either its nature or its technical result.
The second question probed the issue of functionality further, asking whether the necessity of achieving that 'technical result' which may risk an invalidity challenge applies to the function of the product alone, or also to the manufacturing process. Once again the CJEU interpreted the provisions literally and confirmed that only the function of a product is relevant to this provision. As well as showing strict adherence to the wording of the Trade Mark Directive, this part of the decision emphasises the value placed on the consumer in the debate over shape marks. Arguably, the process by which goods are manufactured is capable of showing greater ingenuity or distinction on the part of their creator than the overall function of the product itself, but it is not something that concerns the consumer when they go to buy their chocolate bar.
For the time being, both Nestle and Cadbury have reason to hope and fear in equal measure. The test for acquired distinctiveness works strongly in Nestle's favour because of the comparative distinctiveness of the Kit Kat's shape, but the interpretation on functionality hands over a lot of the cards to Cadbury. Whilst we await the High Court decision with interest, that crystal ball can only confirm that the future for shape marks puts consumers firmly in the driving seat, and sets the threshold high for shape mark applicants.