In a judgment handed down on 25 July 2018 (Joined Cases C‑84/17 P, C‑85/17 P and C‑95/17 P), the Court of Justice of the European Union (“CJEU”) provided clarity regarding the question of acquired distinctiveness of shape marks. In its decision, the CJEU confirmed the previous decision of the European General Court (“EGC”) and stated that the Second Board of Appeal of the European Union Intellectual Property Office (“EUIPO”) was wrong in finding that Société des produits Nestlé SA (“Nestlé”) had shown acquired distinctiveness through use “throughout the European Union” of its four-fingered “KitKat” bar by providing evidence for 10 out of (at that time) 15 EU member states, without adjudicating on whether that mark had acquired such distinctive character in the remaining ones. Now the ball is back in the court of the EUIPO, which has to re-assess the evidence.
This dispute dates back to 2007, when Cadbury Schweppes plc (subsequently Cadbury Holdings, now Mondelēz) filed an application before the EUIPO for a declaration of invalidity in respect of the three-dimensional European Union trade mark (EUTM) of Nestlé for, among others, sweets and biscuits in class 30, claiming that the mark at issue was devoid of inherent distinctiveness. In 2011, the Cancellation Division upheld that application and declared the mark at issue invalid. On appeal by Nestlé, the Second Board of Appeal annulled the decision of the Cancellation Division. It considered that, although the mark at issue was, indeed, devoid of any inherent distinctive character for the registered goods, Nestlé had shown that the mark had acquired distinctive character through use.
Mondelēz brought an action seeking the annulment of the decision at issue and in 2016, the EGC annulled the decision of the Board of Appeal in its entirety. It found that the Board of Appeal's assessment of the mark at issue’s distinctive character acquired through use had not been carried out properly, since it had not taken into account the perception of that mark by the relevant public in Belgium, Greece, Ireland and Portugal and had failed to analyse the evidence put forward by Nestlé with regard to those member states.
Both parties, as well as the EUIPO, appealed the ruling of the EGC and the CJEU rejected all three appeals on different grounds. Mondelēz's appeal was found inadmissible, since Mondelēz had won before the EGC. Mondelēz’s appeal was not directed against the operative part of the judgment of the EGC, but only against the reasoning. Only those grounds which constitute the necessary support of the judgment's operative part become "res judicata", so that Mondelēz will be able to submit the same arguments even if they were previously dismissed by the EGC. The appeals by Nestlé and the EUIPO were dismissed as unfounded.
The CJEU first admitted that according to the judgment in Chocoladenfabriken Lindt & Sprüngli (C-98/11 P) invoked by Nestlé and the EUIPO, it would be unreasonable to require proof of the acquisition by a mark of distinctive character through use for each individual member state. However, it made clear that this does not mean that it is sufficient to prove acquired distinctive character through use in a significant part of the EU. According to the CJEU, there is a distinction between first, the facts to be proven (namely the acquisition of distinctive character through use) and, second, the means of proving such facts.
Further, the CJEU ruled that it is not required that the acquisition of distinctive character through use be established by separate evidence in each individual member state. It might in fact be conceivable that the evidence covers several member states (for example, when several member states are grouped in the same distribution network and treated as if they were one and the same national market, or when, due to a geographic, cultural or linguistic proximity between two member states, the relevant public of the first has a sufficient knowledge of the products and services that are present on the national market of the second), or even the entire EU.
In sum, although it is not necessary that evidence of the acquisition by that mark of distinctive character through use be submitted in respect of each individual member state, the evidence submitted must be capable of establishing such acquisition throughout the member states of the EU. Given that the question of whether the evidence submitted is sufficient to prove acquisition through use is a matter of the assessment of evidence, it is now for the EUIPO to decide whether Nestlé has succeeded to do so with respect to its "4 Finger KitKat" throughout the EU.
The CJEU has taken a literal approach to the law, recalling that EUTMs have “unitary character” throughout the EU, requiring distinctiveness to be proven everywhere where it is absent. This strict approach to the acquisition of rights in the first place is in stark contrast to the more flexible approach for enforcement and maintenance of EUTMs, where “unitary character” does not mean the same level of protection or require use in every member state of the EU. Nestlé and the EUIPO had sought to rely on that more flexible approach.
In an EU of 28 (or soon to be 27) member states, it is extremely difficult for even the biggest businesses to be able to obtain EU-wide trade mark protection for inherently non-distinctive marks such as shapes, colours and other non-traditional trade marks, and potentially even for certain inherently non-distinctive word or figurative marks. Whilst the CJEU has ruled that evidence need not be provided on a country-by-country basis, in practice that is what will be required in most cases. The ruling may also make other (already registered) EUTMs vulnerable to cancellation where acquired distinctiveness is not demonstrated, directly or indirectly, even for a single member state.