Background – the Chiemsee case and the Boxholm case

On 4 May 1999, the Court of Justice of the European Union delivered its judgment in the Chiemsee case.1 In the Chiemsee case, the primary issue was whether a geographic location could be registered as a trademark. The company “Windsurfing Chiemsee” sold sportswear at Lake Chiemsee in Germany and had registered the name as a figurative mark. Some time later, another company called “Huber” also started to sell sportswear under the mark “Chiemsee”. The main question in the case was weather Windsurfing Chiemsee could stop Huber from the use of “Chiemsee”, even though both of the companies sold goods close to the Chiemsee lake.

Following the Chiemsee case, similar issues have been subject to adjudication on several occasions, not least in the Swedish courts. At the end of last year, the Swedish Patent and Market Court (“PMC”) issued an interesting judgement regarding geographical names as trademarks. The background to the Boxholm case2 is that Arla Foods AB (“Arla”) acquired the company Boxholm Mejeri AB in 2011, whose cheese production was located in Boxholm, a smaller village in Sweden. Boxholm Mejeri AB had, for several decades and to a large extent, produced and sold cheese in Boxholm under the trademarks BOXHOLM, BOXHOLMS and BOXHOLMS OST (eng: BOXHOLMS CHEESE). The trademarks were later registered, after Arla's acquisition. In 2019, Arla moved the production of the cheese to its dairy facility in Östersund, another village in Sweden. About two years later, Glada Bonden Mejeri AB (“The Dairy Farm”) launched cheeses under the trademark ÄKTA BOXHOLMS (eng: REAL/GENUINE BOXHOLMS).

On 3 November 2021, Arla commenced proceedings for trademark infringement and unfair advertising against The Dairy Farm and Tobo Solution AB (“Tobo Solution”). Tobo Solution was owned by one of the representatives of The Diary Farm. Furthermore, Tobo Solution was the owner of the domain name where the products in question had been advertised. In connection therewith, The Dairy Farm and Tobo Solution filed a counterclaim against Arla.

The following issues were addressed in the proceedings:

  • Whether there were grounds for cancellation of Arla's trademarks on the grounds of lack of distinctiveness or because they were liable to mislead the public.
  • Whether The Dairy Farm and Tobo Solution had infringed Arla's trademarks.
  • Whether the marketing of Arla or The Dairy Farm/Tobo Solution was misleading and unfair.

The court’s assessment in the Boxholm case

Are Arla’s trademarks distinctive?

The Dairy Farm and Tobo Solution had asserted that Arla’s trademarks lacked both inherent and acquired distinctiveness (Chapter 1, Sections 4, 5 and 7 of the Swedish Trademarks Act (2010:1877) (the “TA”)), since the presence of the geographical place Boxholm in Arla's trademarks gave rise to certain expectations in relation to the cheese in terms of quality and production.

The PMC assessed the trademarks distinctiveness by considering three criterias: the inherent distinctiveness of the features (inherent distinctiveness), the presence of elements indicating the characteristics of the goods (descriptiveness) and the degree of incorporation. The PMC stated that trademarks containing a geographical indication are not necessarily devoid of distinctive character. There is only a public interest in limiting trademark registration of geographical places if the relevant public perceives it as having a connection with the category of goods concerned, or if such a connection is likely to arise in the future.3

The Dairy Farm and Tobo Solution asserted that cheese from Boxholm was characterised by a specific craft tradition and that the milk had a specific content. However, the PMC concluded that neither the method of production nor the qualities/origin of the milk were perceived by the public as site-specific for the cheese product, and determined that Arla's trademarks had inherent distinctiveness.

In addition, the distinctive character acquired through use was considered. The court conducted an overall assessment, taking into account Arla's market share, the use of the trademarks and the investments made to market the cheese. The PMC considered that cheese production in Boxholm had been carried out by only one dairy for a very long time and that the cheese had been supplied under the trademarks for more than a century. Furthermore, Arla was able to demonstrate extensive marketing and sales with a wide geographical spread. The court found that the incorporation of Boxholm as a sign for cheese had been significant and that Arla's trademarks had, in any event, acquired distinctive character. In conclusion, there were no grounds for the cancellation of Arla's trademarks.

Are Arla’s trademarks misleading?

Following the transfer of production to Östersund, Arla's cheese only had a historical link to Boxholm. The Dairy Farm and Tobo Solution therefore argued that Arla had misled the public (Chapter 3, Section 1, second paragraph, item three of the TA) with regards to geographical origin, place of manufacture, commercial origin, and other characteristics in terms of recipes, ingredients and manufacturing characteristics.

In this regard, the court noted that Arla neither alluded to the fact that the cheese was from Boxholm, nor to a specific recipe, ingredient, or other manufacturing characteristics. As mentioned above, the public did not associate Boxholm with certain characteristics either. Rather, according to the PMC, the use of the sign had resulted in the association between Boxholm and cheese. The relevant public was deemed to perceive Boxholm as a trademark. In summary, the PMD concluded that Arla's trademarks were not liable to mislead the public.

Does ÄKTA BOXHOLMS constitute an infringement of Arla's trademarks?

During the autumn and part of the winter of 2021, The Dairy Farm and Tobo Solution had used the sign ÄKTA BOXHOLMS in their marketing. The issue in the proceedings was whether this constituted a trademark infringement. The court initially examined whether there was an infringement due to a likelihood of confusion (Chapter 1, Section 10, first paragraph, item two of the TA).

Initially, the court found that Arla's trademarks had so-called enhanced distinctiveness and a wide scope of protection and that BOXHOLM was the dominant element in ÄKTA BOXHOLM. Consequently, there was a likelihood of confusion between the trademarks. With regard to the use of the trademark ÄKTA BOXHOLMS in accordance with good business practice (Chapter 1, Section 11, second paragraph of the TA), the court found that the likelihood of confusion was very high, which is why stringent requirements were imposed on how the indication of geographical origin was presented. The mark, which had a very prominent role on the packaging, was very similar to Arla's mark. Furthermore, the expression "ÄKTA" (eng: “real”/”genuine”) was considered to allude to the advantages of The Dairy Farm’s products in relation to Arla's, not a commercial origin. The use was therefore not considered to fulfil the requirement of fair use in relation to Arla's trademarks.

Unfair marketing

The court then examined whether The Dairy Farm and Tobo Solution’s use of the sign ÄKTA BOXHOLMS constituted unfair marketing (The Swedish Marketing Practices Act (2008:486) ("MPA"), Sections 5 and 6). According to Section 10 of the MPA, claims and representations in marketing about one’s own or a third party’s business activities must not be misleading. This applies in particular to representations about one’s own or another trader’s qualifications, trademarks and signs (Section 10, second paragraph 5 of the MPA). As a result of the similarity of the trademarks, it was considered that essentially the same image was created in the mind of the consumer and a likelihood of confusion was deemed to exist. Thus, the use of the trademark was misleading and unfair.

According to Section 14 of the MPA, traders may not use imitations in their marketing which are misleading in that they may be easily confused with the well-known and distinctive products of another trader. The court found that given the long and extensive use of the Arla’s trademarks, the trademarks fulfilled the requirement of distinctiveness and familiarity. Such imitation is considered unfair if it affects or is likely to affect the recipient's ability to make an informed business decision according to Section 8 of the MPA.

The distinctiveness of Arla's trademarks was taken into account when assessing whether the product was famous and distinctive, as the trademarks were so prominent on Arla's product displays. Marketing campaigns where the packaging had been displayed, and the product displays of other cream cheeses were also considered. Overall, the court found that Arla's product paraphernalia was well-known and distinctive, and that there was a likelihood of confusion between Arla's product paraphernalia and that of The Dairy Farm. The court considered several similarities in addition to the trademark; for example, similarities in colour, choice of product name and the fact that both labels had a banner ending on each side with two tabs. However, it should be noted that the similarities in the shape of the cheeses was not taken into account, since those similarities were considered to be functional.

In addition, the court adjudicated whether Arla's marketing was unfair, with regard to origin, quality and other distinctive characteristics (Section 10, second paragraph, item five of the MPA). In light of the court's assessment in relation to distinctiveness, i.e., that the public does not perceive that cheese from Boxholm has special qualities or characteristics, the court did not consider the marketing to be unfair. Furthermore, it was noted that there was a de facto historical link between the town and the trademarks. Finally, Arla had not reinforced the impression that the cheese originated from Boxholm, and therefore the marketing was not deemed to be unfair.

Concluding reflections

The case, despite being a lower instance decision, raises many interesting questions in relation to the Chiemsee judgment. The outcome in terms of its context is interesting: the company that actually had its production in Boxholm was prohibited from using a trademark containing the geographical name in a certain way, while another company was permitted to use the same geographical name as a trademark and in its marketing, despite the fact that the company's production had been moved from Boxholm to Östersund. Furthermore, some legally interesting questions are raised as well.

When assessing the descriptiveness of a trademark in terms of geographical origin, the starting point is whether the public perceives a link between the geographical location and the product. In this case, the court found, with reference to the Chiemsee case, that the public does not perceive that cheese from Boxholm has special qualities or characteristics, and thus there is no public interest in keeping the place available.

In the reasons for the judgment, the PMC analyses whether the cheese from Boxholm was de facto different from other cheeses, i.a., in relation to the method of manufacturing. In the Chiemsee case it was stated however that as regards to the interest in preservation of geographical origin “… it is in the public interest that they remain available, not least because they may be an indication of the quality and other characteristics of the categories of goods concerned, and may also, in various ways, influence consumer tastes by, for instance, associating the goods with a place that may give rise to a favourable response.”4 as well as that the prohibition not only relates to ” …the registration of geographical names as trade marks solely where they designate specified geographical locations which are already famous, or are known for the category of goods concerned, and which are therefore associated with those goods in the mind of the relevant class of persons…”.5

It is conceivable that the above quote entails that the existence of site-specific characteristics is not required for the exception to apply. Moreover, the assessment should be able to comprise aspects other than the actual characteristics of the product, as consumers may associate a place with "positive feelings" for other reasons. In addition, the link, according to the Chiemsee case, seems to relate more to the perception of the link by the relevant public, rather than the actual existence of such characteristics. Whether there are actual site-specific characteristics seems to be of less importance.  

For cheese, wine and agricultural products, the relevant public probably have a general interest in where the products are produced, processed, prepared and where the raw materials in the product come from, regardless of whether it is done in a site-specific way. Accordingly, the mere fact that the cheese is produced in a certain place, or that the milk comes from cows from a certain place, may be of importance to consumers when choosing which product to buy. This should mean that the need for availability is high. Hence, it should be difficult to claim inherent distinctiveness for trademarks consisting of geographical names for such types of products.

The above reasoning could also have been reflected in the assessment of whether Arla's marketing was misleading. Moreover, the issue is how consumers perceive the Arla’s trademarks, especially taking into account that case law states that the average consumer generally reads advertising and marketing in a cursory manner.6 It may be argued that a consumer perceive the cheese as being produced in Boxholm when reading the advertisement in a cursory manner, even though it doesn’t say for example the word “from”, and that this perception has an impact on the consumers choice of cheese. Moreover, the fact that Arla's production previously was allocated in Boxholm may also affect the public's perception of the product's connection to the town and that the connection is more than historical.

The provision on the use of trademarks in accordance with good business practice, to describe the geographical origin of the goods (Chapter 1, Section 11 of the TA), can be explained as a line of defence against the monopolisation of descriptive words or symbols.7 Not surprisingly, the PMC stated that the use of the word "ÄKTA" (eng: real/genuine) precluded the question of fair use. Concepts such as "genuine" suggest that there are other products that are "not genuine", in this case mainly Arla's product. The outcome might therefore have been different if, for example, the term "from" had been used instead, although an overall assessment would of course have been made.8

Finally, the judgment illustrates the importance of a strong trademark, not least from a commercial point of view. The judgment resulted in Arla obtaining exclusive rights to trademarks containing a geographical name where it has no production. In addition, the reinforced distinctive character and the strong scope of protection helped Arla to prevent another company, whose production actually was located in Boxholm, from using the same geographical name in a particular context. The strength of the trademarks also influenced the marketing law assessment. The judgment was never appealed, which of course affects the value thereof as a precedent.