A Spoonful of IP (January 2016)

SpoonfulJan2016

January 2016 issue

In this issue:

* No change to the law on “copycat packaging”
* Product shapes as trade marks – Part I
* Product shapes as trade marks – Part II
* Cristal champagne and Cristalino cava
* The importance of “clearing the path” before launching a product

No change to the law on “copycat packaging”

Under The Consumer Protection from Unfair Trading Regulations 2008, businesses are prohibited from marketing products in a manner which creates confusion with any products, trade marks, trade names or other distinguishing marks of a competitor. Specifically, there is a restriction on businesses “promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by that same manufacturer when it is not”.

Crucially, though, the 2008 Regulations are not directly enforceable by a brand owner who alleges that a competitor is engaging in prohibited behaviour. Instead, brand owners must refer such a matter to Trading Standards (or to a designated private enforcer – the only current such body being the consumer organisation Which?). In 2014 the UK Government announced a review of the 2008 Regulations, and invited submissions of evidence in relation to the question of direct enforcement by brand owners.

Following this review, in October 2015 the Government announced that it would not be changing the law in this regard. The Minister said “Following the review, I conclude there is little clear evidence that the use of similar packaging is causing any significant consumer detriment or hindering competition or innovation”.

The 2008 Regulations do not affect the right of a brand owner to commence proceedings for trade mark infringement or passing off. Both those rights of action can, if made out, give powerful protection, including the right to apply for an urgent interim injunction if a likelihood of irreparable harm can be established.

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Product shapes as trade marks – Part I

Shapes of products and their packaging can, in principle, be registered as trade marks. The rules for shape marks are more restrictive than for more traditional marks, however, and a shape cannot be registered “if it consists exclusively of (a) the shape which results from the nature of the goods themselves; (b) the shape of goods which is necessary to obtain a technical result; or (c) the shape which gives substantial value to the goods”.

Nestlé filed an application with the UK IPO for registration of the three-dimensional sign shown below. The sign has been used, together with the ‘Kit Kat’ mark embossed on each finger, since 1935. Cadbury opposed the application and, following an appeal, the High Court considered the application and opposition. In 2014, the High Court decided to refer three questions to the Court of Justice of the European Union, and the answers to those questions have now been provided. The answer to the first question will be discussed in Part 2 of this newsletter, and we discuss here the second and third questions.

KitKat

The guidance provided by the CJEU is as follows:

    • If a shape can be broken down into a series of individual features, one or more of the grounds (a)-(c) set out above must be applicable to each feature in order for the shape to be unregisterable. It is therefore not sufficient for an opponent to an application concerning a shape with, say, three features to show that ground (a) applies to feature 1 and ground (b) but not ground (a) applies to features 2 and 3.

    • Ground (b) – registration must be refused where the particular shape is necessary to obtain a technical result – relates only to the manner in which the goods function, not the manner in which they were manufactured. Accordingly, if a shape results from a particular manufacturing method, that of itself is not a sufficient reason for registration to be denied.

Each of the above, therefore, is favourable from the point of view of an applicant for a registration of a shape mark. Indeed, when the matter was returned to the High Court, Cadbury conceded that Nestlé’s application could not be opposed on any of grounds (a)-(c) above, although (as we explain in the next article) the application was refused on a different ground, namely lack of distinctive character.

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Product shapes as trade marks – Part II

The High Court in the Nestlé case also sought guidance from the CJEU as to whether, where a shape mark (the Kit Kat bar itself) is used in conjunction with other marks (in this case the name “Kit Kat”):

    • is it sufficient for the applicant to show that the public recognises the shape mark and associates it with the applicant’s goods; or

    • must the applicant go further and show that the public relies on the shape mark (as opposed to any other trade marks which may also be present) as an indicator of origin?

As is common practice in dealing with referrals from national courts, the CJEU reformulated the question, and gave the following guidance:

    the trade mark applicant must prove that the relevant class of persons perceive the goods or services designated exclusively by the mark applied for, as opposed to any other mark which might also be present, as originating from a particular company.

On return to the High Court, the judge decided that, in answering a reformulated question, the CJEU had not answered the question he had asked. Following a detailed linguistic analysis, he concluded that the CJEU had rejected the position summarised in the first bullet point above, and decided that, properly construed, the CJEU in fact had adopted the position summarised in the second bullet point above. Applying that to the specific facts, he held that Nestlé had not established that the public relies on the shape of the Kit Kat bar as an indicator of origin. He therefore rejected Nestlé’s application for a registered trade mark.

The approach taken by the judge is unusual (we are not aware of a previous IP case where the court has analysed the background to a CJEU decision in this manner), and we would not be surprised if Nestlé files an appeal. It may therefore be some time before the position regarding assessment of distinctiveness of shape marks can be stated with certainty.

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Cristal champagne and Cristalino cava

The High Court, in the case of Roederer v J Garcia Carrion S.A., held that the Defendant’s budget brand of cava, CRISTALINO, infringed Roederer’s trade mark CRISTAL, registered for champagne. The decision, which can be viewed as “brand-friendly”, raises a number of interesting issues as follows.

• Although UK sales of Cristal are small – around 40,000 bottles per year – and constitute a minute proportion of the sparkling wine (or even the champagne) market, it was held that the CRISTAL mark has a reputation in the UK. However, it was apparent that this reputation is not a result of personal experience of members of the public. Roederer relied in part on survey evidence showing that 14% of respondents, on seeing the simple word CRISTAL and without any prompting, recognised it as a brand of champagne. The judge pointed out that it was unlikely that many, if any, survey respondents had actually purchased or tasted Cristal champagne – unsurprising given that it retails for at least £175 per bottle. Instead, the reputation amongst the public is almost entirely attributable to media coverage and perceptions from popular culture such as hiphop.

• The judge found a likelihood of confusion between CRISTAL and CRISTALINO, but of more interest are the decisions in respect of whether use of CRISTALINO is detrimental to the distinctive character of the CRISTAL mark (“dilution”), whether it is detrimental to the mark’s repute (“tarnishment”), or whether it takes unfair advantage of the distinctive character or the repute of the mark (“free-riding”).

• With regard to dilution, the judge noted that the allure of the CRISTAL mark is not merely the champagne’s quality, but its perceived link with celebrity lifestyles. Accordingly, use of a similar name in connection with a cheap sparkling wine is likely to damage such prestige, leading ultimately to a reduction in sales.

• The judge made no finding of a likelihood of tarnishment. She noted that there was no criticism of the quality of the defendant’s cava and was not prepared to hold that tarnishment is made out merely by using a sign on a product which is a cheaper and more ordinary than the product to which the mark is attached.

• Finally, on free-riding the judge held that on the evidence members of the public had made an association between CRISTALINO and CRISTAL, with the result that Cristalino was seen by some as a “poor man’s Cristal”. She further held that there was a change of behaviour on the part of cava buyers in choosing CRISTALINO cava because of its “quasi-association” with the CRISTAL brand.

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The importance of “clearing the path” before launching a product

2015 saw a flurry of litigation in the English courts concerning the painkiller pregabalin. Although most of the issues in that litigation relate to technical patent infringement matters, one issue raised is of wider importance and is relevant to the retail sector.

It has been established law for many years that is incumbent on a party seeking to introduce a new pharmaceutical product to ensure that patent infringement issues are dealt with prior to launch. Failure to take such action (which is often referred to as “clearing the path”) can provide an argument in favour of an interim injunction being granted. That is so even if there are good arguments that the patent is invalid and/or not infringed. In fact, in the pregabalin litigation the patent in question had already been declared by the Court to be invalidly granted. An appeal of that decision was pending, however, and the judge granted an interim injunction, noting that it would have been open to the defendant to seek a declaration of non-infringement. Its failure to do so counted against it when considering whether to grant interim relief.

The same principle can be equally applicable outside the pharmaceutical sector. Interim injunctions can potentially be obtained wherever there is a likelihood of irreparable harm arising from an alleged infringement. For example, this could occur in the retail sector where the reputation of a brand could be affected, or a price decrease forced on the brand owner. In deciding whether to grant an interim injunction, the court must carry out a balancing exercise between the irreparable likely to be suffered by the defendant if the injunction is granted, and that suffered by the brand owner if it is not granted.

In many cases, there is a fine balance insofar as both parties can demonstrate that they will suffer irreparable damage if the wrong decision is made at the interim stage. The courts, though, would be likely to take a dim view of a business that launched a product, with knowledge of a potential infringement issue, without first dealing with that issue. Such a course of action could easily tip the balance in favour of an interim injunction being granted, as it did in the pregabalin action.

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Photograph of spoon and limes: “Sabre All Color flatware” by Didriks used under CC BY. Brightness/contrast modified from original.