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Commercial Question

What's it all about, Nestlé? The Kitkat fight is over for now

updated on 25 September 2018

Question

Following the Court of Justice of the European Union’s ruling that the Kitkat bar is not distinctive enough to trademark, where next for the IP wars between confectionary giants Nestlé and Mondelez?

Answer

It seems unlikely that Nestlé knew, when the industry giant filed a trade mark application with the European Intellectual Property Office (EUIPO) in early 2002, that this particular application would be the subject of a worldwide media sensation. Yet, in the intervening 16 years, countless pages, columns and forums have been filled with commentary on this mammoth battle involving the EUIPO, Nestlé and its fierce 'intervening' rival, Mondelez (previously Cadbury).

The decision of the Court of Justice of the European Union (CJEU) released in July 2018 has been reported by many major news outlets. It looks as though, as a result of the decision, Nestlé will lose its three-dimensional trademark for its four-finger bar (commonly known as a KitKat bar). The registration has been a topic of debate for journalists, lawyers and consumers alike over many years.

So why read on? This article aims to address some of the questions puzzling UK consumers and reporters in relation to the registration – "why does Cadbury care about the mark?", "what does the decision mean for Nestlé?" and "does that mean they'll stop making KitKat bars?" (with regard to the last question – no, it does not; this one is too important to be left in suspense). The article also aims to provide some other insights and tips not covered in the general discussions.

A whole lot of history

Back in March 2002, Nestlé filed an application with the EUIPO seeking registration of the three-dimensional sign (the Four Finger Mark) as a trademark, in respect of "chocolate, chocolate products, confectionery, candy" as well as "sweets, bakery products, pastries, biscuits, cakes, waffles" in class 30.

Nestlé was unable to convince the EUIPO to accept its application for "chocolate, chocolate products, confectionery, candy" (which some would argue are the core elements of Nestlé's KitKat-branded offering) and, as Nestlé decided not to appeal the EUIPO's decision any further, Nestlé was granted a registered European trade mark protecting the Four Finger Mark for the other goods in class 30 on 28 July 2006.

However, less than a year later, on 23 March 2007, Cadbury (now Mondelez) sought a declaration of invalidity of the European registration on a number of grounds. The most relevant of the various grounds for the CJEU's recent decision is that Cadbury argued, for several reasons, that the Four Finger Mark was “devoid of distinctive character” and therefore the registration should be invalidated and removed from the European trademark register.

This was, in fact, the same reason why the EUIPO would not allow Nestlé's proposed registration in respect of "chocolate, chocolate products, confectionery, candy", as the EUIPO examiner considered that the Four Finger Mark lacked distinctive character in respect of such goods. Cadbury argued that this ground applied equally to the remaining goods for which the application had proceeded to registration.

In January 2011, the EUIPO's cancellation division agreed with Cadbury, and declared that the Four Finger Mark registration was invalid.

Nestlé appealed the decision to the second board of appeal (BOA). After undertaking its assessment, in December 2012 the BOA held that, although the Four Finger Mark was devoid of inherent distinctive character in relation to the remaining goods, Nestlé had shown that, through its use of the sign, the Four Finger Mark had acquired distinctive character. It annulled the cancellation division's decision, finding in Nestlé's favour.

Dissatisfied with this result, in February 2013 Mondelez (as Cadbury had become) appealed to the General Court (GC), seeking that the decision of the BOA be annulled.

The GC reviewed the decision and found in Mondelez's favour. Annulling the BOA's decision, it ruled that:

  • the BOA had made a mistake in law to conclude that to prove acquired distinctive character throughout the European Union (EU), it was sufficient to show that a substantial proportion of the relevant public – merging all the member states and regions – perceived a mark as an indication of commercial origin, and that it was not necessary to prove distinctive character in each member state of the EU; and
  • although the BOA had clearly examined the supporting evidence and explained its findings that Nestlé had established that the Four Finger Mark had acquired distinctive character in France, Italy, Spain, Germany, the Netherlands, Denmark, Sweden, Finland, Austria and the UK, the BOA had not answered the question of whether it had acquired distinctive character in Belgium, Ireland, Greece and Portugal, and had failed to analyse the evidence put forward by Nestlé in relation to those member states.

Still with us?

Neither Nestlé nor Mondelez were happy with the GC's judgment and, early in February 2017 (almost 15 years after Nestlé's original application), both parties appealed. Mondelez's arguments on appeal were found to be inadmissible, so the remainder of this section covers Nestlé's appeal grounds.

Nestlé argued that the GC:

  • had misinterpreted European trademark law when it held that acquisition of distinctive character must be proved throughout the EU – and not just a substantial part or the majority of the EU – and that, consequently, distinctive character cannot be found where evidence fails to cover even an insubstantial part of the European Union (even just one Member State); and
  • was wrong to hold that the BOA erred in law as set out above, and therefore that the BOA had wrongly decided that the Four Finger Mark had acquired distinctive character through use without coming to a conclusion on consumer perception in Belgium, Ireland, Greece and Portugal.

What did the court say?

Unfortunately for Nestlé, the CJEU has endorsed the GC's decision, ruling that "a sign must have distinctive character, inherent or acquired through use, throughout the European Union" in order for it to be accepted for registration as a trademark.

The decision makes clear that "throughout the European Union" means precisely that – a mark must not be registered if it is devoid of distinctive character in any part of the EU, no matter how small that part may be.

As the BOA failed to state whether the Four Finger Mark had acquired distinctive character in Belgium, Ireland, Greece and Portugal, the CJEU endorsed the GC's decision and dismissed Nestlé's appeals.

Therefore, it looks as though this Four Finger Mark fight is over, and Nestlé's European trade mark in respect of the Four Finger Mark will be removed from the trademark register.

Where do we go now?

Looking forward, the CJEU has provided some practical guidance on what this might mean in terms of the evidence required from future European trademark applicants (which might include Nestlé).

Evidence is required where a sign lacks inherent distinctive character

Distinctive character in a sign may be inherent or acquired. Evidence will not be required where the EUIPO determines there to be inherent distinctiveness. Therefore, it could be possible for a sign to become registered even where the applicant only provides evidence for part of the EU, as long as it is able to prove that the sign has acquired distinctive character in those places that it lacks inherent distinctiveness.

This may occur where the sign is descriptive in one language, e.g. Romanian, and the EUIPO may only seek evidence of acquired distinctiveness in Member States which speak that language.

However, if the EUIPO considers the sign to lack inherent distinctiveness completely in all member states, the applicant must rely on acquired distinctive character and faces a greater evidential burden to prove it.

Evidence must deal with all member states, not merely a significant part of the EU

The CJEU confirmed that at least some evidence must be directed toward the recognition by consumers of the sign in each and every member state to demonstrate acquired distinctive character, despite arguments by Nestlé and the EUIPO that it would be 'unreasonable'.

While this may require more evidence where a sign lacks inherent distinctive character in all member states, the CJEU confirmed that it is not simply sufficient to prove that a sign has acquired distinctive character through use in a "significant part" of the EU where such evidence does not cover every member state.

Separate evidence may not be needed for each individual member state

The CJEU hypothesised that, for certain goods or services, it may be that businesses group several member states together in the same distribution network or treat multiple member states as if they were one market (eg, for marketing strategy). It may also be possible to demonstrate that consumers of one member state have sufficient knowledge of products and services available in other member states due to geographic, cultural or linguistic proximity.

The CJEU therefore conceded that it was "not inconceivable that the evidence provided… is relevant with regard to several member states, or even the whole of the European Union", meaning that the evidence submitted by an applicant can address groups of member states, or even all of the EU, without requiring separate submissions for each member state. Whether the whole of the EU has been adequately addressed will be a matter for EUIPO assessment and must be stated in its justification for registration of the sign.

What does this mean?

Nestlé will lose its European trademark registration after more than 16 years of battling with the EUIPO and Cadbury/Mondelez. However, the ruling is likely to prove a bittersweet 'victory' for Mondelez; although it succeeded in securing invalidation of the Four Finger Mark's registration, it will likely have wasted significant costs (which cannot be recovered, according to the CJEU) appealing grounds that were found to be inadmissible.

Fear not – the CJEU decision does not toll the bell signalling the end of production for four-finger KitKat chocolate bars. Indeed, we would not be surprised to see concerted efforts by Nestlé to boost production and marketing in certain member states, in support of any potential future application.

While it appears this battle is over, the war between the confectionary goliaths continues. Nestlé and Cadbury/Mondelez are currently engaged in other proceedings all over the world, including in the UK and Europe, so this will not be the last that we hear about Nestlé's attempts to protect the 'iconic' KitKat.

Patrick Cantrill, Rose Smalley and Amy Galloway are respectively partner, associate and chartered trademark attorney in the intellectual property team at Womble Bond Dickinson