KitKat Snapped - UK Court of Appeal Rejects KitKat Trademark

Having discussed the KitKat chocolate bar saga near ad nauseum, this writer was content that things might've just settled down and the matter finished its course through the courts. To my chagrin, this was not correct, and the fight over everyone's favorite four-fingered chocolate bar rages on. After a spell in the EU courts (discussed here and here), the matter moved on to ultimate determination in the UK courts (here), with the latest decision appealed to the Court of Appeal. Will Nestle be successful on their appeal after a slew of losses?

As a basic primer for the case, Societe Des Produits Nestle SA v Cadbury UK Ltd concerned the application to register the shape of the KitKat chocolate bar made by Nestle (TM 2552692), which comprised of a four-fingered bar with no markings on the surface (although commonly includes the KitKat logo on each finger). Cadbury opposed the application, and since the opposition proceedings the case has bounced between the UK and EU courts, having been decided on by the CJEU and applied by Justice Arnold in the High Court. The matter was then appealed to the Court of Appeal.

The Court's decision concerned acquired distinctiveness, which was extensively discussed in both the CJEU and the High Court, and in particular, whether the mark can have acquired distinctiveness in the absence or in the presence of an already registered trademark (i.e. the embossed KitKat logo on the fingers, but not the registration). Lord Justice Kitchin noted that, even if a three-dimensional shape is sold in conjunction with another registered trademark does not mean that the shape in itself will acquired distinctiveness, or, in other words "..[consumers] might simply regard the shape as a characteristic of products of that kind or they might find it brings to mind the product and brand name with which they have become familiar".

Lord Justice Kitchin then moved on to applying the test for acquired distinctiveness to the sign at hand, which looks at "...whether the applicant has proved that a significant proportion of 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 undertaking", i.e. the shape acts, by itself, as the badge of origin.

With bloodlust in his eyes, Conker devoured his KitKat

What remains important is the consumers' perception of the mark (seeing it and knowing where the product comes from) and reliance on the same when purchasing the product. As discussed above, Lord Justice Kitchin concluded that the main test to resolve the question above would be "...whether [a] person would rely upon the sign as denoting the origin of the goods or services if it were used on its own". This would have to be evidenced somehow, for example, through surveys. The difficulty is in showing, through evidence, the distinction of reliance on the other mark (e.g. the KitKat logo) or on the shape of the chocolate bar. Mere association of the latter with the former is not enough.

The Court didn't disagree with the initial hearing officer in their decision, as Nestle had failed to establish acquired distinctiveness, since there was no evidence that the shape of the product had featured in promotional and advertising material, that it has it never been sold in opaque packaging, or had been featured on the packaging itself (bar for a short time). Survey evidence was also inconclusive on the recognition and reliance on the shape as an indicator of a KitKat product specifically, even though identified by many by the brand.

Although the EU General Court (discussed more here) and CJEU (discussed here) decisions shed some doubts over the need for 'reliance' on the mark (allowing for it to be used in conjunction with other marks and still be distinctive), Lord Justice Kitchin rejected this argument quite straightforwardly. In his mind, the decisions simply reiterated the requirement above on perception and reliance by consumers, and while reliance is not a requirement under the CJEU decision (discussed more here), it still remains an important consideration.Reliance demonstrates that a non-distinctive mark has become distinctive in its own right.

The Court of Appeal therefore was satisfied that the mark had not acquired distinctiveness and dismissed the appeal.

The case is a big blow for Nestle, and it'll be interesting to see whether they appeal the decision further to the Supreme Court. With a CJEU decision and a strong affirmation of the same by the Court of Appeal, success on appeal would seem unlikely, and permission would probably not be granted; however, the brand and the chocolate bar itself is hugely valuable and is potentially worth fighting for. The decision also highlights the importance of reliance on a mark, even if it's not required by EU legislation. Companies should heed the need to use a shape to actively market their goods, should it be something they want to defend, and simply not assume that association with another brand will bring in distinctiveness.

Source: BBC

A Lack of Patent Exhaustion - Discussing the Lexmark Case Ahead of US Supreme Court Hearing

Many IP rights give their owners a great deal or rights and capabilities to restrict the use of their rights by other parties, and arguably, rightfully so, as the creation is indeed theirs. Even though this might be the case at face value, the use and exploitation of those rights should still have certain limitations, for example, from preventing an author from allowing certain people from reading their book after they have purchased a copy. This doctrine is called the exhaustion of rights, which means that after a certain point, the rights held by the author or owner of a technology cease to apply, allowing for the party to use their products as they please. Exhaustion of rights is still a developing area of law, and an up-coming case in the US Supreme Court has been primed to tackle this in relation to patents, with the case having ramifications both ways irrespective of the decision. Looking ahead to the decision, it is important to discuss the Court of Appeal case decided over a year ago.

The case of Lexmark International Inc. v Impression Products Inc. dealt with the sale of refilled ink cartridges for computer printers by Impression, who purchased used cartridges from abroad to refill and resell in the US (having a third-party circumvent the protection mechanism preventing reuse in the cartridges). Lexmark holds patents in relation to these cartridges, and most of the cartridges had strict single-use/resale restrictions set by Lexmark both in the US and abroad. Impression had not sought permission to resell the cartridges in the US, and Lexmark subsequently took the company to court for patent infringement.

Under 35 USC section 271, only the patent holder is authorized to sell and import patented inventions in the US. Impression argued that the rights (undisputed to be valid and enforceable) had been exhausted after the first sale of the cartridges to the original consumer, and therefore their resale and importation would not be an infringement of the rights.  The Court disagreed, and saw that "...a patentee may preserve its § 271 rights when itself selling a patented article, through clearly communicated, otherwise-lawful restrictions, as it may do when contracting out the manufacturing and sale". This would therefore allow Lexmark to assert its rights post-sale as per the stickers on the cartridges.

The Court focussed on the aspect of the provision that restricts the sale of the patented 'without authorization', as the lack authorization of resale through the sticker clearly leaves the buyer without rights. Conversely, the sale of an article without the reservation of rights would, arguably, have the right to resale the item. It all comes down to the language used during the sale process. The Court summarized their position, where "...[a] sale made under a clearly communicated, otherwise-lawful restriction as to post-sale use or resale does not confer on the buyer and a subsequent purchaser the "authority" to engage in the use or resale that the restriction precludes", following the decision in Mallinckrodt Inc. v Medipart, Inc.. This means that the patent owning party would retain the rights in the item if expressly and clearly communicated at the time of purchase, provided that no law or policy is violated through the retention of rights.



Patent exhaustion is a real plight! (Source: Good Little Robot)

The legislative position is not any different, according to the Court, from the common law position as set out in Kirtsaeng v John Wiley & Sons (discussed more here), which restricted the rights in items that have been sold (albeit in relation to copyright and not patent rights). The ultimate seller of patent rights can retain some rights in the sold items, which differs from copyright that does not offer the same varying set of rights.

The second question the Court had to grapple with was whether the sale of the items abroad conferred any authority to Impression to import the cartridges to the US and sell them there. Ultimately, following the Jazz Photo Corp. v International Trade Commission case, the Court determined that no legal rule to this effect existed. For there to be an ability to do so, Impression would have to have a licence, implied or direct, to do so, which in the case they did not have. Similarly to the above, the decision in Kirtsaeng does not apply in this instance either (where copyright protected works were bought abroad and imported for sale in the US), as the law in copyright affords an equivocal right to resell the items, which patent legislation does not give.

Ultimately, Impression's case failed and the Court found that they had indeed infringed Lexmark's rights.

Both Judge Dyk and Hughes dissented from the judgment, raising opposing views on both the applicability of Mallinckrodt and Jazz Photo.

In their view, in relation to the first argument of patent exhaustion, the decision in Quanta Computer Inc. v LG Electronics Inc. applies, which sets out that "...the initial authorized sale of a patented item terminates all patent rights to that item". The moment the item involving the patent has been sold with authorization, all rights in the patented aspect cease to apply, even in relation to resale. Additionally, in relation to the second argument, once the item was sold abroad (with no restrictions as to US patent rights), the rights in the patent works are exhausted. This is even more poignant, according to the judges, due to the sale by the patent rightsholder, and not a mere licensee.

The case, once decided by the Supreme Court, could potentially have huge implications to the sale and resale of goods incorporation patent rights in the US. Should the Supreme Court side with Lexmark, it could cause a huge cooling on the resale of products in the US, and an upswing on the incorporation of stricter sale terms in relation to patent rights in any given goods. This could cause prices to rise and items to be less readily available to consumers. On the opposite side, should the Supreme Court agree with Impression, patent rights could be hugely devalued in the US, especially when it comes to the sale of goods at first instance. This could mean higher up-front costs to protect against the loss on resales, but also release a whole swathe of second-hand markets for patent goods, particularly from abroad should the rights have been exhausted. No matter which way the case goes, it will be very important to both consumers and patentees alike, and shape the future of patent exhaustion for years to come.

Source: Gizmodo

Get a Grip - CJEU Decides on 'Hybrid' EUTMs With Technical and Decorative Features

The registration of trademarks can be quite finicky, especially when it comes to the nuance of graphical representation and what it covers (the Trunki case being a poignant reminder in the UK of the same in registered designs). One has to distinguish between the decorative and functional or technical features of the registration, without which your mark could be under threat for invalidity. After a lengthy battle in the EUIPO, spanning nearly 20 years, a case dealing with the same subject matter has faced its ultimate decision in the CJEU.

The case of Yoshida Metal Industry Co. Ltd v EUIPO dealt with the registration of a trademarks for the design of a knife handle by Yoshida (marks 1371244 and 1372580), which comprised of a metal handle with black dots in the handle (signifying circular indents in the metal). The marks were ultimately registered by the EUIPO; however, the decision was challenged by Pi-Design AG and Bodum. Having lost at the Board of Appeal and the General Court, Yoshida finally appealed to the CJEU.

Yoshida's arguments hinged only on the infringement of Articles 7(1)(e)(ii) and 51(3) of the Community Trade Mark Regulation.

Under Article 7(1)(e)(ii), a trademark cannot be registered if "signs which consist exclusively of… the shape of goods which is necessary to obtain a technical result". Case law, particularly in the LEGO decision, has noted that a shape cannot be rejected solely on the ground that it has functional characteristics. The dots used in the handles were, according to Yoshida, a hybrid mark, having both aesthetic and functional characteristics, therefore remaining registrable under Article 7.

The CJEU considered that, in adopting the wording used in Article 7 above, the exclusion of marks solely on their technical result or nature would be contrary to the law's intention, and clearly intends for marks that only incorporate the technical result and no aesthetic component to be unregistrable. Similarly, the introduction of one or more minor arbitrary elements in a sign, all of whose essential characteristics are dictated by the technical solution to which that sign gives effect, won't alter the conclusion that the sign would only achieve a technical result. Even so, a mark can still be registered if the sign incorporates major non-technical elements that play an important role in the shape of the sign.

Some sharp wit

The Court determined that "...the fact that the sign concerned has ornamental and fanciful aspects does not preclude the ground for refusal under Article 7(1)(e)(ii)... from applying, in so far as those aspects do not play an important role in the shape of goods at issue, all the essential characteristics of which must perform a technical function". In short, even if the sign has ornamental aspects along with the major technical features, it can still be rejected. This follows the decision by the General Court, who saw that Article 7(1)(e)(ii) applies where all the essential characteristics of the sign perform a technical function. The CJEU therefore rejected Yoshida's appeal under Article 7.

The second argument on appeal was under Article 51(3), which excludes particular goods and services applied for only if the invalidity grounds apply to those goods and/or services exclusively. Yoshida argued that the General Court had failed to consider Article 7 as above for all of the goods and services in question (particularly in relation to those that lacked handles, i.e. whetstones, and kitchen utensils and containers).

The Court swiftly despatched this argument, as Yoshida had neglected to bring the argument forward earlier during the proceedings, particularly at the stage when the consideration over the relevant goods were made. They had only limited themselves to the above argument under Article 7, ignoring Article 51 entirely. The CJEU therefore rejected the second argument simply for a lack of raising it at the General Court, barring them from arguing it at the CJEU.

The case brought up a very interesting argument, albeit a flawed one when looking at the wording of the Regulation. The CJEU's decision make sense, since, if Yoshida's argument were allowed, the introduction of any non-technical features to a sign could then avoid the limitation of registering those types of features. As long as the important parts of the sign registered for are the ones that create the technical feature, the mark should not be registered. This writer is sure that both Yoshida and Bodum are happy the case is over, even if the decision didn't swing their way.

Plainly Winning - Australia Wins Plain Packaging Challenge at the WTO

Plain packaging seems to be a nigh inevitability in the current legislative climate, especially with countries pushing for stricter laws surrounding cigarettes and their marketing. This blog has discussed the challenge against the Australian Tobacco Plain Packaging Act 2011 in the WTO and in Asia (discussed here and here) by a number of countries, but the conclusion of those disputes has been coming for some years now. While similar initiatives have been introduced in a number of countries, including the UK, the disputes seem to have put a damper on those efforts, if nothing at least for the duration of the cases.

The WTO dispute (including others made by other nations) concerns the TPP Act 2011, which introduced measures to standardize tobacco product packaging, including changing the color to a boring olive green, and prominently displaying graphic warning labels. The arguments presented against the legislation were that it presents a technical barrier to trade under the Agreement on Technical Barriers to Trade (Articles 2.1 and 2.2), and infringing various provisions under the TRIPS Agreement, for example giving other Member countries more or less favorable treatment (Article 3.1) or creating an obstacle for the registration of a trademark due to the nature of the goods it is used for (Article 15.4). Finally, the Act allegedly gives imported products less favorable treatment under The General Agreement on Tariffs and Trade (Article 3.4).

As discussed above, while the judgment hasn't been released yet, sources at the WTO have claimed that the WTO has sided with the Australian government's argument on the measure qualifying as a legitimate public health measure. The restriction of branding, therefore, does not infringe the above Agreements, and is appropriate for the aim sought by the legislation.

The details of the case will be discussed more when the decision is released in July, but it still remains an important signpost in the development of plain packaging legislation worldwide.

Without a doubt, the tobacco companies and the relevant countries will appeal the decision, as has been indicated by British American Tobacco.

'Quitting clearly had no benefits', Alan thought

According to the WTO, a barrier to trade would amount to, for example, any methods that would give domestically produced goods an unfair advantage. Additionally, countries have the prerogative to "...adopt the standards they consider appropriate — for example, for human, animal or plant life or health, for the protection of the environment or to meet other consumer interests". Even if the standards are brought in to protect these legitimate aims, they still cannot be "...applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade".

This writer does not claim to be a master of international trade law, but would argue that the application of a plain packaging standard to protect human life and health would not amount to a barrier on trade, as the standard would apply equally to Australian and foreign tobacco producers, and is clearly not an arbitrary or unjustifiable measure to do so. Plain packaging evens the playing field for all tobacco producers, but also seeks to stop the starting of a smoking habit, lowering the amounts of tobacco products used in that particular country (Australia showing a drop of 6% in smoking rates in adults, and the reduction of sales of tobacco products by nearly $500 million after the law's introduction).

In the end, plain packaging will be a hard fought, long battle, which will clearly go on for years to come. The tobacco industry is also in a state of transition from the old business models to new ones, including vape products, but the core remains the same and the brands equally valuable to that business. This writer is wholly for plain packaging, but its impact on IP will be a milestone for not just tobacco, but for other possibly harmful products in the future.

Source: Sydney Morning Herald

Press Pause - Sale of Multimedia Players to Facilitate Copyright Infringement is a Communication to the Public

The question of what amounts to a 'communication to the public' under EU law has been debated and adjudicated on fiercely in the last couple of years (discussed more here, here, here, here and here) with very little or no end in sight in the near future. Every decision seems to make an ultimate determination more and more elusive, and this writer for one thinks that the matter will never be decided. Even so, the Court of Justice of the EU has been busy yet again, and a recent decision discussing the sale of devices that aid the infringement of copyright was awaited keenly by many. After some time, the CJEU finally rendered its verdict last week.

The case of Stichting Brein v Jack Wullems dealt with the sale of a multimedia player (Filmspieler) that came pre-loaded with applications and open-source software that allowed you to access pay-for content online for free using your own TV. The Filmspieler was sold on a variety of websites, including Mr Wullems' own website. Stichting Brein found out about the sale of the Filmspieler, and requested that Mr Wullems stop selling the device, which he refused to do. Stichting Brein then took the matter to court, which ultimately ended up in the CJEU, where Stichting Brein asked four questions from the Court.

The first and second questions were dealt with together by the CJEU, which asked in essence "...whether the concept of ‘communication to the public’, within the meaning of Article 3(1) of [the InfoSoc Directive], must be interpreted as covering the sale of a multimedia player… on which there are pre-installed add-ons, available on the internet, containing hyperlinks to websites… on which copyright-protected works have been made available to the public without the consent of the right holders".

What 'communication to the public' entails requires a certain set of criteria to be fulfilled, namely an ‘act of communication’ of a work and the communication of that work to a ‘public’. Whether there has been an act of communication requires a more flexible approach where certain complementary criteria, taken holistically, are applied to the act. A particular focus is on whether, in making the act of communication, in full knowledge of the consequences, intervenes to give access to a protected work to a customer, and without their intervention, the customer would not have had access to the work in question.

A 'public' is defined as an indeterminate number of potential viewers, but implies a fairly large number of people viewing the work. The works have to, however, be communicated to a 'new public' or via new means that were not used in its prior communication. Finally, whether the communication makes a profit or not is not a wholly irrelevant criterion in this determination.

The Court therefore had to assess whether the sale of a multimedia player, as described above, would amount to a 'communication to the public'.

Dave was too lazy to care about his Filmspieler no longer working

While the InfoSoc Directive does expressly exclude the provision of physical facilities enabling or making a communication to the public, the Court determined that this didn't in itself limit it from the sale of such devices. The CJEU focussed on the pre-installation of the applications allowing for the infringing activities, which, according to the Court: "...enable[ed] a direct link to be established between websites broadcasting counterfeit works and purchasers of the multimedia player, without which the purchasers would find it difficult to benefit from those protected works", separating it from the mere provision of physical facilities for doing so.

Through this the CJEU considered that "...the provision of a multimedia player such as that at issue in the main proceedings enables, in view of the add-ons pre-installed on it, access via structured menus to links that those add-ons which, when activated by the remote control of that multimedia player, offer its users direct access to protected works without the consent of the copyright holders and must be regarded as an act of communication". Clearly the Court distinguishes between the provision of a device that would have the capability of utilizing such applications, and the pre-installation of those applications on the same device, where the proactive step of installation puts it beyond the 'mere provision of physical facilities' under the Directive.

Whether the act of communication had been done to a 'public' still remained, and the Court decided that, as the Filmspieler had been purchased by a large amount of people, and continued to be available for further purchases, and clearly the communication was therefore aimed at an indeterminate number of people amounting to a 'public' under the Directive. The Filmspieler made the protected works also available to a 'new' public, as the material accessed was not freely available online for all to view, and the Filmspieler made it available to a 'new' public beyond the contemplation of the rightsholder when the works were published. Mr Wullems knew, or ought to have known, that the hyperlinks posted provided access to works illegally placed online. Finally, if the posting of the hyperlinks is done seeking gain or profit, it is expected that the poster would check the links for legality, presuming that any illegal hyperlinks would have been included within the full knowledge of the poster. Mr Wullems sought profit through the sale of the multimedia player, and thus, his sale of the Filmspieler amounted to a communication to the public.

The CJEU was then faced with two questions, which dealt with the streaming of content, but the questions themselves were only treated as hypotheticals and didn't directly apply to the case at hand. The questions asked "...whether the provisions of Article 5(1) and (5) of [the InfoSoc] Directive… must be interpreted as meaning that acts of temporary reproduction, on an multimedia player such as that at issue in the main proceedings, of a copyright protected work obtained by streaming from a website belonging to a third party offering that work without the consent of the copyright holder satisfies the conditions set out in those provisions". The Article in question provides that, in essence, any temporary reproductions that are transient or incidental (e.g. streaming) are exempt from the rights afforded in the Directive in Article 2.

For Article 5 to apply, certain conditions need to be fulfilled, namely: the act is temporary; it is transient or incidental; it is an integral and essential part of a technological process; the sole purpose of that process is to enable a transmission in a network between third parties by an intermediary or a lawful use of a work or protected subject matter; and that act does not have any independent economic significance. All of the conditions are cumulative, and need to be fulfilled for the exemption to apply. Additionally, the use under the exemption cannot conflict with a normal exploitation of the work and prejudice the interests of the author.

The key aim of Article 5 is therefore to protect innocent conduits between two parties or entities, such as the ISP, not causing liability for transient copying of works for the facilitation of services between other parties.

The Court ultimately saw that "...temporary acts of reproduction, on a multimedia player such as that at issue in the main proceedings, of copyright-protected works obtained from streaming websites belonging to third parties offering those works without the consent of the copyright holders are such as to adversely affect the normal exploitation of those works and causes unreasonable prejudice to the legitimate interests of the right holder, because... that practice would usually result in a diminution of lawful transactions relating to the protected works, which would cause unreasonable prejudice to copyright holders". Due to the prejudice to the legitimate interests of the rightsholders through the streaming of content through the Filmspieler, the temporary copies made for the purpose of streaming would not be exempt by Article 5.

The decision in the case is clearly a positive one for rightsholders, particularly trying to combat the sale of multimedia devices such as in the case. What remains key in the case is the provision of physical facilities (in itself not infringing) in addition to facilitating copyright infringement can turn the provision of physical facilities into an infringing act. One would have to therefore be careful about the content and usability of devices that have the capability of infringing copyright, particularly with pre-installed software. While the case does not settle things once and for all, it remains an important step in the progression of the definition of a 'communication to the public' under the Directive.

Source: IPKat