On 23 March 2016, the new European Union Trade Mark Regulation came into force (1). The new Regulation is part of the EU trade mark reform package and has brought with it a host of changes to EU trade mark law. Some of the changes have been welcomed, however this paper is critical of a particular substantive change in the law which has, at least to some extent, crept in without much attention.
Of concern are the restrictions introduced by Article 7(1)(e) EUTMR – the prohibition on signs which consist exclusively of:
- the shape, or another characteristic (2), which results from the nature of the goods themselves;
- the shape, or another characteristic (3), of goods which is necessary to obtain a technical result;
- the shape, or another characteristic (4), which gives substantial value to the goods
These restrictions in respect of the registration of shapes as trade marks are not new. The CJEU held in Koninklijke Philips Electronics v Remington that the rationale behind the grounds of refusal for shape marks was to prevent trade mark protection from granting its proprietor a monopoly on technical solutions or functional characteristics of a product which a user is likely to seek in the products of competitors (5).
However, the introduction of the obscure and ambiguous term “another characteristic” has added a new dimension of uncertainty to the absolute grounds provisions because now the restrictions apply not only to shapes but to other types of signs as well. Absent a clear and precise definition of “another characteristic”, it remains to be seen how this term will be interpreted by the European Union Intellectual Property Office (EUIPO), the national offices and the courts. This paper will focus specifically on Article 7(1)(e)(iii); the potential problems posed by the prohibition on signs which are deemed to consist exclusively of “another characteristic which gives substantial value to the goods.”
Perhaps the reasoning behind the introduction of the wording “another characteristic” is to counteract the removal of the graphical representation requirement. Under the old Regulation, for a mark to qualify for registration it had to be capable of being graphically represented. From 01 October 2017 onwards, there will be no requirement for graphic representation and in theory it should be easier to register some non-traditional trade marks such as movement marks. However, it appears that since the removal of the graphical representation requirement might broaden the types of trade marks which could be registered, it was perceived that the Regulation needed to include grounds to prohibit overzealous expansion. However, the Regulation has thrown the baby out with the bathwater.
It seems that the introduction of “another characteristic” under Article 7(1)(e)(iii) has brought some additional obstacles to registration, not only in respect of non-traditional trade marks but also in relation to conventional marks. A literal interpretation of Article 7(1)(e)(iii) EUTMR conceivably leaves many trade marks or types of trade marks vulnerable to refusal or invalidation. At this relatively early stage, it is difficult to predict with a measure of certainty how the EUIPO, the national offices and the courts will interpret and apply Article 7(1)(e)(iii) EUTMR. However, a good place to start is a review of the most recent EUIPO Guidelines. According to the Guidelines and the case law cited therein (6):
“A sign consists ‘exclusively’ of the shape of goods or other characteristics when all its essential characteristics — that is to say, its most important elements — result from the nature of the goods (Article 7(1)(e)(i) EUTMR), perform a technical function(Article 7(1)(e)(ii) EUTMR) or give substantial value to the goods (Article 7(1)(e)(iii) EUTMR). The presence of one or more minor arbitrary elements, therefore, will not alter the conclusion (judgments of 18/09/2014, C-205/13, Hauck, EU:C:2014:2233, § 21-22; 14/09/2010, C-48/09 P, Lego brick, EU:C:2010:516, § 51-52).
Therefore, it is clear that to ascertain whether a mark falls foul of the new provision, it is first necessary to determine the essential characteristics of the sign in question. The essential characteristics of a sign will depend on the type of sign as well as the sign itself. For example, the essential characteristic of a non-traditional trade mark may be its smell, taste, sound, texture or colour.
However, in light of Article 7(1)(e)(iii), what will be the position on determining the essential characteristics of a traditional or conventional trade mark such as a word mark? The EUIPO Guidelines state that (7):
“an objection under Article 7(1)(e) EUTMR would not be justified if the sign applied for were a shape or other characteristic(s) combined with additional, distinctive matter such as word or figurative elements (that qualify as essential characteristics of the sign) as the sign in its entirety would then not consist exclusively of a shape or other characteristic(s).”
Taking the above into account, it is obvious how a shape mark which includes a word as one of its essential characteristics is supposed to be treated. However, what about a pure word mark? The essential characteristics would of course have to be limited to those relating to the word / words alone.
For example, an “other characteristic” which could give substantial value to the goods could be the fame associated with a particular name, such as a celebrity name. If a celebrity tries to register their name as a trade mark, there is the possibility that their mark will be refused registration on the basis that their mark, which comprises their name, along with the associated fame and notoriety, adds substantial value to the goods. This could prove especially problematic in respect of celebrity branding. The reason for celebrity branding is of course because of the advertising and marketing power a celebrity can bring to the table.
There are many consumers who will buy a celebrity branded product on the basis that they believe a certain celebrity truly approves of the product or that the product will help the purchaser to become an improved version of themselves. For example, a consumer may buy a particular fitness product or supplement because they believe that they will become strong, fit and attractive like the renowned sports star endorsing the product. By associating a celebrity with a particular product, companies can imply that their product will enable their customers to achieve the same success, fame and social status of the celebrity. An unknown brand can go from relative obscurity to suddenly being thrust into the limelight due to the celebrity lending their name to the product. This drives sales, growth and market share of the product. The celebrity’s name, which is their trade mark, therefore adds substantial value to the goods being sold. A literal interpretation of Article 7(1)(e)(iii) could give rise to the above scenario.
The EUIPO Guidelines and case law cited therein indicate that (8):
“The concept of ‘value’ should not be interpreted as meaning ‘reputation’, since application of this absolute ground for refusal is justified exclusively by the effect on the value added to the goods by the shape or other characteristic and not by other factors, such as the reputation of the word mark that is also used to identify the goods in question (see in this regard, decision of 16/01/2013, R 2520/2011-5, § 19).”
“If a shape or other characteristic derives its appeal from the fame of its designer and/or marketing efforts rather than from the aesthetic value of the shape or other characteristic itself, Article 7(1)(e)(iii) EUTMR will not apply (decision of 14/12/2010, R 486/2010-2, Shape of a chair (3D mark), § 20-21).”
The above implies that trade marks will not be caught by Article 7(1)(e)(iii) by virtue of their reputation or fame. This is of course a welcome indication and hopefully the above common sense and practical approach will be applied rigorously by the EUIPO, as well as the national offices and the courts. However, this may be wishful thinking. In the decision of The London Taxi Corp Ltd v Frazer-Nash Research Ltd (9), Arnold J had to consider whether a three-dimensional shape of a London taxi added substantial value to the goods. A review of the Hauck decision (10) led Arnold J to conclude that it is the shape itself which must add substantial value to the goods and that goodwill derived from sales and advertising is not relevant. But to some extent an applicant may be jumping out of the frying pan into the fire because the UK national court decision held that regard must be had to all the circumstances of the case, including additional subject matter such as consumer perception, the category of the goods, the artistic value of the shape, the dissimilarity of the shape from other shapes in common use, the price of the goods and the manufacturer’s promotional strategy.
Even if trade marks will not be caught by Article 7(1)(e)(iii) by virtue of their reputation, the fame of the owner or marketing efforts, what will the position be for trade marks which are comprised of terms which already have a reputation or appeal but not as a result of the marketing efforts of the trade mark owner? An example of this would be registering the name of a fictitious person or entity, such as a figure or deity from Greek or Roman mythology. If a company today applied to register Apollo, Zeus, Orion, Titan, Trojan or Ajax, would registration be refused on the basis that the words themselves add substantial value to the goods by virtue of their connotations with gods, warriors and victory? Would marks such as these be vulnerable to invalidation on the same grounds? The names of these figurers were already known to the world well before these companies registered them as trade marks and sold goods under these brands. Discounting any reputation these registered marks have now as a result of the trade mark owners promotional efforts, it could be argued that the marks, by their inherent associations with gods, strength and victory add substantial value to the goods (and not through the later marketing efforts of the trade mark owners). The most alarming consequence of a situation such as the above is that the ground of refusal under Article 7(1)(e)(iii) cannot be overcome through acquired distinctiveness. Therefore, if the mark is found to not qualify for registration due to one of its characteristics adding substantial value to the goods, not even extensive use will enable the mark to be registered.
There could also be a potential problem with an entertainment figure registering their stage name. It is common knowledge that people involved in the entertainment industry often don’t use their real names. For example, the real names of the movie actors Martin Sheen and his son Charlie Sheen are Ramón Antonio Gerardo Estévez and Carlos Irwin Estévez. These stage names were chosen to increase the likelihood of father and son getting acting parts in Hollywood. Likewise, Miley Cyrus, Whoopi Goldberg, Michael Caine are stage names which are very different to the real names of the people who use them. The reason they adopt a different name for the entertainment industry is to increase their value and the value of their products e.g. to sell a higher number of music records. If somebody is starting out and tries to register their stage name as a trade mark, then there is an argument that such a trade mark consists exclusively of a sign which adds substantial value to the goods. Therefore, that mark could be refused registration. In the event that person did register their stage name as a mark and went on to become a very famous person, even though they may have built up a reputation or fame through their own marketing efforts, the fact is that at the time the trade mark application was filed, the sign added substantial value to the goods and could be vulnerable to invalidation. Acquired distinctiveness would be irrelevant and the exclusive rights to the mark could be lost.
Given the infancy of the new Regulation, there have been no significant case law developments in respect of an “other characteristic” which adds substantial value to the goods. The EUIPO Guidelines give one hypothetical example of a sign which consists exclusively of an “other characteristic” that gives substantial value to the goods. The example given is a sound mark, “representing a specific sound of a motorbike that may be appealing to a significant part of the relevant public to the extent that it may indeed affect the consumer’s choice of purchase.”(11) It should be noted that the example given is a non-traditional trade mark. The author can only assume that the EUIPO has deliberately not given examples of standard trade marks which could be prohibited under the new “other characteristic” ground, such as word marks or device marks, on the basis that (a) nobody is sure exactly what kind of signs or characteristics the prohibition will apply to and (b) there is reluctance to open a Pandora’s box through early assumption and speculation of issues which have not tested by the EUIPO or the courts in real life cases. Indeed, the Guidelines indicate that a case by case approach will be necessary and that “in most of these cases a proper examination will only be possible where there is evidence that the aesthetic value of the shape or other characteristic can, in its own right, determine the commercial value of the product and the consumer’s choice to a large extent.”
However, just how broad an interpretation “aesthetic value” will be given is not clear. A device mark which includes intricate designs, eye catching colours or beautiful visual textures and patterns could arguably induce a consumer to buy an otherwise bland product. One only has to think of your average supermarket products. Name brands are more often than not, more visually appealing than store brands. The store brand product will often have unexciting branding and standard packaging, whereas the name brand product will be more visually stimulating e.g. the product might feature a device mark comprising an artistic illustration or elegant design. There is no doubt that a product featuring an aesthetically pleasing device mark can induce a customer to buy one product over another. Should a company’s trade mark rights in respect of a device mark be scuppered because the sign’s aesthetic properties add substantial value to the goods? Certainly not, but this is a possibility under the new Regulation.
The new provision may also make it much more difficult to register colours or colour combinations as trade marks. It is already notoriously difficult to register a colour as a trade mark absent acquired distinctiveness. Indeed, in KWS Saat v OHIM (12), the ECJ held that “distinctiveness without any prior use is inconceivable save in exceptional circumstances, and particularly where the number of goods or services for which the mark is claimed is very restricted and the relevant market very specific”. The essential characteristics of a colour trade mark is the colour per se. If it can be determined that a colour mark adds substantial value to the goods, then the new provision will make it even more difficult to register colours as trade marks. It is not hard to see how a customer may purchase a particular product based on its colour .e.g it may have an attractive shade which is visually very appealing. If it can be shown that a consumer will buy a product based on its colour, then logic dictates that the trade mark which is comprised solely of that colour adds substantial value to the goods. Whereas previously an absolute ground objection in relation to a colour being devoid of distinctive character could be overcome by proving acquired distinctiveness through use, that option is not available under the new Regulation if it is shown that the mark adds substantial value to the goods.
It is extremely important that the provision under Article 7(1)(e)(iii) EUTMR is given a sensible interpretation by the EUIPO, the national offices and the courts. A literal interpretation of Article 7(1)(e)(iii) could spell disaster for trade mark owners. While it is hoped that the relevant authorities will be vigilant in interpreting and applying this ground sensibly, bad decisions at the highest level do occur and such decisions can change the whole legal landscape. Irrational trains of thought can find their way into trade mark law and can derail sound established practice. Yesterday’s ludicrous findings have a way of becoming precedent and entrenching themselves in today’s law. This ground of refusal under Article 7(1)(e)(iii) has absolutely no place in the reasonable and justifiable expectations of trade mark owners. It should never be applied to word marks or figurative marks. Just one bad decision could have severe repercussions for trade mark proprietors. The relevant authorities will need to be reminded that the introduction of the wording “another characteristic” was to counteract the removal of the requirement of graphical representation. Therefore, the ground of refusal under Article 7(1)(e)(iii) should only apply to certain non-traditional marks. Even if it is to be applied to non-traditional trade marks, it should be exercised by the relevant authorities using extreme caution and due care. Otherwise, there is a real danger that left unchecked, this ground could have ramifications which undermine the fabric of the very function of a trade mark.
If you would like to learn more on this issue, please contact David Flynn, European Trade Mark Attorney
1. REGULATION (EU) 2015/2424 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95 implementing Council Regulation (EC) No 40/94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs)
2. Emphasis added
3. Emphasis added
4. Emphasis added
5. Koninklijke Philips Electronics v Remington[ 2002] ETMR 81
6. See Guidelines for Examination of European Union Trade Marks, European Union Intellectual Property Office (EUIPO), Part B, Examination, Section 4 Absolute Grounds for Refusal, No. 1, p. 3
7. See Guidelines for Examination of European Union Trade Marks, European Union Intellectual Property Office (EUIPO), Part B, Examination, Section 4 Absolute Grounds for Refusal, No. 1, p. 4
8. See Guidelines for Examination of European Union Trade Marks, European Union Intellectual Property Office (EUIPO), Part B, Examination, Section 4 Absolute Grounds for Refusal, No. 4, p. 9
9. The London Taxi Corp Ltd v Frazer-Nash Research Ltd  ETMR18
10. Hauck GmbH & Co. KG v Stokke A/S  ETMR 60.
11. See Guidelines for Examination of European Union Trade Marks, European Union Intellectual Property Office (EUIPO), Part B, Examination, Section 4 Absolute Grounds for Refusal, No. 4, pp 9.
12. KWS Saat AG v OHIM  ETMR 23.