,

The problem of adding substantial value to shapes

In comparison to other forms of trade marks, such as word or figurative marks, it is very difficult to protect shapes and product designs as 3D trade marks. The main reason for this is the strict interpretation that the European Court of Justice (further referred to as: ECJ) has on the absolute grounds for refusal set out in Article 7 of the EU Community Trademark Regulation (2015/2424; further referred to as: EUTMR).

The abovementioned Article provides a set of rules (absolute grounds for refusal) under which a trade mark cannot be registered. Among other things, it is said that the signs shall not be registered if they consist exclusively of: the shape, or another characteristic, which results from the nature of the goods themselves; the shape, or another characteristic, of goods which is necessary to obtain a technical result; the shape, or another characteristic, which gives substantial value to the goods (Article 7(1)(e)(i, ii, iii) EUTMR).

In “World Trademark Review” magazine the author Anders Poulsen wrote an article (further referred to as: WTR article) on the most problematic criterion of those three – when a shape is viewed as adding substantial value to the goods and that being a reason for registration refusal.

Purpose of “substantial value”

The main goal of the disputed ‘substantial value’ set out in Article 7(1)(e)(iii) EUTMR is explained in the guidelines provided by the European Union Intellectual Property Office (further referred to as: EUIPO guidelines). According to EUIPO guidelines the main purpose is to prevent the rights that a trade mark provides from indefinitely extending the life of other IP rights, such as patents or designs, for which the EU legislature requires limited periods of duration. In other words, the purpose is to avoid creating an eternal monopoly and to allow the rights-holders to find a way around the limits of other IP rights.

Furthermore, the guidelines emphasize that a ‘value’ of a good should not be misinterpreted as meaning ‘reputation’. The reason for this is the fact that the application of this absolute ground for refusal is justified only when the value of a good is added by its shape or other characteristics, not by any other factors – such as its reputation. To clarify, if the shape is appealing because of the fame or reputation of its designer and/or marketing efforts, and not because of the aesthetics of the shape itself, Article 7(1)(e)(iii) EUTMR will not apply. Consequently, as the author of WTR article stated, it seems that the EUIPO’s criterion for assessing whether or not this absolute ground for refusal is applicable lies within the answer to this question: Is the shape (and not the reputation) of the mark so eye-appealing that it is one of the consumer’s main motives for buying the goods?

Interpretation adopted by case-law

One significant example of applying the above mentioned criterion is the Second Board of Appeal’s December 14 2010 decision (R 486/2010-2) regarding the protection of a 3D mark illustrating an Eames chair. In this case, registration was initially refused by the examination division because it was devoid of distinctiveness. After some major marketing efforts, distinctiveness was acquired and, therefore, the Board of Appeal found that the chair had gained importance and substantial value from the fame of its designers and considered the 3D trade mark to be valid. Given the aforementioned EUIPO guidelines, this decision seems both reasonable and logical.

However, ECJ case law does not appear to adopt the same interpretation of this absolute ground for refusal and leads to think that there is a certain degree of inconsistency between some of the ECJ decisions and EUIPO guidelines.

One example of this is an ECJ October 2011 decision (T-508/08) in which the ECJ refused Bang&Olufsen’s application for a 3D mark illustrating its loudspeakers. The application for registration was refused because the court found that the aesthetic characteristics of the loudspeakers added substantial value to the goods due to the fact that they were an essential element of the applicant’s branding and an important selling point. In its reasoning, however, the court failed to explain the difference between the value attributed by the aesthetics of the design and the value attributed by its reputation. Consequently, the author of the WTR article was right to conclude that there is a very “…narrow line between satisfying the requirements for distinctive character and being so different that the shape is found to add substantial value.

Another example of inconsistency towards EUIPO guidelines is a preliminary ruling of the ECJ regarding the validity of a 3D mark for the famous Tripp Trapp children’s chair set out in September 2014 decision (C-205/13). A question was raised before the court whether shapes are covered by Article 7(1)(e)(iii) only when the shape is considered the main or dominant value (compared to other values such as safety, comfort etc.) or does the ground for refusal also apply if there are other values which are also considered substantial. The court’s response is somewhat surprising.

It answered that the concept of ‘a shape which gives substantial value to the goods’ cannot be limited only on the shapes that have an artistic or ornamental value. Otherwise, it argued, there is a risk that products which have essential functional characteristics and a significant aesthetic element will not be covered by this absolute ground for refusal. According to this ECJ’s wider interpretation of Article 7(1)(e)(iii), it seems that the requirement of ‘substantiality’ of added value is diminished by the fact that several characteristics can now add substantial value to the mark. Like in the previously mentioned case, the court also failed to further explain how to demonstrate such substantial value, especially for marks with several characteristics which each provide a substantial value.

In the WTR article, the author stated his opinion on the design of the Tripp Trapp chair which he found to be not very aesthetical but more functionality-oriented. He stated that: “Although it does have eye-appeal, the design of the Tripp Trapp baby chair (…) appears to be made up of a mix of its functional characteristics and the reputation of the (…) brand”. And yet, the protection of the mark was refused on the grounds of Article 7(1)(e)(iii).

Other characteristics that give substantial value

In March 2016 changes were brought by the EU trade mark reform in the new EU Trademark Regulation. Among other things, this new regulation brought a change to the wording of the discussed Article 7(1)(e)(iii) in a way that it now says that signs that consist of “the shape, or another characteristic, which gives substantial value to the goods” shall not be registered. The emphasised part, ‘other characteristics’, is the added wording in the Article which implies that the scope of this absolute ground for refusal is no longer restricted to the shape itself, but includes other characteristics which add substantial value (like word marks or figurative marks).

The author of the WTR article was right to call this change drastic and unnecessary given the fact that existing requirements for standard word and figurative trade marks applied by the courts have proven to be adequate for decades. Nevertheless, the application of this newly alternated ground for refusal is sure to lead to a great deal of uncertainty since “…the main purpose of word marks is to add value to the goods and, as illustrated in previous case law, it may be difficult to differentiate the value attributed to the reputation from the inherent value of the word or figurative mark.

Why this criterion is unnecessary

There are several reasons why, in the author’s of WTR article opinion, this absolute ground for refusal is not necessary and is even counter-productive.

First of all, the author emphasized that the foremost precondition for a shape to enjoy protection as a trade mark is that it must have distinctive character. In order to prove existence of distinctive character, the applicant must prove that the mark alone identifies the company from which the goods originate (ECJ’s September 16 2015 decision No. C-215/14). This requirement is strict but also very uncertain since the members of the public are less likely to make assumptions about the origin of the product based solely on their shape if there is no graphic or word element. That is why the shapes have to have some eye-appeal, otherwise it would be impossible for the public to recognize them as indication of origin.

However, the author continues to state that most shapes will fail to fulfill this distinctiveness requirement and the ones that do may add substantial value to the goods (even if this value also originates from other elements, such as reputation) thus constituting an absolute ground for refusal. It is because of this reason that it is almost impossible to differentiate the substantial value of the actual design from the value given by the reputation.

Relatebly, the author of the WTR article found that possibly the most significant problem of the discussed Article 7(1)(e)(iii) is the fact that in its application there is a certain level of inconsistency between the guidelines provided by EUIPO on how the Article should be interpreted and how the Article is actually interpreted and applied by the ECJ. The author of WTR article states that “…Article 7(1)(e)(iii) appears to exclude and punish marks which are regarded as successful. Even though the EUIPO guidelines state that reputation should not be included when assessing substantial value, previous ECJ case law (…) indicates that it is extremely difficult to distinguish between the reputation of the rights holder and the value in the actual shape of the mark.

Lastly, the recent changes in the wording within the Article only worsens the legal framework as this uncertainty now extends to all types of trade marks. Given all the aforementioned reasons, the author of WTR article concluded that this absolute ground for refusal should be abolished.

 

Source: http://www.worldtrademarkreview.com/Magazine/Issue/69/Features/Adding-substantial-value-to-shapes-why-this-absolute-ground-should-be-abolished

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *