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.



Trademark Glossary

Absolute obstacles – Not every sign can be registered as a trademark. At an international level there are several criteria that always lead a trademark registration to be refused. It is enough only the sole existence of one of them. They are :

  1. the sign applied for lacked distinctiveness (eg. too generic, too descriptive and suggestive terms )
  2. descriptive terms that must be kept free for general use (eg. “sweet” for confectionary products)
  3. liability of misleading the public (eg. adopting “royal ” term for marketing dinner sets)
    containing state emblems ( including country’s coulors or coat of arms ) or
  4. the trademark is contrary to public policy or the accepted principles of morality (profane or vulgar manner, trademarks relating to sexuality and innuendos, racial slurs, illegal activity)

Anyone can oppose an application on absolute grounds.

Acquired distinctiveness – Exception, that allows mark that did not have enough distinctive character to serve as a trademark. The owner shall demonstrate that the general public perceive the mark at issue as an indicator of origin (eg. Rolls – Royce, Ferrari, Mercedes, Lufthansa, Camel etc.).

Applicant – A person who applies for trademark protection, in essence, could be any natural or legal person or a partnership provided that has capacity to acquire rights and enter into liabilities.

Application date – The date when the complete request for trade mark protection is sent to the GPMA for assessment. The application date is crucial for defining the priority of a trademark application.

Cancellation – This proceeding occurs after the mark is registered. There are basically, two types of cancellation. The first one is cancellation due to nullity which comprises the absolute grounds for refusal and the second due to request for revocation which generally means that the trademark has not been put to use a certain period of time, or moreover, when the proprietor abandoned his trademark.

Collective mark – A mark which is represented by members of a certain group, an association, or other collective organization, to identify their goods or services by using the same name for their products. Often used to promote products that have characteristics of a given region or to indicate some membership and promoting the interests of the members.

Certification marks – A mark that identifies goods and/or services that meet certain established standards or specifications like: quality, accuracy, place of origin, materials, mode of manufacture of goods or performance of services etc. Anyone who complies with the standards can apply for a certification mark. Their function is not to indicate the origin but to certify that goods or services in relation to which it is applied have the required characteristics.

Commercial designations – Signs used in the course of trade as a name, company name or special designation of a business operation or an enterprise.(eg ‘Company Name’ LLC). Business names also enjoy trademark protection and the trademark rules are applicable to them.

Descriptive – Descriptive is a trademark that consists only of a sign that is, in no way, different from the normal characteristic of the products for which is used. (eg. sweet for confectionary products, Sushi for Japanese food). Non – descriptiveness is a necessary precondition for registering trade marks.

Distinctiveness – Distinctive is the trademark which, by any means, identifies the origin of the goods and services. The core principle is the consumers to be associated with the trademark sign and thus to enable the ones who acquired them to repeat the experience, if it proves to be positive, or to avoid it if it proves to be negative. Distinctiveness is core criteria and also one of the absolute obstacles for registration.

Dilution – Dilution is a legal concept that concerns only the well known marks. It is established in their favour due to their long lasting use and their reputation in the trade. This concept enables the proprietor of a mark to bring actions against users of a similar mark even if the opponent’s goods or services are not related to the ones of the famous mark. The idea behind is that the mark will be harmed by blurring and tarnishment by causing association to a similar mark and therefore the mark will lose its capacity to signify a certain source. Dilution is therefore different from trademark infringement because the latter involves a certain degree of customer confusion, whereas for the concept dilution, the sole existence of confusion is not prerequisite.

EUIPO – European Union Intellectual Property Office known as OHIM until 23 March 2016, is headquartered in Alicante, Spain. The core focus is to manage and promote Community Trademarks and Community Designs within the European Union and aims at harmonizing the trademark registration practices. The registered mark was known before as Community trade mark and as of March is European Union Trademark (EUTM).

European Union Trademark (EUTM) –  known before as Community trade mark are trademarks that have been afforded special protection at EU level and their validity is in all 28 Member states. Administered by EUIPO.

Examination – The process in which the examiners in the GPTO and all following hierarchical instances review the trade mark application with regards to its essential characteristics and prerequisites required by the law and decide whether to reject or to grant protection for a trademark.

Exclusive right – After the grant of the trademark protection the owner have an exclusive right to use the mark without exception. Primarily, after the registration at the DPMA, the owner has the right to exclude others from using in the commerce, to a certain extent confusingly similar trademark. The exclusive right is closely in line with the application date and the priority principle.

Figurative mark – Trademarks that consists generally of a figure or a figure combined with word. The emphasis is put on the visual part of the trademark. In this category is also a mark designed with a particular font or similar specifications. ( eg. MAc OEs )

Generic term – Any word or an expression which solely describes the product which is widely used in commerce even without regard to any specific product. Generic terms are not and can never be trademarks.

Genericness: The case when a trademark has become quite common descriptive name of an product or services. In that situation the trademark does perform the functions that justified its registration as an indicator of an origin, but becomes a standard word to describe products of that kind. The legal standard is: What do the buyers understand by the word for whose use the goods are marketed? Some marks that have become generic are: Aspirin, Escalator, Sellotape.

GPTO (German Patent and Trademark Office) – Central authority in the field of industrial property protection in Germany. This is first instance for protecting trade mark on a national level and is in charge for registration and later administration of the registered trade marks. Located in Munich, Berlin and Jena.

Indications of geographical origin – Signs which indicate the exact location from which the goods originate and moreover, possess qualities and reputation closely linked to that region (eg. Tequila, Champagne etc.) They are mainly used for agricultural products, foodstuffs, wine and spirit drinks, handicrafts, and other industrial products.

Likelihood of confusion – This is a standard that is crucial in determining trademark infringement. Marks used by unrelated parties are similar if, by their use on the same, for same or related goods or services, the relevant consumer would think the goods or services come from the same source or economically linked undertaking. Likelihood of confusion is assessed for the signs at issue and for the good and services as well. In this perspective, there are several evaluation criteria which are the relative strengths of the marks, the duration and extent of each party’s use in commerce, the goods or services on which the marks are used (or for which they are registered), the market in which they are sold, the sophistication of the consumers in that market and how carefully they may consider a purchase of those goods or services. (eg, the marks sound alike when spoken, are visually very similar, or create the same general commercial impression, target the same consumers)

Madrid system – Centralized system with the aim to facilitate the protection of a trademark (registering and managing) in a large number of countries. This system provides flexible mechanism to obtain trademark protection with only a single application in multiple countries and it enables an effective and efficient way to ensure protection. A mark may be subject of an international application only if it has already been registered at the trademark office where the party has domicile. The Madrid system is administered by WIPO.

National trademark – Every country has its own trademark register and its own legislation. National registration is the application for protection directly in the country, for every applicant that operates within a certain geographical area. In Germany this administrative Organ for national trademarks is GPTO. All the applications before registering at EUIPO and WIPO have to be submitted to the corresponding National Office.

Nice classification – International Classification established under the Nice Agreement that serves to classify goods or services for the purposes of registration of marks. It is a necessary requirement for obtaining registration, that any applicant include in the files the classes to which the goods and services belong. The Nice classification consists of broad list of classes for goods and services and explanatory notes thereto, in alphabetical order from which 34 for goods and 11 for services.

Opposition – Legal procedure that have the same effect as veto with the idea to block a published mark from being registered. The time period is 3 months which begins after the trademark is advertised in the Official Journal. In essence, the opposition could be based on the twofold obstacles for registration: absolute and relative grounds. As a rule the opposition is generally filed by the virtue of the mark’s identity and likelihood of confusion.

Priority – First to file principle, the earlier in time, the stronger in law. In trademark law the one who filed earlier for registration has priority rights to use the mark filed for. This principle is closely related to the application date. In case of trademark rights between conflicting applications the first filed mark, has priority rights to use the sign applied for and therefore could exclude others for using similar signs. Generally, the earlier in time prevails.

Registered v.s unregistered trademark – It is recommended to have a registered trademark since it gives you immediate right to defend or action against misuse. This relates also when asking for damages. Nevertheless, unregistered trademark enjoy protection under the unfair competition laws. For more information: trademark symbols.

Relative grounds – Not necessarily lead to invalidation to the trademark since can only be raised in opposition proceedings. These includes: prior IP rights of others (an older registered trademark), non-use of a trademark for a certain period of time etc. Only a proprietor of an earlier mark may oppose on relative grounds.

Renewal – This is a period when a trademark maintain its validity from an administrative aspect. By law, trademark registrations have 10 years of protection and they have indefinite renewal time period. Registration cancelled due to this reason, if the need arise can not be revived but shall be registered anew.

Three dimensional mark – mark that consists of a shape of a product or its packaging. There is a thin line between three dimensional marks and the industrial design however, they are protectable if they do not lack any originality to be easily distinguished or if they do not represent a ordinary shape or shape that come from its nature or function.

Trade marks – could be any word including personal names, designs, letters, numerals, sound marks, three-dimensional designs, the shape of goods or of their packaging, as well as other wrapping, as well a colours and colour combinations. The core purpose of the trade mark is to serve as a recognizable sign with two main ideas; to identify the source of products or services and to distinguish the trademark owner’s goods and services from those of others. The main question when registering a trademark is “Do I want to be known by this name in the trade?”.

Trademark Symbols
Trademark symbol notify the public that the goods and services are marketed under a certain brand.

  • ® – the “r-in-a-circle” symbol next to a mark means that the mark is registered
  • ™ symbol means that the mark is not registered but is in use by the company for promoting the goods
  • SM symbol means that the mark is not registered but is in use by the company for promoting the services

Trademark infringement – Unauthorized use of a trademark in a way that is highly likely that it will cause confusion about the source of the goods or services among the consumers population. Infringement can occur mainly to a registered trademark. The main criteria for assessing infringement are the unlawful use of an opponent’s trademark, in the commerce, respectively in the course of the trade, and the central focus is the degree of likelihood of confusion between the earlier and the later trademark. The more similar or related are the signs as well as the goods or services, the greater the possibility of trademark infringement.

Use of the trade mark – The proprietor has the exclusive right to use the trademark in the commerce in relation to the goods and services for which the protection has been granted. Usage generally involves marketing products and brand the reputation for the company’s goods and services. In case of infringement the owner can file a civil action. The trademarks can be subject in the course of trade, they can be sold and bought.

Vienna classification – International Classification system with the purpose to classify the figurative elements of the marks on the basis of their shape and at the same time to facilitate trademark searches at the international level. For a valid registration purpose, the applicants are required to include in the the official documents the categories, divisions and sections of the figurative marks applied for registration.

Well-known mark – Marks that have a high degree of recognition and reputation due to the long lasting and intensive use in the trade, regardless whether they are registered or not. The scope of protection of the well known marks is not restricted only to the goods and services that are protected but also to other category of services that might indicate some connection between the well known mark and the goods and services in question, (eg. Google, Microsoft, Mcdonald’s).

WIPO (World Intellectual Property Organization) – International Organization under United Nations. The general aim is to to promote protection of Intellectual Property throughout the world. WIPO is responsible for registering trademarks only if they are protected on a national level in their respective countries. Located in Geneva, Switzerland.

Word mark – trade marks that consist of the standard set of characters like words and letters and any characters that could be typed. It can also be combination of numbers and letters. Slogans are also considered as word marks. (eg. Just do it, Herbalife, Levi’s )