Supreme Court holds that product shapes can acquire distinctiveness

Factual claims and procedural history
Legal analysis
Ruling

In August Storck KG v Alpha Intuit Foods Ltd (Appeal 11487/03) the Supreme Court has reversed a district court ruling that a product shape is not eligible for registration as a three-dimensional (3D) trademark. The court found that a product’s 3D shape is, by definition, not inherently distinctive as a trademark. However, it may acquire distinctiveness (ie, secondary meaning) provided that its features are not essentially functional or aesthetic.

The Supreme Court remanded the case to the district court to decide whether the plaintiff’s 3D registered mark was infringed by the defendant’s similarly shaped product.

Factual claims and procedural history
August Storck KG – the German owner of the mark TOFFIFEE, which is used for certain confectionery products – brought a lawsuit for trademark infringement and unjust enrichment against a local retailer that sold chocolate caramel candy, imported from Turkey, under the trademark CHOCODAN’S. The plaintiff asserted infringement of its registered Trademark 163894, consisting of a representation of the product’s shape from three different angles. The plaintiff sought to enjoin the defendant from importing or selling the infringing product, or other similarly shaped products, and to recover damages.

The district court rejected the plaintiff’s claim that its trademark was in fact a 3D mark and, in the absence of any reference in the registration itself that the mark was indeed 3D, held that the mark was two-dimensional. The district court further held that while it is possible, in principle, to register 3D marks under the Trademarks Ordinance, this does not imply that the shape of a product is eligible for registration. Therefore, the marketing of the defendant’s product was held not to constitute infringement.

The plaintiff appealed, arguing that product shapes are eligible for trademark registration and that the defendant’s product therefore infringed its 3D mark, which consisted of the product’s shape. The respondent claimed, among other things, that it is not possible under the Trademarks Ordinance to register the shape of a product as a trademark.

Legal analysis
Noting that the Trademarks Ordinance permits 3D marks and that the sole requirement under the Trademarks Regulations pertaining to 3D marks is that the application should provide a view of the mark from all sides, the Supreme Court concluded that the mark in question had been registered as 3D, despite the absence of a remark to that effect.

Addressing the main issue of whether 3D product shapes are eligible for registration as a trademark, the court noted the Registrar of Trademarks’ Circular Letter of 17th August 2004, which states that only in exceptional cases of acquired distinctiveness may 3D marks be registered. The Supreme Court referred to prior case law (in particular, the Kalil and Agudat HaKormim precedents), which acknowledges the possibility that functional marks may obtain secondary meaning (although in these particular cases, protection was denied). The court also noted the limited scope of passing-off protection accorded to a product’s shape as compared to the product’s get-up and packaging.

The court finally reached its decision as to the most desirable solution under Israeli law after reviewing the relevant Canadian, EU, UK and US law on this subject.

Ruling
Confirming that a product’s shape may be the subject matter of a trademark under the Trademarks Ordinance, the Supreme Court dismissed the respondent’s contention that a trademark must consist of signs that are used “in respect of goods” and thus cannot be the goods themselves. The court held that, in principle, a product’s shape may be eligible for registration as a trademark in respect of the product (or of goods of the same description), but noted that such registration gives rise to a variety of concerns. Trademark protection for product shapes may deprive competitors of the utilitarian and aesthetic advantages of that particular shape and permit proprietors to circumvent the time limits of patent and design protection. Further, functional or aesthetic features of a product shape may hinder it from being inherently distinctive or acquiring distinctiveness as a mark, as the public tends not to identify product shape as an indication of origin of goods.

The court held that no product’s shape is inherently distinctive because a definitive test for this is difficult to devise and because such practice may lead to the circumvention of time limitations of other IP laws and unfair limitation of competition. However, a product shape will be eligible for registration based on it having acquired secondary meaning, where the public comes to identify a product shape with a certain source (ie, where the shape has been proven to distinguish the product and not to serve an aesthetic or functional role).

The possible entitlement of a shape that actually serves to identify and distinguish a product to other forms of IP protection (eg, design protection) does not preclude trademark protection if the shape has acquired distinctiveness. However, the court concluded that, at least as regards 3D marks that are product shapes, an essentially functional or aesthetic character makes them ineligible for protection, even if acquired distinctiveness is proved. This is because the grant of an external exclusive right would unduly prejudice competition as to functional or aesthetic shapes.

In summary, the court held that: 

• A product’s 3D shape is not eligible for registration as a trademark on the basis of its inherent distinctiveness. 
• However, a product’s 3D shape is eligible for trademark registration in the event of acquired distinctiveness, provided that the shape does not serve an essentially aesthetic or functional role (ie, if the shape is essentially functional or aesthetic, it is not registrable even if it has acquired distinctiveness). 
• The court recognised the difficulty in determining a clear test for an aesthetic or functional role, as well as the resulting restrictions on competition and uncertainty. The conclusion as to registrability does not affect the right of aggrieved manufacturers to seek redress through the tort of passing off (although the tort also gives no protection to a functional or aesthetic shape of a product).

The Supreme Court therefore reversed the district court decision and remanded the case to the district court for reconsideration as to the validity of the appellant’s mark. The Supreme Court further mandated that the Registrar’s Circular Letter should be revised accordingly.