The Color Red Sparks a Dispute Between Banks

The Secondary Distinctiveness of a Trademark: Ruling of the Court of Justice of the European Union

If a ‘significant part’ (at least 70%) of the consumer group is able to recognize given goods as deriving from a specific company using the trademark, then the mark has certainly acquired distinctiveness, including in the case of ‘secondary distinctiveness as a result of use’.

The European Court of Justice held on 19 June 2014 in a ruling (C-217/13 and C-218/13) in the case of Oberbank AG, Banco Santander SA and Santander Consumer Bank AG vs. Deutsche Sparkassen und Giroverband e.V. (DSGV), the result of three pre-trial questions submitted to the Court of Justice by the German Federal Patent Office (Bundespatentgericht). The findings were as follows:

1. When considering whether a trademark, that does not possess distinctiveness, has acquired what is known as ‘secondary distinctiveness as a result of use’, European Union law must be interpreted as precluding an interpretation of the law of a member country, according to which a prerequisite to acquire secondary distinctiveness is a set percentage of consumers recognizing the secondary distinctiveness of the trademark.
2. When evaluating whether a trademark has acquired secondary distinctiveness, it is necessary to check whether this occurred before the date of filing of the mark. The absence of primary distinctiveness and of the acquisition of secondary distinctiveness prior to the filing date constitutes a condition for invalidating the trademark.
3. The burden of proof concerning distinctive character, acquired following the use which has been made of the mark at issue, must be borne by the proprietor of that mark which invokes that distinctive character.

On 11 July 2007, the DSGV obtained a registration of a trademark in the form of the color red, without contours (red HKS 13) for Class 36 in the meaning of the Nice Treaty. On 15 January 2008, Oberbank submitted a motion for the invalidation of the right to that trademark, claiming a lack of distinctiveness. In a decision of 16 June 2009, the German Patent and Trademark Office dismissed the motion for invalidation, stating that, even though the contested mark is not in essence distinctive, it had acquired that quality as a result of use. Banco Santander and Santander Consumer Bank also submitted motions for invalidation, raising arguments similar to those of Oberbank, and these were also dismissed. All of the objecting parties then went to court with a complaint requesting that the decision of the German Patent and Trademark Office be overturned and that the right to the trademark be invalidated.

The pre-trial questions presented to the Court of Justice, concerned the conditions for acknowledging that a given mark has acquired what is known as ‘secondary distinctiveness through use’. The court sought, in particular, to establish what level of renown among the interested group of consumers is required for it to be acknowledged that secondary distinctiveness exists and also sought to resolve doubts as to what moment is proper for an evaluation of secondary distinctiveness—the moment at which a mark is submitted or the date on which it is registered.

In analyzing the above issues, the Court of Justice referred to the provisions of Directive 89/104, replaced by Directive 2008/95. The Court of Justice pointed out that, in accordance with previous case law, an assessment of the distinctiveness of a given mark must be made in reference to the goods or services the mark identifies and to the presumed manner of perception of the trademark by the interested group of consumers (see, among other rulings: C-363/99 in the Koninklijke KPN Nederland case and C-353/03 in the Nestlé case).

As to the issue of how to determine whether a mark has acquired secondary distinctiveness, the Court of Justice showed that the authority competent to register should always make a concrete analysis of a given case. Criteria that helps in making such an assessment include the trademark’s:

• market share
• intensity
• geographic range
• length of use
• degree of recognition.

It was emphasized that if a ‘significant part’ of the consumer group is able to recognize given goods as deriving from a specific company using the trademark, then the mark has certainly acquired distinctiveness. At the same time, the Court of Justice expressed the view that the circumstance of a significant degree of recognition cannot be determined “solely on the basis of general, abstract data such as a specific percentage” (the court, in its pre-trial questions, proposed 70% recognition among the group surveyed as a threshold).

The Court of Justice also took the stance that the right holder to a trademark may effectively defend itself against a justified charge of a lack of primary distinctiveness, only by showing that distinctiveness had been acquired through use before the date on which an application for registration was submitted. It should be emphasized that, pursuant to Article 3 par. 3 of Directive 2008/95, member states are authorized to extend the application of the construction of distinctiveness acquired through use also to the period after the date of submission of an application for registration or even to after the date of the registration itself.

With regard to the last of the pre-trial questions, the Court of Justice expressly ruled that the burden of proof of the acquisition of secondary distinctiveness, before the date of submission of an application for registration, lies with the right holder to the trademark. Consequently, if a right holder does not effectively produce such evidence, and the mark does not possess primary distinctiveness, the trademark must be held to be invalid.