Apple retail format – groundbreaking or just another trademark?

On July 10 2014 the European Court of Justice (ECJ) found that a representation of the layout of a retail store could potentially be registered by Apple, Inc following a refusal by the German Patent Office. The decision has been heralded by some – particularly in the trade press – as groundbreaking for the retail market.

This article examines whether that initial assessment is correct by analysing the foundations of the decision, its reasoning and its implications, with regard to the registration of retail formats generally, enforceability and the breadth of protection.

As is the case with many alleged new developments in trademark law, the issue originated in the United States. Apple had obtained from the US Patent and Trademark Office (USPTO) a registration for a three-dimensional trademark consisting of the representation, by design and colour (in particular, metallic grey and light brown), of a retail store format that it used in relation to “retail store services featuring computers, computer software, computer peripherals, mobile phones, consumer electronics and related accessories and the demonstration of products relating thereto”.

This representation, which Apple described as “the distinctive design and layout of a retail store”, is recreated in Figure 1.

Figure 1: A recreation of Apple Inc’s US service mark registration, which Apple described as “the distinctive design and layout of a retail store”

Apple then filed an international trademark registration based on the original US trademark registration, covering Benelux, Germany, Spain, France, the United Kingdom, Italy, Norway, Poland and Sweden.

The original US trademark registration encountered objections from the USPTO and Apple was forced to make various amendments to the description before it was eventually granted. The most significant of these was the provision of a detailed description of the trademark in words to supplement the line drawing representation shown above. However, the international trademark registration, which derived from the US trademark registration, did not incorporate the detailed word-based description.

The international registration then progressed before the various designated EU IP offices, but did not proceed in a uniform manner. The Spanish, Italian, French and Polish IP offices allowed the registration to proceed on the basis that the representation formed an inherently distinctive trademark. However, the Swedish, Norwegian, UK, Benelux and German IP offices issued provisional refusals against the registration.

German Patent Office decisions

In January 2013 the German Patent Office refused to extend the international trademark registration to Germany on the grounds that the representation depicted within the registration was nothing more than a representation of the essential aspects of Apple’s business. The German Patent Office considered that while it was true that consumers might perceive the layout of such a retail space as an indication of the quality and price bracket of the products being sold, they would not see such a representation as an indication of the products’ commercial origin. Further, it considered that the retail store depicted in the representation was not sufficiently distinguishable from other stores and providers of electronic products.

Apple appealed this decision to the Federal Patent Court. However, the court stayed proceedings and referred the following four questions to the ECJ:

• Is Article 2 of the EU Trademarks Directive (2008/95/EC) to be interpreted as meaning that the possibility of protection for the ‘packaging of goods’ also extends to the presentation of the establishment in which a service is provided?
• Are Articles 2 and 3(1) to be interpreted as meaning that a sign representing the presentation of the establishment in which a service is provided is capable of being registered as a trademark?
• Is Article 2 to be interpreted as meaning that the requirement for graphic representability is satisfied by design alone, or is it necessary to include additions such as a description of the layout or indications of the absolute dimensions and measurements or of relative dimensions with indications as to proportions?
• Is Article 2 to be interpreted as meaning that the scale of the protection afforded by a trademark for retail services also extends to the goods produced by the retailer itself?

The first three questions (the fourth was found inadmissible and was not answered) focused on whether the representation provided by Apple under the international trademark registration could fulfil the basic requirements of a trademark under Article 2, most notably that: “A trade mark may consist of any signs capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, shape of goods or of their packaging provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings.”

The questions can be distilled down into, first, an analysis of whether Apple’s representation was capable of being represented graphically, thus providing certainty of protection; and second, a consideration of whether the representation was capable of distinguishing the goods or services of one undertaking from those of other undertakings.

The questions did not deal with the issue of whether the representation did indeed act as a trademark – either inherently or via use in the German market. Although, Article 3(1) was referred to in the second question, and this article does deal with issues of distinctiveness, the question was qualified and restricted to whether the representation was capable of acting as a trademark, which is the fundamental question dealt with by Article 2. While this point is a subtle one that seems to have been lost in some of the commentary, it goes to the heart of the decision’s impact on the retail market.

ECJ decision

The ECJ examined and answered the first, second and third questions together, given that they dealt with the “presentation of the establishment in which a service is provided”. It stated that the Federal Patent Court was essentially asking whether Articles 2 and 3 of the Trademarks Directive must be interpreted as meaning that a representation by design alone – with no indication of the size or proportions of a retail store’s layout – may be registered as a trademark for services designed to induce the consumer to purchase the applicant’s products and, if so, whether this can be treated in the same way as packaging.

The ECJ stated in paragraph 17 that in order for a sign to be capable of constituting a trademark for the purposes of Article 2, it must fulfil three conditions:

• It must be a sign;
• It must be capable of being represented graphically; and
• It must be capable of distinguishing the goods or services of one undertaking from those of others.

The ECJ stated that it is absolutely clear that Article 2 encompasses designs of the nature of the representation for which registration was sought, as a category of sign which is capable of being represented graphically.

In paragraphs 19 and 20 the ECJ continued that:

It follows that a representation, such as that at issue in the main proceedings, which depicts the layout of a retail store by means of an integral collection of lines, curves and shapes, may constitute a trade mark provided that it is capable of distinguishing the products or services of one undertaking from those of other undertakings. Consequently, such a representation satisfies the first and second conditions referred to at paragraph 17 of this Judgment, without it being necessary either, on the one hand, to attribute any relevance to the fact that the design does not contain any indication as to the size and proportions of the retail store that it depicts, or, on the other hand, to examine whether such a design could equally, as a “representation of the establishment in which a service is provided”, be treated in the same way, as “packaging” within the meaning of Article 2 of the Directive 2008/95…

The representation, by design, of a layout of a retail store is capable of distinguishing the products or services of one undertaking from those of other undertakings and, hence, satisfying the third condition referred to at paragraph 17 of this Judgment. In that regard, it suffices to observe that it cannot be ruled out that the layout of a retail outlet depicted by such a sign may allow the products or the services for which registration is sought to be identified as originating from a particular undertaking. As the French Government and the Commission have submitted, this could be the case when the depicted layout departs significantly from the norm or customs of the economic sector concerned (see, by analogy, as to signs consisting of the appearance of the product itself, Storck v OHIM, C-25/05 P, EU:C:2006:422, paragraph 28, and Vuitton Malletier v OHIM, C-97/12 P, EU:C:2014:324, paragraph 52).

While the German Patent Office refused to extend Apple’s international trademark registration to Germany, the subsequent ECJ decision could pave the way for its retail store format – such as used in this store in Berlin (opposite) – to obtain trademark protection

Picture courtesy of Apple.

The ECJ essentially found that the representation depicted in the international registration sought by Apple was sufficiently detailed to act as a graphical representation, with no further need for any description in words as to either the store’s size or dimensions. Further, it did not rule out the possibility of such a sign acting as a trademark, either inherently or on the basis of past use.

The ECJ did not find that the sign actually acted as a trademark – either by way of use or inherently. Ultimately, that is a decision for the Federal Patent Court. However, as outlined above, initial indications and comments from the Federal Patent Court suggest that it would find such a sign distinctive. In the words of the ECJ, provided that the retail format at issue departs from the “norm or customs of the economic sector concerned”, the sign is capable of acting as a trademark. These words seem to have been imported into this decision directly from other decisions relating to the registration of the shape of goods before the ECJ, with Storck being referred to explicitly.

Uncertainties on scope of retail services

Intriguingly, the ECJ seems to have considerably muddied the waters of what does and does not constitute a protectable form of retail service in its deliberations – a question which, to a degree, seemed to have been determined previously to the satisfaction of all.

In dealing with the question of whether services intended to induce consumers to purchase the applicant’s products can constitute ‘services’ within the meaning of Article 2, Apple submitted that this case corresponded to the Praktiker Bau- und Heimwerkermarkte decision (C-418/02, EU: C:2005:425, paragraphs 34 and 35) – the key case on the registration of trademarks for retail services.

However, the commission considered that such case law could not be transposed directly into the situation at hand, in which the sole objective of the services was to induce the consumer to purchase the applicant’s products. One can only presume that the commission envisaged that the retail format was a promotional cocoon whose sole purpose was to promote the retail services which Apple had placed within it.

The ECJ held that where services do not form an integral part of the offer for sale of those goods, certain services (eg, demonstration services by means of seminars for products) could constitute services falling within the concept of a ‘service’ under the directive.

The ECJ’s finding on this point does not appear to have been analysed in any detail in the commentary to the case, having been overshadowed by headlines that a retail format is potentially protectable. The ECJ’s comments do seem to raise the possibility than that the service protection allowed would be more restrictive that for more standard retail trademarks with regard to the protection of retail formats. However, this would appear to be counterintuitive: if a retail store format does or is capable of acting as a trademark under the ECJ’s reasoning, why should it be treated differently from any other trademark? Indeed, the various decisions relating to registration of the shapes of products or their packaging, on which the ECJ seemed to place great weight in its deliberations, make clear that the registration of shape marks should be treated no differently from other trademarks, beyond the exclusions explicitly set out by the directive.

It is to be hoped that the German Federal Patent Court will shed further light on this particular aspect of the ECJ ruling when it issues its final decision.

Is the decision groundbreaking?

The ECJ decision has been heralded as groundbreaking by various commentators. However, a number of EU IP offices had already accepted the representation as being inherently distinctive, without needing to refer the matter to the ECJ. Further, the international trademark registration at issue is based on a granted US registration. It would appear that the German Patent Office was perhaps slightly behind in its analysis of the protection of retail formats when compared to other IP offices across the world. Therefore, the ECJ decision is not in itself groundbreaking.

However, what the decision has made clear is that the registration of retail formats as trademarks may be accepted at a pan-EU level, removing any doubt over the issue. Further, the decision may open the gates to other applications by retailers to register their retail formats.

There is also the question of whether the protection of such formats is justifiable on public policy grounds. The authors’ answer to such a question is a clear ‘yes’. If one were to ask anyone in the street to describe an Apple store, it is likely that the answer would be identical or nearly identical to the representation provided by Apple in its international registration. Further, one cannot overlook the fact that such retail formats are the subject of design registrations in both the United States and the European Union – indeed, Apple has recently achieved a design patent registration in the United States for its marquee store format on Fifth Avenue in New York. The extension of such rights to the field of trademark law does not seem a bridge too far.

Scope of protection of retail formats under trademark registrations

In many ways the decision raises many more questions than it answers – particularly with regard to the scope of the protection of such rights and their enforceability – which will no doubt be the subject of further references to the ECJ.

What is a departure from the ‘norms or customs’ of the retail sector to warrant the registration of a retail format? The Federal Patent Court suggested in its initial deliberations that it felt that the Apple retail format consisted of features that distinguished it from the usual layout of retail stores in the electronics sector. Is that a departure from the norm or customs of the retail sector? If one makes an analogy to the protection of shapes and the shape of packaging, which was a theme running through the ECJ decision, many practitioners would argue that it is extremely difficult to obtain protection for such shapes based on existing ECJ case law. Are retail formats to be treated in the same way?

What about prior rights and issues of validity? The Apple registration is one of the first registrations of retail formats in the European Union, at least in the countries where it has been accepted to date and presumably, in time, in Germany. It is notable that invalidity under the Trademarks Directive is based on prior statutory rights, such as trademark and design rights or unregistered rights. However, there are by definition few preceding statutory rights on record for such formats. Could a prior rights holder possibly claim rights to a format under unregistered design rights, copyright or common law trademark rights such as passing off?

Further, what constitutes a similar sign to a retail format for the purposes of enforcement? Traditional comparisons based on phonetic and conceptual meanings are not suitable. One can make a visual comparison, but will this be akin to the comparison for registered designs of infringement being found when the formats give the same overall impression to the informed user? Will the designer’s freedom be taken into account? Will the formats currently and previously on the market be taken into account in any comparison?

Interestingly, the fourth question referred to the ECJ by the Federal Patent Court did deal with the question of the scope of protection of such formats. However, the ECJ explicitly refused to answer this on the basis that it did not deal with the subject matter of the main proceedings before the German court. However, the authors would contend that this question will once again be raised in future cases on the subject of retail formats and will then have to be answered by the ECJ.

Conclusion

The decision is groundbreaking to a degree, in that it has clearly found that retail formats are capable of being registered as trademarks at a pan-European level. However, retailers still have to overcome the second hurdle of the registration of retail formats with regard to arguments as to whether they are inherently distinctive or distinctive by use.

It will be interesting to see in the future how the court deals with many of the outstanding questions raised by this decision. What is a similar trademark in the field of retail formats? What is the scope of protection of such formats? How does one deal with prior rights and issues of invalidity? It is possible that aspects of design law may creep into trademark registrations for retail formats, most notably dealing with questions dealing with ‘overall impression’. However, these questions are for the future.