A year of firsts in Singapore

Last year was a year of firsts for trademark law and practice in Singapore. Several unprecedented decisions were issued by the Trademark Registry at the Intellectual Property Office of Singapore, as well as by the courts. This review highlights two interesting High Court decisions, which are instructive for brand owners as well as practitioners in formulating their approaches to trademark protection and enforcement.

Protection for shape marks

The show stealer of the year was undisputedly the High Court decision in Société Des Produits Nestlé SA v Petra Foods Ltd ([2014] SGHC 252). In this case, the court provided a detailed analysis of the applicable principles for the protection of shapes as trademarks and highlighted the importance of maintaining documentary evidence to prove ownership when asserting copyright infringement.

The plaintiff belongs to the Nestlé group of companies, while the defendant belongs to the Petra Foods group. Nestlé is the registered owner of two-finger and four-finger shape marks in Class 30 and asserted ownership of copyright in the design of the packaging for its KitKat bars, which carries a representation of a two-finger bar (the artistic work). Petra Foods manufactures, imports and distributes a chocolate product under the trademark TAKE-IT or DELFI TAKE-IT. Take-It is also sold in two-finger and four-finger packs, with a representation of the bars on its packaging. Nestlé brought an action against Petra Foods for trademark infringement in relation to its registered shape marks and copyright infringement in its artistic work.

The court invalidated Nestlé’s registered shape marks, under the technical result exception set out in the Trademarks Act, finding that they were devoid of any inherent or acquired distinctiveness. The registered shape marks were also susceptible to revocation for non-use, as they were found not to have been used as trademarks. The copyright infringement claim also failed, as Nestlé was unable to establish the chain of title of ownership to the artistic work.

Shapes as registered marks

Under the act, a shape cannot be registered as a trademark where it consists exclusively of the shape of the goods and this is necessary to obtain a technical result. The High Court identified that the essential characteristics of the registered shape marks were the rectangular slab, the presence of breaking grooves and number of grooves and fingers. It also confirmed that each of these features was necessary for a specific, though different, technical result. The rectangular slab was necessary for efficient manufacture; the grooves to facilitate the chocolate bar being broken up; and the number of grooves and fingers to achieve the desired portion size. As such, the technical result exception applied and the registered shape marks could be invalidated on this basis.

Further, the court held that the registered shape marks were also devoid of distinctive character, as they did not inherently indicate trade origin. Nestlé tendered survey evidence to prove that the registered shape marks had acquired distinctiveness through years of use. However, the court took issue with the methodology of the survey and gave it little weight, finding that the evidence was insufficient to conclude that the registered shape marks had acquired distinctiveness, as the shape marks had always been used together with the KITKAT mark and it was this that was recognised by customers. In addition, the chocolate bars were wrapped in foil and thus the shape was not visible to the customer at the point of purchase.

Revocation for non-use

The High Court also held that the registered shape marks were susceptible to revocation on the basis of non-use.

On the evidence before it, the court found that the registered shape marks had not been used in a trademark sense – that is, as a badge of origin. KitKat products are sold in opaque wrappers, which means that the actual shape of the products has no trademark significance at the point of sale. With respect to the image of the registered shape marks, which appeared in a modified form on the packaging, this was found to be a descriptive use as it merely illustrated the goods being sold and served to attract customers. In addition, even when the product was unwrapped for consumption, the KITKAT mark featured prominently.

Shapes as well-known marks

Nestlé also argued that its registered shape marks should qualify for protection under Section 55 of the Trademarks Act, as they were well-known marks. In this regard, the court considered the definition of “any unregistered trade mark that is well known in Singapore”.

The court held that there is a fundamental difference between a mark being unregistered and unregistrable on one of the grounds set out in Section 7. Since in this case the registered shape marks were inherently unregistrable under Section 7, Section 55 could not afford them protection as well-known marks.

Copyright infringement

Nestlé further claimed that it owned copyright in an artistic work, which had also been infringed by Petra Foods. The court held that in order to argue a claim for copyright infringement, Nestlé first had to show that it owned the copyright by proving a chain of title from the original owner to itself. In this regard, Nestlé tendered little evidence and this was insufficient to convince the court of its ownership in the artistic work. Accordingly, Nestlé’s claim of copyright infringement was dismissed.

This case highlights some of the potential limitations of shape mark protection. Rights holders seeking such protection should be mindful of the manner in which shape marks are used in practice. It remains to be seen whether Nestlé will appeal it. If it does, the Court of Appeal’s judgment will be much anticipated.

Statutory damages for counterfeits – Converse v Ramesh Ramchandani

In Converse Inc v Ramesh Ramchandani ([2014] SGHCR 11) the High Court awarded the plaintiff the unprecedented sum of S$100,000 – the maximum amount of statutory damages available under Section 31(5) of the Trademarks Act. The case related to 13,716 pairs of shoes, which were seized from a container that had passed through Singapore and was finally stopped in Rotterdam. The plaintiff brought an action for trademark infringement and passing off against the defendants for dealing in counterfeit high-cut Chuck Taylor All Star canvas shoes and elected to seek statutory damages against the defendants.

The remedy of statutory damages is alternative and complementary to the existing remedies (eg, general damages or account of profits), and is appropriate in cases where the plaintiff has difficulty proving its loss because the infringer has offered no evidence of its activities or gains.

The High Court noted that Section 31(5) gives the courts wide discretion to award an appropriate amount of damages upon considering the factors set out in Section 31(6) and giving proper weight to the evidence put forward by the parties to establish these. These factors are:

• the flagrancy of the infringement;
• any loss that the plaintiff has suffered or is likely to suffer as a result of the infringement;
• any benefit shown to have accrued to the defendant by reason of the infringement;
• the need to deter other similar instances of infringement; and
• all other relevant matters.

The court noted that the plaintiff’s damages could be broadly summarised as loss of royalties, loss of reputation and other intangible losses (eg, damage to the mark’s commercial value) and benefits which would have accrued to the defendants.

Of these, the court accepted the plaintiff’s submissions only in respect of loss of royalties. It observed that the plaintiff had offered no real evidence to show the loss of reputation – only bare assertions had been made.

In the ultimate analysis, the court accepted the following submissions and awarded statutory damages of S$100,000:

• The plaintiff would potentially have suffered a loss of S$46,226.40 in respect of royalties which it would otherwise have imposed on the defendants as hypothetical licensees.
• In principle, the exclusivity of the plaintiff’s brand had been diluted and the price eroded, with the corresponding loss of reputation and damage to the commercial value of its trademark.
• The defendants would likely have profited or benefited from the infringement to a greater extent than the evidence showed (in no small part due to the defendants’ failure to disclose relevant evidence).
• The defendants were experienced dealers in counterfeit goods and had been selling counterfeits on an organised and regular basis for some time. They knew that they were infringing the plaintiff’s trademark and that such infringement was flagrant.
• There was a clear need for deterrence in this case.

This case is instructive in its interpretation of the provisions in relation to statutory damages in counterfeiting cases. Where a plaintiff does not adduce sufficient or convincing evidence in this regard, it runs the risk that the court will accord little, if any, weight to it, which will affect the amount of statutory damages that can be recovered.