The Swiss Federal Supreme Court confirms cancellation of the shape mark for Nespresso capsules. It was absolutely impossible to register a technically necessary shape, even if it had become established as a trade mark in the market.
The trademark dispute over the well-known Nespresso capsules from Nestlé (Switzerland) has been going on for years, including in Germany. Nestlé had already registered the shape of the Nespresso capsule as a Swiss trade mark in 2000 (number 486 889) and extended this Nespresso trade mark protection internationally (IR trade mark) via the Madrid System of the World Intellectual Property Organization (WIPO), including in EU member states. However, Nestlé was unable to obtain protection as an EU trademark; the EUIPO refused to register the trademark in April 2002 on the grounds that the shape had not acquired distinctive character.
In Germany, however, the trademark registration was accepted, and Nespresso capsules have been protected in Germany since April 2003. But, in summer 2014 the German Patent and Trademark Office (DPMA) decided to cancel the trademark protection for Germany. Since then, Nestlé has been fighting a legal battle in Germany against the Swiss Ethical Coffee Company, but so far in vain. The Federal Patent Court ruled in 2017 that the Nespresso capsules lose trademark protection in Germany. Nespresso capsules were a packaging container with a design only for technical reasons. The Packaging is to be equated with the shape of the goods.
The cancellation request had been filed by Ethical Coffee Company (Switzerland), which developed a biodegradable coffee capsule with a similar shape that is compatible with Nespresso machines. As a result, Nestlé had filed a lawsuit against Ethical Coffee, in Germany – and likewise in Switzerland.
Trademark dispute Nespresso capsules in Switzerland
In Switzerland, Nestlé had claimed that Ethical Coffee had infringed its trademark rights and the UWG by distributing its capsules (Art. 55 para. 1 MschG; Art. 9 para. 1 UWG). In a counterclaim, Ethical Coffee requested the cancellation of the Swiss Nespresso trademark. The registered trademark was invalid because it was a technically necessary shape within the meaning of Art. 2 lit. b. MSchG.
And the Ethical Coffee Company was successful with its counterclaim.
The civil court of first instance in the canton of Vaud dismissed Nestlé’s claim and ordered the cancellation of the Nespresso capsules shape mark at the Swiss Federal Institute of Intellectual Property (IPI). In particular, Nestlé had failed to prove that the allegedly public domain shape had become established as a trade mark in the course of trade.
Nestlé appealed against this decision, which has now (7 September 2021) been decided by the Swiss Federal Supreme Court.
In its ruling, the Swiss Federal Court confirmed the cancellation of the Nespresso capsules shape mark, but justified this differently from the lower court, because the absolute ground for exclusion already arose from Art. 2(b) of the Swiss Trademark Act. It was absolutely impossible to register a technically necessary shape, the Federal Supreme Court ruled, even if it had become established as a trade mark in the market. The technical necessity in the present case took precedence over the assertion in the market according to 2 lit. a. MSchG, ruled the Swiss Federal Supreme Court. Trade mark law contributes to the smooth functioning of competition, so that it is justified to also take competition law considerations into account when clarifying the question of technical necessity.
The Swiss Federal Supreme Court explicitly referred to a similar provision as Art. 2(b) of the Swiss Trademark Act in European law (Art. 4(1)(e/ii) of EU Directive 2015/2436).
Compatibility of the capsules – technical necessity?
But was this a technical necessity at all? The compatibility of a product, in this case the use of third party capsules in Nespresso coffee machines, could be the basis for a technical necessity within the meaning of Art. 2 lit. b. MSchG, the Swiss Federal Court explained. A technical necessity exists if a competitor has no alternative form at all (technically) for a product of the type in question or cannot be expected to do so in the interest of functioning competition.
Interests of consumers prevail
In other words, the monopoly of the owner of the shape mark was only permissible if equivalent alternative shapes were available to competitors – without additional production costs. Incidentally, this was also in the interest of consumers, the Swiss Federal Supreme Court added. Nespresso capsules are only sold on the internet and in Nespresso shops at a relatively high price, the Swiss Federal Supreme Court explained, while a simple Nespresso coffee machine is not very expensive in relation. In this context, competitors should be free to produce capsules that are compatible with the Nespresso system, provided they behave fairly.
The interests of the consumer prevail even if the original manufacturer practices poor value for money, even if it makes less profit on the sale of the main product (in this case the Nespresso machine) than on the accessory product, the price of which appears high.
The Swiss Federal Supreme Court therefore confirmed the judgement of the lower court and the cancellation of the Swiss shape mark Nespresso capsules.
Ethical Coffee now insolvent and in bankruptcy
The case also contains another interesting side aspect: The two companies of Ethical Coffee have meanwhile – on 12 November 2018 – been declared insolvent; bankruptcy proceedings have been opened over their assets.
In Germany, this had an impact on the appeal against the BPatG’s decision – the BGH ruled in 2019 that the trademark proceedings should be interrupted by the insolvency.
In Switzerland, on the other hand, the Waadt Civil Court decided to resume the trade mark proceedings. The plaintiffs had an interest worthy of protection to proceed against the bankruptcy estate of Ethical Coffee Company SA, the court ruled, just as the latter had an interest in having the invalidity of the trademark established.
With its judgement, the Swiss Federal Supreme Court has now rejected Nestlé’s appeal in its entirety (4A_61/2021).
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