Back to Square one? General Court decision provides guidance on distinctiveness of composite marks

EU, UK

In a decision dated 20 October 2021, the General Court of the European Union (“GC”) has reaffirmed the requirements for the registration of a composite trade mark, i.e. one composed of both word and device elements. The decision is useful for brand owners, because it is often presumed (wrongly) that combining a descriptive word with some form of stylistic/design element (however simplistic) will, in tandem, suffice to secure registration. The General Court has emphatically rejected that proposition. Further, the decision is also instructive for practitioners, as it helps to clarify the circumstances in which grounds of appeal premised on a failure to provide reasons, equal treatment and the right to be heard, which are oft cited but rarely successful, may apply.

The facts

Square, Inc., the Californian-based digital payments company, had sought to register the following sign composed of both word and design elements at the European Union Intellectual Property Office (EUIPO):

Image LN article Intellectual Property

(the “Application”).  The Application was filed in relation to “downloadable software for enabling the transfer of financial instruments; downloadable software for providing discounts on products and services; downloadable software to enable transaction of value to be requested from or sent to others” (the “Goods”).

The Application was refused initially by the EUIPO in relation to all Goods, based on the (i) perceived lack of distinctive character and (ii) descriptiveness of the Application.

On appeal, the Board of Appeal (“BOA”) upheld the EUIPO’s decision, concluding that the Application would be perceived by the relevant public as indicating that the Goods “make it possible to transfer or to obtain cash as a result of a financial transaction, and not as an indication of the commercial origin of those goods”.

Square subsequently appealed the BOA’s decision to the GC. The appeal was premised on a number of grounds, the GC’s approach to which is instructive for brand owners and practitioners alike. Broadly speaking, the appeal grounds can be split into two categories, comprising alleged procedural deficiencies and the purported infringement of substantive legal provisions.

The GC’s approach

Alleged procedural deficiencies

The strategy adopted by Square’s counsel can be best summarised as taking ‘the kitchen sink’ approach. Indeed, the grounds of appeal are notable for the sheer number of procedural grounds relied upon, namely the BOA’s alleged failure to: carry out an independent and separate absolute grounds examination of the Application’s distinctiveness and descriptiveness; state reasons and afford the Applicant the right to be heard; and apply the principles of equal treatment and sound administration. It is common for these grounds to be relied upon in isolation, but rarer for them to be combined, as was the case here. It is also worth noting that, from experience, the EUIPO, BOA and GC tend to give relatively short shrift to procedural complaints.

An argument often relied upon by applicants when contesting absolute grounds refusals is the acceptance of an identical/similar mark in an analogous trade mark jurisdiction. Again, these arguments are rarely accepted, as the EU trade marks regime is an autonomous system, so the fate of a comparable mark does not bind the EU judicature. In this case, Square submitted that the EUIPO’s failure to take into account the acceptance of an equivalent UK application amounted to an infringement of the principles of equal treatment and sound administration. As expected, the EUIPO dismissed the claim in short order. Practitioners may wish to consider the merits of including such arguments in the future (at least before the EUIPO/BOA/GC), as forlorn lines of appeal tend to reflect negatively on the perception of the appeal as a whole.

Square also alleged that the BOA had failed to state reasons for its decision, as it framed the refusal of the Application generally, in relation to the Goods as a single category rather than as individual items.  Further, in Square’s estimation the BOA did not explain why the Goods were “interlinked in a sufficiently direct and specific way in order to form a sufficiently homogeneous category or group of goods”. The GC summarised the BOA’s assessment of the Goods and noted that, contrary to Square’s claims, it had identified that the Goods did indeed present a homogeneous characteristic, namely that they could all be used to carry out a financial transaction or to access discounts, so perform the same functions. The Applicant had not presented any arguments that could call the BOA’s assessment into question, so the GC concluded on that basis that it had not erred as alleged.

The GC went on to examine the Applicant’s conjoined ground of appeal, namely that it had not been given the opportunity to be heard. The Applicant complained that the BOA refused the Application solely on the basis of Article 7(1)(b) EUTMR (distinctiveness), whereas the EUIPO examiner had objected to the mark principally on descriptiveness grounds, pursuant to Article 7(1)(c) EUTMR. In the contested decision, the BOA stated that as the mark was descriptive, it was necessarily devoid of distinctive character too. In making this statement, the Applicant claimed that the decision had been made on the basis of a ground of refusal that had not been pleaded on a standalone basis in the examiner’s original decision.

Contrary to the Applicant’s submission, the GC held that both the original ex officio refusal, as well as the examiner’s final decision, had been based on articles 7(1)(b) and (c). Although the BOA had refused the Application solely on the basis of distinctiveness grounds (7(1)(b)), that line of refusal had also been adopted in the original refusals. Consequently, in the GC’s estimation, the Applicant had been given the opportunity to challenge the examiner’s position on distinctiveness in its appeal to the BOA.  Further, the GC also pointed out that the Applicant had in fact contested the ex-officio decision by addressing the question of distinctiveness. Accordingly, the GC concluded that the Applicant had not been deprived of its right to be heard, thereby dismissing its complaint.

The final procedural ground of appeal that the GC was asked to consider was premised on the allegation that the BOA had failed to carry out a separate and independent examination of Articles 7(1)(b) and (c) respectively. In particular, Square complained that when reaching its conclusion that the Application was devoid of distinctive character pursuant to Article 7(1)(b), the BOA had assumed that the Application was descriptive.  The GC reviewed the reasoning of the BOA and noted that unlike the original examination refusal, which was based on articles 7(1)(b) and (c), the BOA’s decision was founded on 7(1)(b) alone. Consequently, the GC went on to examine whether the BOA had conducted an independent analysis of the ground of refusal relied upon in the contested decision. The GC found a number of instances in the contested decision where the BOA had opined on the distinctiveness of the Application. As such, the GC was satisfied that the BOA had conducted an independent analysis of the ground of refusal under 7(1)(b).

Alleged substantive deficiencies

While the procedural grounds pursued by Square are instructive, particularly for practitioners, it is the GC’s commentary on the substantive grounds of appeal that are probably most relevant from a brand owner’s perspective. In essence, the Applicant alleged that when assessing the distinctiveness of the Application, the BOA had only considered the mark’s design and word features in isolation, rather than as a whole. If the BOA had subsequently assessed the distinctiveness of those features in concert, it would – in the Applicant’s submission – have been compelled to have found the mark distinctive. In any event, the Applicant claimed that the BOA had erred in finding the individual components devoid of distinctiveness.

The GC reviewed the BOA’s analysis and found that while it had assessed the Application’s individual elements in turn, finding consequently that taken separately they were devoid of distinctive character, it then went on to conduct an overall assessment of the mark. In particular, the BOA’s conclusion that the relevant public would perceive the Application ‘as a whole’ as an indication that “the software makes it possible to transfer or to obtain cash, i.e. money, as a result of a financial transaction or a discount” was seemingly fatal to the Applicant’s complaint.

The GC also reviewed the distinctiveness of each of the individual components of the Application, which had been held by the BOA to comprise a dollar symbol represented on a green square with round corners, and the word element CASH APP situated outside the square. The GC again sided with the BOA, which had found that the square with rounded corners was a ‘very simple geometric shape’. The rounded corners themselves were not an unusual design feature and therefore would have no impact on the perception of the public.

The GC also agreed with the BOA’s conclusion that, in view of its use on US dollar banknotes, the colour green in association with the dollar sign could evoke a ‘general connection with finance’. Further, even though the dollar sign represented in the Application did not feature parallel vertical strokes, that would not – in the GC’s view – preclude the relevant public from associating it with the dollar symbol.

Taken together, the GC stated that the figurative element of the Application would be perceived by consumers as an application on a mobile device. Moreover, the use of the colour green together with the dollar symbol would simply denote to consumers that the application in question concerns money, so would not act as a commercial indication of origin. Finally, the GC agreed that the word ‘cash’ would be understood to mean ‘money in physical form, namely banknotes and coins’. Accordingly, the GC held that BOA’s assessment of the Application’s distinctiveness had been conducted accurately, thereby leading to the dismissal of the Applicant’s ground of appeal.

Key take-aways

When the Application was coined, Square no doubt presumed that notwithstanding the clearly descriptive wording and non-distinctive design features, the mark as a whole would be considered sufficiently distinctive to warrant registration.  Indeed, there is a widely-held perception that a descriptive word mark can be ‘saved’ by combining it with a logo/design element, even where the design feature is, itself, not particularly novel or unique. Although as a starting point, the EUIPO makes clear that the threshold for demonstrating distinctiveness is low, this decision reinforces that there must still be some element present that is capable of acting as a badge of origin. In that sense, the decision is instructive for both brand owners and practitioners. Brand owners should be aware that, at least in the absence of evidence of acquired distinctiveness, composite marks comprised of descriptive words and simple design features may not be registrable. Practitioners will no doubt adopt a more cautious approach when advising clients on the registrability of such marks.

Marketing teams tend to adopt two approaches when devising a name/design for a new product/service: either employ a word/design that can be interpreted descriptively, or select an indication that has no association with the underlying products/services. The advantage of the former approach is that consumers are instantly educated to understand the brand offering – in that sense, far less investment is required to achieve consumer buy-in.  By contrast, although the latter option is likely to necessitate intensive marketing and investment in order to raise the brand profile, the long-term impact created by the brand may be stronger. This decision may therefore serve as useful food for thought for brand owners and their marketing teams when considering which approach to take.  Practitioners should work closely with marketing teams in the run-up to brand/product launches, with a view to determining: whether the intention is to secure exclusive rights in the name/design; the shelf-life of the product/service in question; the geographical markets targeted; the proposed enforcement approach to similar/identical marks/brands. By asking these questions, practitioners can ensure that their clients are fully aware of the risks/opportunities from a legal perspective, giving them the opportunity to revise their approach as necessary ahead of launch, and/or formulate a realistic prosecution/enforcement strategy.

Finally, this decision further indicates that procedural grounds of appeal based on an alleged failure to provide reasons, the right to be heard, and the principles of equal treatment and sound administration are very difficult to quantify in practice. Indeed, grounds of appeal that contain one or more of these allegations may – as a consequence – betray a certain lack of confidence in the appeal as a whole. In certain circumstances, practitioners may, therefore, consider foregoing such procedural complaints, with a view to focusing on the substantive legal position instead.