As Kit Kat, Starbucks and Posh Spice rulings show, intellectual property is big but bittersweet business

Stephen Vines says as the importance of trademark protection to the global trade agenda grows, Hong Kong’s rule of law advantage over mainland China is apparent

PUBLISHED : Wednesday, 01 August, 2018, 12:01pm
UPDATED : Wednesday, 01 August, 2018, 10:34pm

What is the difference between Nestlé’s Kit Kat and the Toblerone bar manufactured by Mondelez?

Existential questions of taste, texture and maybe even cocoa content can obviously come into play when answering this question. But considerations of this kind are for chocolate aficionados. Here on the business pages, perhaps lamentably, less lyrical matters must be considered.

The reason being that the European Court of Justice has recently decided that there will be no European Union-wide trademark protection for what was described in court documents as “four trapezoidal bars aligned on a rectangular base”, aka Kit Kat.

Unlike Nestlé, Mondelez had managed to trademark its “zigzag prism”-shaped Toblerone bar. Moreover, as the owner of the Leo and Kvikk Lunsj confectionery brands, offering chocolate bars that are similar in appearance to Kit Kat, Mondelez was happy to see Nestlé falter in its long-running battle for exclusive rights to the Kit Kat shape.

The court ruling is a landmark in Nestlé’s 16-year battle over Kit Kat but it is unlikely to be the end of the road as makers of branded products take trademark matters very seriously. After all, vast sums of money are at stake.

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Usually, epic trademark battles are between Davids and Goliaths, as in the case of Starbucks versus Sambucks, when the American chain succeeded in preventing a coffee shop owner in Oregon from using the word “buck” in any of her store products. The owner’s name is Sam Buck Lundberg.

The ubiquitous fashionista and sometime singer Victoria Beckham (yes, wife of footballer David Beckham) had less luck in trying to prevent the Peterborough United football club from registering the word “posh” as its trademark, on the grounds that she had been known as “Posh” in the Spice Girls band and it was attached to her fashion brand. The football club successfully countered that Peterborough FC had used this nickname since the 1930s.

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In China, global brands have been far less successful in protecting their trademarks and have ended up paying Chinese companies for the right to use the Chinese translations of their names.

The mighty Apple, for example, had to hand over US$60 million to mainland-based Proview International for the right to use the iPad trademark in China.

On the other side of the coin, a Chinese company called Qiaodan, the transliteration of the name “Jordan”, created a whole range of branded products using the name and image of the former Chicago Bull star Michael Jordan, even including his jersey number 23 and a logo suspiciously similar to that found on Jordan’s own sports products. A four-year battle in the Chinese courts gave Jordan a partial victory in 2016 but the losing side still retained rights to use a version of the Jordan name.

Watch: Michael Jordan wins rights to his name in China

Chinese trademark law is still very much in the process of evolution and the time it is taking to develop is causing much vexation among international branded goods companies. They are also still engaged in attempts to curb outright trademark and intellectual property theft, which is supposed to have been largely stamped out, but as anyone familiar with hawkers on streets of mainland cities knows, this battle is far from over.

Hong Kong has better established and less complex trademark laws and rules but the local regime is hardly exemplary, as applications for trademarks are known to drag on for a long time and there seems to be a rather quixotic approach to what are regarded as being generic names, as opposed to specific names that apply to individual brands.

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For example, while the law does not seem to allow a trademark to be synonymous with a specific industrial product, the group of companies founded by Stanley Ho Hung-sun, has a trademark for TurboJET. Hong Kong Airlines, controlled by the mainland-based HNA group, also has a name that appears to be suspiciously generic yet is registered.

It’s a near certainty that smaller companies attempting registration of names like these, without the benefit of a battery of lawyers, would have a smaller chance of success in establishing their trademarks.

The issue of trademarks is one of the biggest aspects of intellectual property protection, which is climbing the agenda of both global trade talks and the concerns of individual companies.

While it sometimes appears to be amusing to observe highly paid legal experts wrangling over whether, for example, the distinctive triangular shape of a Toblerone bar is worthy of trademark protection, much is at stake.

What matters is recognition of intellectual property rights and adequate enforcement of these rights. As ever, it comes down to how far the rule of law prevails. Those who are relaxed about the convergence of the Hong Kong and mainland legal systems need to consider the breadth of implications such convergence entails.

Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster