The background of the dispute at hand
Over the past three decades, Nestlé have been successfully marketing its Nespresso system, which has two basic components: Nespresso coffee machines and Nespresso capsules. Next to various patents relating to the machines and the capsules, which have all expired by now, Nestlé have registered a 3D trade mark for the shape of the capsule in Switzerland in 2000 (Swiss trade mark Reg. No. P-486 889, registered for "coffee, coffee extracts and preparations on the basis of coffee").
Ethical Coffee Company, a small Swiss company, developed a biodegradable coffee capsule (based on vegetable fibers and starch) compatible with the Nespresso system. The capsules were first sold in Switzerland at the end of September 2011.
(Credit: Ethical Coffee Company (Suisse) SA)
Shortly afterwards, Nestlé at first secured a preliminary injunction prohibiting Ethical Coffee Company from distributing its capsules in ex parte proceedings, based on their registered 3D mark. This decision was eventually overturned by the Swiss Supreme Court on procedural grounds and the lower court, in a second decision in 2014, rejected the request for preliminary injunction on the grounds that the shape of the capsule was technically necessary and thus excluded from trade mark protection according to Art. 2 lit. b of the Swiss Trade mark Protection Act (TmPA).
Simultaneously, in 2012, Nestlé sued Ethical Coffee Company in the main proceedings and requested a permanent injunction against the distribution of the capsules. Ethical Coffee Company countersued for invalidity of the 3D trade mark. These first instance proceedings only came to an end in 2020, having suffered significant delays due to the insolvency of Ethical Coffee Company. The court of first instance ultimately rejected Nestlé's request for injunction and invalidated their 3D trade mark for the Nespresso capsules. Nestlé appealed this decision to the Swiss Supreme Court - which has now drawn the final line in this epic saga.
The decision of the Swiss Supreme Court
On 7 September 2021, the Swiss Supreme Court rejected Nestlé's appeal (see here for the decision in French). In its decision, it elaborated at length on the origins of the exclusion of "shapes of the goods or their packaging that are technically necessary" from trade mark protection according to Art. 2 lit. b TmPA.
The Swiss Supreme Court pointed out that the notion "technically necessary" originates from its case law with regard to unfair competition law according to which even a slavish imitation of a product's design is permissible if the design is technically necessary. In Swiss trade mark law, a shape is "technically necessary" (1) if there is no alternative shape for a product of the same kind available, or (2) if adopting such alternative shape cannot reasonably be required from a competitor in the interest of a functioning competition. The latter is the case if the alternative solution is less practical (less convenient), less robust (less resistant) or has higher production costs (more expensive) since competitors cannot be expected to give up the most obvious and adequate solution.
In its past decisions, the Swiss Supreme Court always held that the range of possible alternative shapes was not limited to those compatible with a preexisting system (see here for its decision on Lego's plastic bricks in German). However, this legal position was reversed in the present decision: A majority of Swiss scholars challenged this position, and contended that the compatibility of a product with a preexisting system may very well represent a "technical necessity" in the sense of Art. 2 lit. b TmPA. The scholars argued that, in the interest of competitors, but also consumers, the possibility to register 3D trade marks shall not enable unlimited monopolies for technical solutions which are not (or not anymore) protected by intellectual property rights. The Swiss Supreme Court now followed these arguments.
The Swiss Supreme Court found that Nestlé's patent for its Nespresso capsules expired in 1996 in Switzerland and in 2005 in the EU. Moreover, Nestlé sells its Nespresso capsules for a relatively expensive price, whereas the Nespresso machines are comparatively inexpensive. The Swiss Supreme Court therefore concluded that competitors, also in the interest of consumers, must be free to design capsules which are compatible with Nestlé's Nespresso system.
The Swiss Supreme Court then went on to examine possible alternative shapes to Nestlé's Nespresso capsules, which are compatible with the Nespresso coffee machines, based on expert reports provided by the parties. It determined that the alternative capsule shapes do not offer a functioning and result equivalent to the Nespresso capsules, since they do not fully correspond to the capsule department of the Nespresso coffee machines. Therefore, although there are alternative shapes available, the Swiss Supreme Court arrived at the conclusion that competitors cannot reasonably be required to adopt such alternative shapes. As a consequence, the shape of Nestlé's Nespresso capsules is excluded from trade mark protection since it is "technically necessary" according to Art. 2 lit. b TmPA.
Consequences for the registration of 3D trade marks in Switzerland
Whereas the wording of Art. 2 lit. b of the Swiss TmPA, which stipulates the exclusion of "technically necessary" shapes from protection as 3D trademarks, does not differ significantly from Art. 7.1 EUTMR, its interpretation does. Thus, according to the case law of the Court of Justice of the European Union, a shape is excluded from trade mark protection, if all its essential characteristics fulfil a technical function, independently of other possible shapes. Contrary to this, the Swiss Supreme Court states that a shape is only excluded from protection as a 3D trade mark, if there is either (1) no alternative shape available or (2) if adopting such alternative shape cannot reasonably be expected from competitors.
In addition to this, for a long time, the range of possible alternative shapes was more or less infinite, since the Swiss Supreme Court held that the range of possible alternative shapes was not limited to those compatible with a pre-existing system. In the present decision, the Swiss Supreme Court has now reversed its standing case law: It determined that if technical solutions are not (or not anymore) protected by intellectual property rights, their protection cannot be extended by registering them as 3D trademarks. Thus, once the intellectual property protection of these technical solutions has expired, companies must be free to sell products which are compatible with technical solutions sold by their competitors. As a consequence, the range of possible alternative shapes is in principle limited to those compatible with the pre-existing system of a competitor, which will make it more difficult in the future to register 3D trade marks in Switzerland, thus aligning the Swiss standards with those in the European Union (as was, by the way, also the intention of the legislator when drafting Art. 2 lit. b TmPA).