Consumer Value as the Key to Trade Mark Functionality
| Published date | 01 May 2022 |
| Author | Ilanah Fhima |
| Date | 01 May 2022 |
| DOI | http://doi.org/10.1111/1468-2230.12709 |
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Modern Law Review
DOI:10.1111/1468-2230.12709
Consumer Value as the Key to Trade Mark
Functionality
Ilanah Fhima∗
This article identies the central role of consumer perceptions of value in design and marketing
literature.Relying on this literature,it proposes changes to our legal understanding of functional-
ity,the doctrine denying trade mark protection to technical and other features traders must access
in order to compete.Marketing and design literature explains that consumers approach dierent
values inherent in products holistically,inuenced by emotional resonance.Thus, in the context
of a developing body of interdisciplinary trade mark scholarship,I advocate a move away from
trade mark law’s formalistic approach to functionality, where technical and aesthetic product
values are treated as distinct.Instead I argue for a single consumer-focussed competition-based
functionality exclusion, centred around the ‘substantial value’ exclusion to registration.
INTRODUCTION
Trade marks tell consumers about the commercial origin of goods. Most often
words or logos axed to goods will perform this function (think of COCA
COLA or the NIKE swoosh device), but a trade mark may comprise of any
aspect of the goods, including their shape, colour, pattern, the position of fea-
tures on goods or even the way in which the product’s components move.
This presents a challenge to the existence of a competitive market. Granting
trade mark rights in product characteristics potentially places certain product
attributes, concerning how a product works or what makes it appealing to con-
sumers, into the hands of a single undertaking. A party that secures a trade mark
registration for such a product feature may obtain a competitive advantage at
the expense of its rivals operating in the same product market.Competitors are
disadvantaged if they are unable to oer goods which include the characteris-
tics that consumers seek and registration then restricts the consumer’s choice
of supplier for equivalents products. Thus, trade mark law denies protection
for certain characteristics of goods in the interests of free competition. This
exclusion is known as the ‘functionality’ exclusion.
Historically the functionality exclusion has been divided into two forms.
Utilitarian or technical functionality relates to how a product works. Aesthet-
ical functionality broadly relates to the product’s visual appeal. This moniker
∗Professor of Intellectual Property Law, Co-director,Institute of Brand and Innovation Law,Faculty
of Laws, University College London. I would like to thank Annette Kur and Antoon Quaedvlieg
for their helpful comments, as well as Alexander von Mühlendahl for his insights into the drafting
process of the Trade Mark Directive. Thanks also to Lynne Chave for research assistance.
© 2022 The Author.The Modern Law Review © 2022 The Modern Law Review Limited. (2022) 85(3) MLR 661–696
Consumer Value and Trade Mark Functionality
though does not fully capture either the extent of the competitive interests
triggered, or of the exclusion in European trade mark law.What is often classed
as the European version of aesthetic functionality excludes characteristics which
‘add substantial value’ to the goods. On its face, this would seem to go beyond
the visual. Yet, what constitutes ‘value’ or when that value will be substantial
are not adequately dened in the law or literature. Attempts to dene ‘value’
to date have relied on formalist notions of what should be excluded from trade
mark protection. These focus on the appearance of products, which is treated
as a separate question from how products work. However,a review of the aca-
demic legal literature and the jurisprudence in this piece reveals a common aim
at the heart of both forms of functionality: to prevent trade mark protection
of product features that competitors need to access in order to compete with
each other. Nevertheless, the question of which product character istics, beyond
those which are technical in nature, need to remain free from trade mark mo-
nopolisation has not been convincingly addressed by the Court of Justice of
the European Union (CJEU) in its attempts to dene the various forms of
functionality.
It is argued in this piece that the current legal approach to value fails to re-
ect the reality of how consumers make product selections.The product design
and marketing literature both recognise that consumers seek technical,aesthetic,
cultural, sensory and many other features in products on an equal basis and are
guided as much by emotional responses as rational decisions based on technical
advantages or aesthetic preferences. The marketing and product design schol-
arship explains that consumers adopt a holistic approach which not only blurs
the boundaries between ‘the utilitarian’ and ‘the aesthetic’ but also embraces
wider forms of value. It is argued that this interdisciplinary understanding of
‘consumer value’ should inform how trade mark law understands ‘substantial
value’. This exercise forms part of a growing literature in which trade mark
scholars look to interdisciplinary approaches to conceptualise trade mark law,
and the notion of value in particular, on a ‘real world’consumer-centr ic rather
than formalist basis.
It is argued that the marketing and design literature demonstrates that it is
what consumers value that is determinative of the features that should be keptfree
because consumers will seek (and designers will incorporate into their product
designs) features that they value and reject products that do not incorporate
those values. Moreover it is argued that, because of the holistic way in which
consumers view product features, the most appropriate way in which to pre-
vent such valuable product features from being registered is to adopt a single
functionality exclusion, based on value. This is because consumers’ assessment
of value, whether technical, aesthetic, sensory, cultural or in a dierent for m, is
not reected in how current trade mark law divides technical and value-based
functionality.
The article begins with an outline of the EU provisions that exclude func-
tional product characteristics from trade mark registration. It then considers
dierent rationales that have been oered for the substantial value exclusion,
arguing that these either oer only a partial explanation for the inclusion of the
provision,are not directly relevant in the EU context,or say more about what
662 © 2022 The Author.The Modern Law Review © 2022 The Modern Law Review Limited.
(2022) 85(3) MLR 661–696
Ilanah Fhima
the rationale is not,rather than its raison d’être.Next,it discusses how the CJEU’s
case law has dened and justied the substantial value exclusion,comparing this
with the policy basis identied for the other clauses of the functionality exclu-
sion. It is argued that, in fact, the policy underlying all the functionality clauses
is to ensure that competitors have access to competitively necessary features.
This then begs the question: what features do competitors need to be able to
access? This is a question the CJEU has not satisfactorily answered. It is argued
that we can seek this answer in product design and marketing literature. This
demonstrates that competitors need to be able to use ‘valuable’product features,
where value may reside in aesthetic features, features that are inherent to how a
product works, features that make a product work better, or indeed in any other
product feature. It is argued that the wide-ranging and holistic view of value
identied in this literature suggests an expansive approach to value (a course on
which the CJEU has already embarked),but also one which advocates a single,
integrated provision barring the registration of valuable product features with
what consumers value as its very heart. This would retain focus upon competi-
tors’ needs,while also removing articial distinctions between the functionality
clauses that have led to confusion and formalism. The ar ticle concludes with
some tentative ideas about how an exclusion based on value might work in
practice, so that a balance is struck between protecting competition and en-
suring that the exclusion does not serve as a de facto bar to registration for all
product features.
FUNCTIONALITY – A BRIEF OUTLINE
The Trade Mark Directive (TMD) and its equivalent legislation1specify three
situations in which a trade mark will be refused registration on functional
grounds. Article 4(1) (i) excludes a sign consisting of a shape,or another char-
acteristic of goods, resulting from the nature of the goods. Article 4(1) (e) (ii)
prevents the registration of the shape, or another characteristic of goods, which
is necessary to obtain a technical result. Article 4(1) (e) (iii) states that the shape,
or another characteristic of goods, cannot be registered if it adds substantial
value to those goods.All three exclusions apply only when the sign in question
consists ‘exclusively’ of a shape or other characteristic of goods that has one of
the excluded outcomes. This article focusses on the meaning of Article 4(1) (e)
(iii) in particular, and its overlap with Article 4(1) (e) (ii). It briey considers
the overlap between Article 4(1) (e) (i) and Article 4(1) (e) (ii). It will be argued
that the formalist distinction between the three dierent forms of functionality
identied in the three sub-articles does not accurately reect the core interest
that functionality should be seeking to protect: what competitors need access
to in order to compete, which in all three sub-articles is ultimately based on
what consumers value.
1 The functionality provisions of the TMD correspond to Art 7(1) (e) of Regulation (EU)
2017/1001 of the European Parliament and of the Council of 14/06/2017 on the European
Union trade mark [2015] OJ L 336/1 (EUTMR).
© 2022 The Author.The Modern Law Review © 2022 The Modern Law Review Limited.
(2022) 85(3) MLR 661–696 663
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