In its Judgment of 6 March 2014 in case C-409/12 Backaldrin Österreich The Kornspitz Company (Kornspitz), the Court of Justice of the EU (CJEU) has declared that a trademark is liable to revocation if, as a consequence of acts or inactivity of the proprietor, it has become the common name for the product from the point of view solely of end users of the product. The case interprets Article 12(2)(a) of Directive 2008/95 on the approximation of the laws of the Member States relating to trade marks (Codified version), which indicates that a trade mark is liable to revocation if "in consequence of acts or inactivity of the proprietor, it has become the common name in the trade for a product or service in respect of which it is registered". The contentious part of the provision concerned the interpretation of the term "trade".
In the case at hand, the professionals (intermediaries) in the Austrian baking sector are aware that 'Kornspitz' referred to a specific trademark for ‘flour and preparations made from cereals; bakery goods; baking agents, pastry confectionery, also prepared for baking; pre-formed dough … for the manufacture of pastry confectionery’. However, given that the owner of the brand (Backaldrin) produces a baking mix which it supplies primarily to bakers and then allows bakers and foodstuffs distributors to use the term 'kornspitz' in the sale of the bread rolls made with the trade marked mix, it was argued that consumers appreciate no distinctive character in the term 'kornspitz', which has become the standard name for a given mix of flours and seeds. Hence, one of Backaldrin's competitors challenged the 'Kornspitz' trade mark and applied for its revocation.
The CJEU accepted the argument and clarified that:
19 […] Article 12(2)(a) of Directive 2008/95 addresses the situation where the trade mark is no longer capable of fulfilling its function as an indication of origin (see, to that effect, Case C‑371/02 Björnekulla Fruktindustrier [2004] ECR I‑5791, paragraph 22).
20 Among the various functions of a trade mark, that function as an indication of origin is an essential one (see, inter alia, Joined Cases C‑236/08 to C‑238/08 Google France and Google [2010] ECR I‑2417, paragraph 77, and Case C‑482/09 Budějovický Budvar [2011] ECR I‑8701, paragraph 71). It serves to identify the goods or services covered by the mark as originating from a particular undertaking, and thus to distinguish those goods or services from those of other undertakings (see, to that effect, Case C‑12/12 Colloseum Holding [2013] ECR, paragraph 26 and the case-law cited). That undertaking is, as the Advocate General stated at point 27 of his Opinion, that under the control of which the goods or services are marketed.
[… 22] […] Article 12(2)(a) of the directive relates to the situation where the trade mark has become the common name and has therefore lost its distinctive character, with the result that it no longer fulfils that function (see, to that effect, Björnekulla Fruktindustrier, paragraph 22). The rights conferred on the proprietor of that mark under Article 5 of Directive 2008/95 may then be revoked (see, to that effect, Case C‑145/05 Levi Strauss [2006] ECR I‑3703, paragraph 33).
23 In the case described by the referring court [...] the end users of the [...] bread rolls known as ‘KORNSPITZ’, perceive that word sign as the common name for that product and are not, therefore, aware of the fact that some of those bread rolls have been made using a baking mix supplied under the trade mark KORNSPITZ by a particular undertaking.
24 [...] that perception on the part of end users is due, in particular, to the fact that the sellers of the bread rolls made using that mix do not generally inform their customers that the sign ‘KORNSPITZ’ has been registered as a trade mark.
25 [...] the sellers of that finished product do not generally, at the time of sale, offer their customers assistance which includes an indication of the origin of the various goods for sale.
26 Clearly [...] the trade mark KORNSPITZ does not, in the trade in respect of the bread rolls known as ‘KORNSPITZ’, fulfil its essential function as an indication of origin and, consequently, it is liable to revocation in so far as it is registered for that finished product if the loss of its distinctive character in respect of that product is attributable to acts or inactivity of the proprietor of that trade mark (C-409/12 at paras 19-26, emphasis added).
The CJEU then goes on to assess whether the loss of distinctive character is attributable to the owner of the brand and finds that an insufficient insistence on the use of the term 'kornspitz' as a trade mark by bakers and foodstuffs distributors would be sufficient to trigger the revocation of the trade mark (paras 31-36). Indeed, the CJEU cleary stressed that
in a case [...] in which the sellers of the product made using the material supplied by the proprietor of the trade mark do not generally inform their customers that the sign used to designate the product in question has been registered as a trade mark and thus contribute to the transformation of that trade mark into the common name, that proprietor’s failure to take any initiative which may encourage those sellers to make more use of that mark may be classified as inactivity within the meaning of Article 12(2)(a) of Directive 2008/95 (C-409/12 at para 34, emphasis added).
Therefore, the standards of 'duty of care' or 'vigilance' applicable to trade mark owners are high and they will always be required to take (appropriate) positive steps to protect the distinctive character of the signs that they use to brand their products [for a law and economics discussion on the requirement of distinctiveness and the ensuing 'trade mark policying' obligations imposed on their owners, see Landes & Posner, 'Trademark Law: An Economic Perspective' (1987) 30 J.L. & Econ. 265, 287-288].