Trademark aspects of the coffee capsule case: Nestlè v Vergnano
Sometimes there is nothing better than an Italian coffee conveniently dispensed from one of those colourful coffee capsules. Fortunately, there are now many such options available to coffee lovers worldwide. Recently, the makers of two brands of capsules, Nestlè and Vergnano, brought several IP issues before the Court of Turin.
In an order of June 15 2012 the Specialised IP Division of the Court of Turin issued its preliminary decision in the action filed by Nestec SA, Societe des Produits Nestlè SA and Nespresso Italia SpA (collectively "Nestlè") against Italian company Casa del Caffè Vergnano SpA ("Vergnano") for alleged infringement of its patent for coffee capsules and its trademark NESPRESSO, as well as for alleged misleading advertising and unfair competition.
Vergnano, the oldest Italian coffee manufacturing company, began selling its own branded ÈSPRESSO1882 compatible capsules In Italy at the beginning of 2012.
Vergnano advertised that its coffee capsules were compatible with Nespresso machines with the statement: “Capsules compatible with NESPRESSO machines”. Vergnano's packaging also explicitly stated that the trademark NESPRESSO was not the property of Caffè Vergnano SpA or any affiliated company.
In February 2012 Nestlé applied for a preliminary injunction based in part on the alleged infringement and unlawful use by Vergnano of its trademark NESPRESSO. In particular, Nestlé asserted that the marketing of Vergnano’s capsules constituted unfair competition and unlawful comparative advertising, since the reference to the NESPRESSO mark intended to lead consumers, who relied on the quality and reputation of Nestlé’s trademark, to switch to Vergnano, on the implied pre-supposition that the quality standard was the same.
Relevant code provisions
According to Article 20 of the Industrial Property Code, a trademark owner has the right to make exclusive use of the mark. The owner is entitled to prevent all third parties, unless they have its consent, from using in commercial activity any sign which is identical or confusingly similar to the registered trademark, even for non-similar goods or services, if:
- The registered trademark enjoys a reputation in the state.
- Use of the sign without due cause enables unfair advantage to be taken or detriment to be caused to the distinctive character or reputation of the trademark.
On the other hand, Article 21 of the Industrial Property Code provides that trademark rights shall not entitle the owner to prohibit third parties from using a mark in the course of trade if this is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts, provided that such use is in accordance with the principles of fair-trade practice.
Finding almost entirely in favour of Vergnano, the court stated that the manufacture and sale of Vergnano coffee capsules advertised as compatible with NESPRESSO coffee machines did not constitute an act of unfair competition, nor was it detrimental to the character or reputation of the trademark. Thus, Vergano's activities did not violate Article 20.
Turning to Article 21, however, the court concluded that the phrase “compatible with NESPRESSO coffee machines” was too broad and exceeded the limits allowed by Italian law for use of a third-party trademark in a descriptive manner. When the use is too broad, the court said, it becomes inconsistent with the principles of fair-trade practice set down by Article 21.
The court combined its different findings by requiring Vergnano to add into its commercial communications specific information regarding the particular types of Nespresso coffee machine with which its capsules are compatible.
Vergnano’s coffee capsules are now sold with the following statement: “Capsules compatible with ÈSPRESSO1882 machines as well as Citiz, Pixie, Essenza, Lattissima, U and Maestria NESPRESSO brand coffee machines for home use.”
As mentioned above, Nestlé had applied for a preliminary injunction in this case; it is now seeking a permanent injunction at full trial.
Thus, the coffee capsule case continues. Unless settled, it is likely to last for several years until a final decision on the substance of the matter is rendered.
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