The country's Court of Appeal ruled that the chocolate treat, created in 1935 and marketed with the slogan "Have a Break, Have a KitKat", is not distinctive enough in shape to warrant a trademark. Nestle had argued that the shape of the famous snack was iconic and deserved protection.
The ruling is the latest twist in a decade-long UK chocolate wars saga between Nestle and the US Mondelez International, maker of Cadbury chocolate.
Nestlé originally registered the three-dimensional shape of its four-fingered chocolate bar in 2006 with Cadbury applying to cancel the registration, a claim it won in 2012.
The fight then went on to the legal system, going as high as the Appeal Court in the latest ruling. Nestlé could now take the battle over the bar to the Supreme Court.
A spokesperson for Nestle said the company is weighing up its options. "Nestle is disappointed by the Court of Appeal judgment and is considering next steps. "KitKat is much loved around the world and its four-finger shape is well known by consumers.
"Nestlé's four-finger shape has been granted trademark registration in many countries of the world, for instance Germany, France, Australia, South Africa and Canada, further protecting it from imitations."
A Mondelez spokesman said: “We are pleased with the Court of Appeal’s decision today and welcome their conclusion. As we have previously stated, we do not believe the shape of the KitKat bar should be protected as a trade mark in the UK.”
Nestle had also failed in September 2015 to get the EU's top court, the European Court of Justice, to let it trademark the shape of the KitKat in Britain.
The four-fingered chocolate bar made its debut in Britain in 1935 when it was produced as Chocolate Crisp by Rowntree. Nestlé bought Rowntree in 1998.
A similar Norwegian chocolate bar called Kvikk Lunsj, or ‘quick lunch’, has been around since 1937.
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