Ceramiche Caesar S.p.A. V Caesarstone Ltd [2020] FCAFC 124 (28 July 2020)

In the recent decision of Ceramiche Caesar S.p.A. V Caesarstone Ltd [2020] FCAFC 124 (28 July 2020) the Full Federal Court decided that the primary judge had erred in finding “honest concurrent” use of the CAESARSTONE mark.  The decision also considers the requirements for “quality control” and a finding of “authorised use”.

Proceedings

The decision involved Ceramiche Caesar S.p.A’s (Ceramiche Caesar) appeal of the primary judge’s decision to allow Caesarstone Ltd’s (Caesarstone) Australian Trade Mark Application No 1058321 for the word mark CAESARSTONE (CAESARSTONE Mark) to proceed to registration for certain class 19 floor and wall goods on the basis of honest concurrent use.

The decision also involved proceedings in Ceramiche Caesar’s appeal of the primary judge’s decision to allow Caesarstone’s Australian Trade Mark Application No 1211153 for

to proceed to registration for certain goods and services in classes 19, 35 and 37 (Caesarstone Device Mark) and to allow Caesarstone’s Australian Trade Mark Registration No 1211152 for the word mark CAESARSTONE to remain registered for services in classes 35 and 37 (Caesarstone Services Word Mark).

The parties agreed that the result in the first proceeding would determine the results in the second proceedings and almost entirely determine the result in the third proceeding.  The discussion below therefore relates only to the first proceeding.

Facts

The appellant, Ceramiche Caesar, has manufactured ceramic tiles for indoor and outdoor flooring and wall cladding in Australia since 1988. Effective from 23 November 2004, Ceramiche Caesar has had a registration in class 19 covering  “ceramic tiles for indoor and outdoor use” for a CAESAR device mark:

 

 

The respondentCaesarstone, is an Israeli company that manufactures and sells large quartz slabs which have been labelled on the underside of the slab with the mark “CAESARSTONE” since 1987.

Caesarstone’s slabs were distributed in Australia from 2003 by two distributors: Caesarstone’s licensee, Tessera Stones and Tiles Pty Ltd (Tessera) and Tessera’s sub-licensee, Carsilstone Pty Ltd (Carsilstone). In 2006, Caesarstone incorporated an Australian subsidiary, Caesarstone Australia Pty Ltd (Caesarstone Australia).

From 2003 the distributors, Tessera and Carsilstone, sold the slabs to stonemasons in Australia who would then convert them into finished products, including benchtops and countertops, vanities and surrounds and splashbacks, which would then be sold on to customers.

Ceramiche Caesar’s CAESAR device mark registration was cited against the  application to register the CAESARSTONE mark on 2 June 2005.  To overcome this citation, Caesarstone amended its goods specification to disclaim “tiles” as follows:

Panels for floors, floor coverings, wall cladding, ceilings; non-metallic covers for use with floors and parts thereof; profiles and floor skirting boards; none of the foregoing being in the nature of tiles.”

The CAESARSTONE application was subsequently successfully opposed by Ceramiche Caesar, with the Registrar’s delegate deciding that the CAESARSTONE mark was deceptively similar to the CAESAR device mark and that, based on the facts, the exception for “honest concurrent use” under s 44(3)(a) and/or “prior continuous use” under s 44(3)(4) of the Trade Marks Act 1995 should not apply.

Caesarstone appealed the decision and the primary judge in Caesarstone Ltd v Ceramiche Caesar S.p.A. (No 2) [2018] FCA 1096 (Caesarstone (No 2)). found that there had been “honest concurrent use” of the CAESARSTONE mark on floor panels and wall cladding and that the use of the CAESARSTONE mark by Caesarstone’s distributors was “authorised use”.

On the appeal the two main issues in dispute in the first proceedings were whether the primary judge erred in concluding that:

(1) there was honest concurrent use of the CAESARSTONE mark on the designated Class 19 goods;

(2) the prior use of the trade mark was authorised use under Caesarstone’s control”.  [1]

Honest concurrent use

The interpretation of the disclaimer of “tiles” in the goods description was crucial to the question of whether there was honest concurrent use.

Caesarstone argued that the exclusion of “tiles” from its specification was of no significance because it did not limit the goods specifically listed in the specification.  They relied on the primary judge’s finding that the disclaimer did not “subtract all content from” the words “panels for floors” and “wall cladding”.  [2]

Ceramiche Caesar argued that the disclaimer effectively excluded tiles.  As the primary judge found that the goods in honest concurrent use were floor panels and wall cladding in the nature of tiles, there was therefore no honest concurrent use of the mark in respect of the goods covered by the application.

Their Honours considered that “as a matter of plain English, the words “none of the foregoing being in the nature of tiles” operate to limit the class 19 goods to include only panels for floors, floor coverings and wall claddings which are not in the nature of tiles”.  They said that “the primary judge’s conclusion that the tile disclaimer did not “subtract all content” from the words “[p]anels for floors, floor coverings, and wall cladding” which are not “in the nature of tiles” was a statement of the obvious” and “not a statement which supports the conclusion that the tile disclaimer was “ineffectual” in the sense contended for by the respondent”.  [3]

The Full Court held that the primary judge erred in finding honest concurrent use because honest concurrent use must be in respect of the goods covered by the application. In this case, the finding of honest concurrent use was for goods which were all “in the nature of tiles”.  As tiles had been expressly excluded from the specification they were not covered.

The Full Court also refused Caesarstone’s request to remove the disclaimer, because this would effectively widen the scope of the registration to include tiles.

Authorised use

While the Full Court found that there had not been honest concurrent use, and the second question of whether Caesarstone’s use would have been “authorised use” did not therefore strictly arise, the judges considered the question briefly.

Section 8(1) of the Trade Marks Act 1995 states that a person is an authorised user “if the person uses the trade mark under the control of the owner of the trade mark” and section 8(3) provides that:

(3) If the owner of a trade mark exercises quality control over goods or services:

(a) dealt with or provided in the course of trade by another person; and

(b) in relation to which the trade mark is used;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

The primary judge’s finding that Caesarstone’s prior concurrent use was authorised use under Caesarstone’s control and therefore use in accordance with section 8(3) of the Trade Marks Act was on the basis that Caesarstone:

“(1) gave instructions regarding slab transport and storage to the Australian distributors;

(2) provided technical and marketing support services to the Australian distributors;

(3) sought to exercise quality control by ensuring that the Australian distributors provided fabrication and installation manuals to the stonemasons, and contributing to the content of these manuals.”  [4]

However, on appeal their Honours decided that the evidence did not support this and that the primary had judged erred in finding authorised use.

The Full Court stated that “Authorised use requires the trade mark applicant to establish “control as a matter of substance”: Lodestar Anstalt v Campari America LLC [2016] FCAFC 92(2016) 244 FCR 557 (Lodestar) at [97]. What constitutes control as a matter of substance is informed by the function of the trade mark, which is to indicate a connection in the course of trade with the registered owner – see Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56(1977) 137 CLR 670 (Pioneer) at 683 per Aickin J”. (pgh 39).  [5]  The court also noted “the critical enquiry is whether there was quality control with respect to the designated goods”.

The court held that Caesarstone did not exercise quality control because the control was not in relation to the designated goods, being panels for floor covering and wall covering.  Further the quality control was not in relation to the work of the stonemasons who fabricated the slabs into the finished products and were therefore responsible for the ultimate quality of the designated goods.  Their honours found that “not only did Caesarstone not have any contractual relationship with the stonemasons, but there was no evidence that Caesarstone ever inspected the stonemasons’ work or conducted any quality control regarding the final product.” [6]

In relation to the evidence on which the primary judge based his finding of quality control, the court noted that:

  1. Caesarstone’s storage and transport instructions only ensured that the slabs were not damaged, they did not enforce quality control over the finished products covered by the application being the panels for floor covering and wall cladding;
  1. The installation and fabrication manuals provided by the distributors to stonemasons were for guidance only and the “provision of technical information is not, at least of itself, the exercise of quality control”. [7]
  1. There were no terms relating to “quality control standards, brand guidelines, marketing approval mechanisms or rights of inspection of fabricated product” in Caesarstone’s distribution agreement with Tessera. [8]

Authorised use on a wider basis

The primary judge had also found that there had been control “on a wider basis than… exercising quality control”.  However, their Honours held that this was not the case because “the application of the mark to a slab is not indicative of control over the designated goods” [9] and the various claims of wider control, such as Caesarstone’s website listing ideas on possible uses for the slabs did not “operate to constrain or demand the stonemasons to use the slabs in any particular way or require fabrication in any particular way” [10].  Further, the general communications between Caesarstone and its distributors did not include reporting back to Caesarstone on the ultimate application of the slabs and did not “translate into a finding of “control” over the designated goods”.  [11]

Decision

Their honours found that the primary judge erred in concluding that there had been honest concurrent use in respect of the goods covered by the amended application. They also found the claimed use was not authorised use under Caesarstone’s control and that Caesarstone did not exercise quality control and general control on a wider basis.

The second proceeding was resolved in the same way as the first and third proceeding also went the same way as the first.

The appeals in all three proceedings were allowed, the primary judge’s orders were set aside, Ceasarstone’s application numbers 1058321 and 1211153 were refused and registration number 1211152 was cancelled.

Takeaway

The decision is an important reminder that quality control must be exercised as a matter of substance. This is essential if the use of the trade mark is to be considered authorised use that can be relied upon by a registered owner for the purposes of defending a non-use removal action, or to support an applicant’s claim to registration based on use.

It serves as useful clarification that disclaimers in goods specifications are to be interpreted as a matter of plain English and is a reminder that to establish “honest concurrent use”, it is necessary to prove use on the goods covered by the application.


[1] Ceramiche Caesar S.p.A. V Caesarstone Ltd [2020] FCAFC 124 (28 July 2020), paragraph 22.

[2] Ibid, paragraph 27.

[3] Ibid, paragraph 29

[4] Ibid, paragraph 45.

[5] Ibid, paragraph 39.

[6] Ibid, paragraph 60.

[7] Ibid, paragraph 52.

[8] Ibid, paragraph 58.

[9] Ibid, paragraph 64.

[10] Ibid, paragraph 70.

[11] Ibid, paragraph 75.