Trade marks exist in the minds of consumers

The principal role of a trade mark is to assist consumers find the products of certain manufacturers they know and like and which they expect to have certain characteristics.

In Re Powell’s Trade-Mark, Bowen J explained the function of a trade mark in the following way1:

“The function of a trade-mark is to give an indication to the purchaser or possible purchaser as to the manufacture or quality of the goods – to give an indication to his eye of the trade source from which the goods come, or the trade hands through which they pass on their way to the market.”

This primary role of a trade mark is recognized in Section 17 of the Trade Marks Act 1995, which defines a trade mark as follows:

“A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person”.

Consistent with this, section 41(3) of the Act requires the Registrar of Trade Marks to consider the degree to which a sign is inherently adapted to distinguish the designated goods from the goods of others before registering it as a trade mark.

However, it is now understood by business and brand strategists that a successful trade mark can also have an important marketing function. Words carry their own intrinsic meaning and a trade mark can be an extremely effective compressed means of conveying information to the target market (which is essentially the general public for consumer products like coffee) about the benefits offered by product. Consumers can take a long time to comprehend marketing communications, but brand meaning can be conveyed through a suitable trade mark within a few seconds.

It is because of this marketing advantage that many businesses adopt trade marks that describe the attributes of the product to which they are applied (i.e. the “brand proposition”). However, in their eagerness to unambiguously communicate the brand proposition the primary role of the trade mark. When it is too descriptive the trade mark no longer functions to differentiate the product and, in terms of the Act, cannot be registered as a trade mark.

A trade mark, inextricably connects a product with the consumer in these ways and so how consumers recognise, interpret and assimilate the information conveyed by any trade mark is critical to the fundamental role of a trade mark and its capacity to distinguish.

The recent High Court Decision of Cantarella Bros Pty Limited v Modena Trading Pty Limited2 confirmed the importance of considering a trade mark’s capacity to distinguish from the consumer’s point of view.

A key issue in the case was whether the Italian terms ORO and CINQUE STELLE were too descriptive to be registered as trade marks and specifically whether the term” inherently adapted to distinguish” in section 41 of the Act requires a consideration of what the ordinary signification or meaning of words would be to the ordinary Australian consumer.

Facts

This case, involved use of the product sub brands ORO and CINQUE STELLE

Cantarella has sold its ORO and CINQUE STELLE branded coffee in Australia since 1996 and 2000 respectively. It owned registered trade marks for both. “Oro” and “Cinque Stelle” are Italian words which translate in English to “Gold and “Five Stars” respectively. As suggested by the name itself, Cinque Stelle was promoted to the fine dining and first class traveller segments as a premium blend.

In late 2009 Modena began distributing “CAFFÈ MOLINARI ORO and CAFFÈ MOLINARI CINQUE STELLE in Australia. Cantarella sued Modena for trade mark infringement. Modena denied infringement claiming it was not using “Oro” or “Cinque Stelle” as trade marks and also cross-claimed that ORO and CINQUE STELLE were not registrable trade marks, because they were not inherently distinctive.

Modena submitted evidence of use of oro in relation to coffee products in composite brand names (such as Lavazza Qualità Oro and Caffè Incas Oro coffee) and argued that Oro and Cinque Stelle were words that were commonly used in the marketing of Italian-style coffee in Australia and product marketing generally.

Judgement of Emmett J

Emmett J found that ORO and CINQUE STELLE were inherently capable of distinguishing and so validly registered trade marks3. In deciding this he applied a registrability test requiring consideration of whether the words would be understood as descriptive of the goods or their attributes by a significant number of the target market for coffee goods in Australia. He accepted that Italian speakers would have understood the words Cinque Stelle and Oro as common Italian laudatory and therefore descriptive words. He also accepted that the English terms “Five Stars” and “Gold would not be capable of distinguishing. However, his factual finding was that ordinary English speakers made up the vast majority of the likely target audience for these goods in Australia and that the Italian words were not “commonly understood” or “generally understood” in Australia by “ordinary English speaking persons” as meaning five stars and gold respectively.

Appeal to Full Federal Court

Modena appealed to the Full Federal Court and was successful, with the Full Court ordering that the trade mark registrations be cancelled. The factual finding of the primary judge was not directly challenged; rather Modena argued that the wrong registrability test had been applied by the primary judge4.

The Full Court applied the registrability test of Kitto J in Clark Equipment Company v Registrar of Trade Marks5 and held that it was not necessary that consumers know what the words mean in English. Instead, they decided that the relevant issue was whether other traders might, without improper motive, want to use the words on their Italian-style coffee products.

The Kitto Test is as follows:

“[T]he question whether a mark is adapted to distinguish [is to] be tested by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives – in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess – will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it6.

It was the relevance of the highlighted words that were argued before the Full Court7 senior counsel for Modena argued that the Kitto test had been refined by Kitto J himself in the later case of F.H. Faulding & Co Limited v Imperial Chemical Industries of Australia and New Zealand Limited8, which omitted the highlighted words, such that the issue of what the ordinary signification of the words to the public should not be the focus of the enquiry; rather, it was whether other traders may want to use the same words.

While the Full Court was not persuaded as to the correctness of this argument it said that the reference to the “public” in the Kitto test did not necessarily mean the general population, or even the general adult population of Australia. The Full Court referred to other cases9 which did not require an enquiry at all into the knowledge and practices of consumers as the focus of the registrability enquiry but instead focussed on knowledge and practice within the relevant trade10. They said at paragraph 81 of their judgment:

“It seems to us that “the public” in Kitto J’s parenthetical phrase in Clark Equipment is primarily referring to members of the public who are or may become traders, and who in the future may want to use the word or words in question, …..”.

The Full Court found that the following facts supported the conclusion that other traders would likely want to use the ORO and CINQUE STELLE marks for their own coffee-related goods.

  • Oro and Cinque Stelle are Italian words meaning “gold” and “five stars”, respectively, which signify the highest quality;
  • Pure coffee in Australia is often associated with Italy, and so obvious to use Italian words to describe the quality of a coffee blend;
  • There are many Italian speakers in Australia; and

Appeal to the High Court

Canteralla appealed the decision of the Full Federal Court to the High Court. Canteralla argued that assessing whether a foreign word is inherently adapted to distinguish is no different from assessing any word in English, including invented words, for the same purpose. Cantarella relied on the emphasized passage in the Kitto test to support their contention that the inherent adaptability of a trade mark consisting of a word (including a foreign word) is to be tested by checking the ordinary meaning (i.e. the “ordinary signification”) of the word to anyone ordinarily purchasing, consuming or trading in the relevant goods, which Canteralla characterized as “the target audience”11. Cantarella argued that the Full Court had incorrectly focused on how the Italian words had been used by other traders in composite marks. Canteralla referred to the need to evaluate a mark in the real world12 and argued that any attempt to understand why it is that a trader would wish to describe goods using a particular trade mark necessarily requires a consideration of the mark’s ordinary signification to the target market.

Modena argued that the reasoning of the Full Court’s was correct and that the “inherent adaptability to distinguish” of a word is not to be tested by whether the word has “a meaning to ordinary people”. It argued that it is unnecessary that consumers know what the words mean in English and the test is confined to whether other traders would be at least likely, in the ordinary course of their business and without any improper motive, to desire to use the word in connection with a particular product13.

The Majority Judgment

By majority decision the High Court allowed the appeal. The majority confirmed that the Kitto test in Clarke was the relevant registrability test but held that the question of whether a trade mark, consisting of a word or words (English or foreign) is “inherently adapted to distinguish”, requires consideration of the “ordinary signification” of the words to any person in Australia concerned with the goods to which the proposed trade mark is to be applied.

They noted that coffee is a commodity and a familiar beverage consumed by many and agreed that the consideration of the “ordinary signification” of the words “oro” and “cinque stelle” in Australia undertaken by the primary judge, which considered the ordinary signification of the words to English speaking consumers (a significant proportion of the target market) accorded with settled principles. Emmett J had found that the evidence submitted by Modena did not establish that “ORO” and “CINQUE STELLE” conveyed a meaning sufficiently tangible to this group to amount to a direct reference to the character or quality of the goods and this factual finding had not been challenged by Modena.

To support their conclusions, the majority of the High Court referred to Mark Foy’s Ltd. v Davies Coop & Co Ltd14, where the trade mark “TUB HAPPY” was found to be a registrable trade mark having no direct reference to the character or quality of cotton garments. In the cited case “TUB HAPPY” wad found to convey to consumers only an overt and skilful allusive reference to goods that was not “sufficiently tangible” to amount to a “direct reference” to the character or quality of the goods.

At paragraph 71 they said:

“As shown by the authorities in this Court, the consideration of the “ordinary signification” of any word or words (English or foreign) which constitute a trade mark is crucial, whether (as here) a trade mark consisting of such a word or words is alleged not to be registrable because it is not an invented word and it has “direct” reference to the character and quality of goods, or because it is a laudatory epithetor a geographical name, or because it is a surname, or because it has lost its distinctiveness, or because it never had the requisite distinctiveness to start with. Once the “ordinary signification” of a word, English or foreign, is established an enquiry can then be made into whether other traders might legitimately need to use the word in respect of their goods. If a foreign word contains an allusive reference to the relevant goods it is prima facie qualified for the grant of a monopoly. However, if the foreign word is understood by the target audience as having a directly descriptive meaning in relation to the relevant goods, then prima facie the proprietor is not entitled to a monopoly of it. Speaking generally, words which are prima facie entitled to a monopoly secured by registration are inherently adapted to distinguish”.

The majority found that the evidence led by Modena, purporting to show that rival traders used (or desired to use) the word “oro” to directly describe their coffee products, showed no more than that the word “oro” or the form “d’oro” had been employed in a range of composite marks and that such evidence fell well short of proving that the word “oro”, standing alone, is understood in Australia by persons concerned with coffee products to be directly descriptive of the character or quality of such goods.

Comments

To a large extent, brand names or trade marks used for consumer products (like coffee) exist in the minds of consumers because how they function and what they signify depends on how they are recognised and interpreted by the consumer.

In confirming the importance of considering the ordinary signification of words to persons concerned in the goods, which for the Australian coffee market are largely comprised of English speaking consumers, when determining the distinctness and registrability of a trade mark under Section 41(3), the High Court has reaffirmed the historical rationale for a trade mark as being something that assists consumers find the products they know and like.

At least for general consumer goods, the issue of what other traders may want to use (without improper motive) will necessarily be driven by what the ordinary signification or meaning those words have to the target audience for the goods, the consumer.

Traders often want to use descriptive words for the purpose of conveying relevant and desirable meaning about their products. If they want to do this and secure trade mark rights at the same time, they need to ensure that the words used, as considered by the target audience, are not directly descriptive, but at most a skilful allusive reference to a characteristic of the goods or broader brand proposition, of the type that was excepted in the Tub Happy case and now by the majority of the High Court in this case.

Footnotes

1 (1893) 2 Ch 388, at pp 403
2 [2014] HCA 48
3 as required by s 41(3)
4 Modena argued that the primary judge incorrectly applied registrability tests founded in Mark Foy’s Ltd v Davies Co-op & Co Ltd [1956] HCA 41 and Johnson & Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited [1991] FCA 310; (1991) 30 FCR 326
5 [1964] HCA 55; (1964) 111 CLR 511 at 514 (” Clarke Equipment”)
6 When considering s 26 of the 1955 Act
7 And later on further appeal before the High Court
8 [1965] HCA 72; (1964) 112 CLR 537 (“Faulding”)
9 Gibbs J in Burger King Corporation v Registrar of Trade Marks [1973] HCA 15; (1973) 128 CLR 417 of what Kitto meant at 425; Clark Equipment itself and Faulding
10 Paragraph 79
11 It followed from Emmett J’s factual finding in the first instance (i.e. that ordinary English speaking consumers made up the vast majority of the likely target audience) that it is the ordinary signification to this group which is important
12 Referreing to French J statement in Kenman Kandy Australia Pty Limited v Registrar of Trade Marks (2002) 122 FCR 494 about making the “practical evaluative judgment about the effects of the relevant mark in the real world”12
13 Relying particularly on Lord Parker’s speech in Registrar of Trade Marks v W & G Du Cros Ltd [1913] AC 624 at 635 (“Du Cros”)
14 [1956] HCA 41