Full Federal Court considers honest concurrent use requirements

• The Full Federal Court allowed an appeal against the primary judge’s decision that Caesarstone was an honest concurrent user of the CAESARSTONE word mark
• The Full Court made instructive comments on authorised use, although it was obiter dicta
• The decision highlights some key issues in trademark management

In the recent appeal decision of Ceramiche Caesar SpA v Caesarstone Ltd ([2020] FCAFC 124), the Full Court of the Federal Court of Australia has addressed some of the requirements of honest concurrent use for trademarks that would otherwise be unable to obtain registration due to their similarity to a prior registered mark. The Full Court also made useful comments on authorised use, although it was obiter dicta.  

Background

This case concerned three proceedings, two being trademark oppositions and one being a trademark cancellation application, all initiated by Ceramiche Caesar. The relevant trademarks are as follows are outlined below:

The parties in this matter agreed that the result in the opposition against the CAESARSTONE word mark application would be determinative of the other two disputes. The Full Court’s findings followed this agreement and each dispute was decided in substantially the same way.

Facts

Since 1988, Ceramiche, an Italian manufacturer of ceramic tiles for indoor and outdoor flooring and wall cladding, had sold tile products in Australia. In 2004 it registered the following stylised device mark in Class 19 for “ceramic tiles for indoor and outdoor”:

(the CAESAR device mark)

Since 1987, Caesarstone Ltd, an Israeli manufacturer of large quartz slabs marked the underside of all of its slabs with its CAESARSTONE mark. It commenced selling large quartz slabs into Australia in 2003, and created an Australian subsidiary in 2006. Prior to this time, it sold its slabs to Australian consumers through two distributors. Stonemasons generally purchased Caesarstone slabs for the purpose of converting them into finished products for sale to consumers.

Although the CAESARSTONE word mark had been used in respect of quartz slabs, the issue in this case was whether it had been used for tiling.

In 2005 Caesarstone applied to register the CAESARSTONE word mark in Class 19 for “[t]iles, panels for floors, floor coverings, wall cladding, flooring, and ceilings; non-metallic covers for use with floors and parts thereof; profiles and floor skirting boards”. During examination, the examiner initially refused to accept the application under Section 44 of the Trademarks Act 1995 (Cth) on the basis that it was deceptively similar to the already registered CAESAR device mark.

In order to overcome this objection, Caesarstone removed tiles from its statement of goods, which it qualified by the additional phrase “none of the foregoing being in the nature of tiles”. The application was subsequently accepted and opposed by Ceramiche. That opposition ended up before the Federal Court on Appeal, in which the primary judge made the same finding as the examiner, namely that the CAESARSTONE word mark was deceptively similar to the CAESAR device mark. However, the primary judge then found that Caesarstone was an honest concurrent user of the CAESARSTONE word mark and allowed its registration for “floors; floor coverings; wall cladding; formed of composite stone slabs; none of the foregoing being in the nature of tiles”. Ceramiche then sought leave to appeal to the Full Federal Court against that decision.

Decision

The appeal of the first proceeding addressed two key issues, honest concurrent use and authorised use of the mark.

Issue 1 - honest concurrent use for Class 19 goods

In the appeal, the Full Court considered whether the primary judge erred in finding there was honest concurrent use of the CAESARSTONE word mark for the designated Class 19 goods. The primary point of contention was the interpretation of the disclaimer: “none of the foregoing being in the nature of tiles”.

The Full Court found that the specification for which the primary judge had ordered registration expressly excluded those goods for which the primary judge had found honest concurrent use. The Full Court said that “[a] finding of honest concurrent use must be a finding of use in respect of goods that are in fact specified in the trademark application”.

Caesarstone had used the CAESARSTONE word mark for tiles which it had specifically excluded from the specification of goods. Accordingly, the trademark application did not proceed to registration.

Issue 2 - authorised use of the mark under Caesarstone’s control

Although the Full Court’s comments on authorised use were merely obiter dicta (as the appeal was determined on the lack of honest concurrent use finding, outline above), the Full Court’s comments on authorised use are instructive. 

Caesarstone itself did not in fact sell its products in Australia: rather, its distributors (who were in effect the authorised users of the mark) used the CAESARSTONE word mark. In order for use by Caesarstone’s Australian authorised users to constitute use by Caesarstone, it needed to demonstrate under Section 8 of the act that they exercised control over the goods or services dealt with in the course of trade in relation to its CAESARSTONE word mark.

The primary judge concluded that Caesarstone had exercised control over the use of its marks in accordance with Section 8 of the act because it had:

1. exercised quality control; and
2. exercised control “on a wider basis than… exercising quality control”.

The primary judge found that quality control had been exercised by Caesarstone:

• giving instructions to the Australian distributors regarding slab transport and storage;
• providing technical and marketing support services to the Australian distributors; and
• seeking 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.

The Full Court found that the giving of instructions by Caesarstone regarding the slab transportation and storage was insufficient to amount to “quality control”, because those instructions only dealt with lowering the likelihood of damage to the slabs. Additionally, the technical and marketing support services, and the provision of manuals for fabrication and installation, were not considered to be quality controls by the Full Court, as they were more in the nature of guidance than controls.

The Full Court noted that the distribution agreement between Caesarstone and one of its distributors did not contain terms in the nature of quality control standards, brand guidelines, marketing approval mechanisms or any rights of inspection of fabricated product. It was also noted that Caesarstone did not have any contractual relationship with the stonemasons, and there was no evidence that Caesarstone ever inspected the stonemasons’ work or conducted any quality control regarding the final product. Equally, there was no control or supervision of the content of marketing brochures as put together by the distributors.

The primary judge found wider control on the basis of a number of different steps that were asserted by Caesarstone, such as the visible presence of the CAESARSTONE word mark on each Caesarstone slab. The Full Court noted that Caesarstone applied its mark to the slabs, but in fact those goods were not designated goods. Thus, there was no direct use by Caesarstone of its mark on designated goods. None of the asserted steps taken by Caesarstone were sufficient to persuade the Full Court that they constituted “control”. More importantly, the Full Court also noted that one (or more) of the distributors had for six years applied the CAESARSTONE word mark to inferior tiles of a Turkish competitor without Caesarstone’s knowledge. From this, it was inferred that Caesarstone had not exercised control as a matter of substance.

In conclusion, the Full Court said that the “whole picture” did not substantiate control.

Issues 3 and 4 – because of other circumstances and discretion to refuse registration

The third issue, being the ability to register a trademark “because of other circumstances” (Section 44(3)(b) of the act) was rejected by the Full Court because the CAESARSTONE word mark was not used in respect of the designated goods (including walling and flooring).

The court also found that the fourth issue did not arise in the circumstances.

The court thus ordered that the CAESARSTONE word mark not proceed to registration.

Comment

This case highlights two key issues in trademark management:

1. Careful drafting of specifications for trademark applications - always consider the uses of the trademark and whether any limitation required to overcome an objection could present a hurdle to establishing honest concurrent use.  
2. Controlling your trademark - if relying on authorised users of your mark in Australia, it is important to exercise actual control of all uses of your mark, such as quality control of the products and control of the marketing. ‘Policing’ the actual use of your mark by an authorised user is essential. If there are other parties in the supply chain of your products whose work you do not control, that too can result in a finding that there is no control. Any unauthorised use of your mark by an authorised user (eg, applying your mark to third-party goods without your knowledge) could be fatal to the conclusion of whether you have “control” over your mark.