In the recent decision of Cantarella Bros Pty Limited v Modena Trading Pty Ltd [2014] HCA 48 (Cantarella decision), the High Court of Australia provided some guidance on the requirements necessary to establish whether a trade mark is ‘inherently adapted to distinguish’ within the meaning of section 41(3) of the Trade Marks Act 1995 (Cth) (Trade Marks Act).

The Cantarella decision will have an impact on the registrability of foreign words as trade marks in Australia. We recommend that this decision is closely reviewed by trade mark owners and rival traders using or seeking to use foreign words as trade marks in Australia.

Cantarella Bros Pty Limited v Modena Trading Pty Ltd [2014] HCA 48

Cantarella and Modena each advertise and sell coffee products in Australia. Cantarella is the owner of two Australian registered trade marks for the Italian words ‘ORO’ and ‘CINQUE STELLE’ (meaning ‘gold’ and ‘five stars’, respectively) for coffee and related goods. In 2009, Modena commenced importing coffee from the Italian company Molinari under brand names which included the words ‘ORO’ and ‘CINQUE STELLE’.

In proceedings commenced in the Federal Court, Cantarella claimed that Modena had infringed Cantarella’s registered trade marks. Modena brought a cross-claim arguing that the trade mark registrations should be cancelled under section 41 of the Trade Marks Act on the basis that the marks were not ‘inherently adapted to distinguish’ the goods for which they were registered. At first instance, Cantarella succeeded in establishing infringement and Modena failed in its cross-claim, such that the two marks remained on the Register.

Modena appealed on the cross-claim to the Full Federal Court. The Full Court allowed the appeal finding that the two marks were not distinctive and so should be removed from the Trade Marks Register.   

By special leave, Cantarella appealed to the High Court. A majority of the Court allowed the appeal and concluded that the Italian words ‘ORO’ and ‘CINQUE STELLE’ were inherently adapted to distinguish the coffee goods for which they were registered from the coffee goods of other traders. As a result, the trade mark registrations were reinstated on the Trade Marks Register.

“Inherent adaptability to distinguish”

The legislation in issue in the Cantarella decision was section 41 of the Trade Marks Act.

At the time of commencement of proceedings, section 41(2) of the Trade Marks Act provided that the Registrar of Trade Marks was required to reject an application for registration of a trade mark if the trade mark was “not capable of distinguishing the applicant’s goods… in respect of which the trade mark is sought to be registered… from the goods… of other persons”. Section 41(3) of the Trade Marks Act provided extra guidance by stating that in deciding whether section 41(2) applied, it was necessary for the Registrar to consider the extent to which the trade mark was “inherently adapted to distinguish the designated goods… from the goods… of other persons” (emphasis added).

Cantarella and Modena disagreed on the application of the leading test for determining if a trade mark is inherently adapted to distinguish, which was set out by Justice Kitto in Clark Equipment Co v Registrar of Trade Marks [1964] HCA 55. In that decision, Justice Kitto had held that the ‘ordinary signification’ (or ordinary meaning) of the words comprising a trade mark must be determined in order to assess inherent distinctiveness. Cantarella argued that the reference to ‘ordinary signification’ was to be determined by looking to those persons purchasing or consuming the goods (consumers), while Modena argued that the test was whether other traders might legitimately wish to use the words in connection with their own goods.

The test for inherent distinctiveness

In its decision, the majority of the Court agreed with Cantarella that the appropriate test for inherent distinctiveness is a consumer-focused one which looks to the perceptions of Australian persons concerned with the goods in question rather than the needs of other traders. The majority held that the test has two steps: 

  1. First, determine what the ‘ordinary signification’ of the word is to persons in Australia concerned with the goods to which the mark is to be applied (the ‘target audience’)
  2. Second, make an inquiry into the likelihood that other traders may wish to use the word in connection with their own goods.

The majority drew a distinction between words which contain a ‘direct reference’ to the relevant goods, which are prima facieun-registrable and words that make a ‘covert and skilful allusion’ to the relevant goods, which are prima facie registrable.

The majority applied its two-step test to the facts in issue and came to agree with the primary judge’s conclusion that only a ‘very small minority’ of English speakers in Australia would understand the meaning of ‘ORO’ and ‘CINQUE STELLE’. Therefore, the majority concluded that Australian consumers of coffee goods would not understand ‘ORO’ and ‘CINQUE STELLE’ to have meanings that were directly referable to the character of Cantarella’s coffee goods (i.e. that they were of five star or gold quality). In addition, the majority held that the evidence led by Modena was not sufficient to show that honest traders might want to use the words ‘ORO’ or ‘CINQUE STELLE’ to directly describe or indicate the character or quality of their goods.

Accordingly, the majority held that the two Italian word marks were sufficiently inherently adapted to distinguish the goods of Cantarella from the goods of other traders and so should be reinstated on the Register.

Justice Gaegler handed down a dissenting judgment. His Honour agreed with the Full Court that the relevant question for inherent distinctiveness is whether the word in issue is one that other traders are likely to wish to use upon or in connection with their goods. His Honour agreed with the Full Court that ORO and CINQUE STELLE were not inherently distinctive and so should not be registered as trade marks. 

The registrability of foreign words as trade marks

In addition to clarifying the test for inherent distinctiveness to be applied to all trade marks, the majority’s decision provides some commentary on the threshold for registering foreign language trade marks in Australia.

The majority held that a number of earlier decisions supported an approach to distinctiveness that looks not to the meaning of the foreign word as translated (although that might be relevant) but to the meaning conveyed by the foreign word to the target audience.

Notably, the majority’s approach appears to be at odds with the general approach of trade marks examiners at the Australian Trade Marks Office (ATMO). The ATMO will usually require a translation of a foreign language trade mark. This will be required, for example, where the English meaning of the trade mark is likely to impact on whether or not a ground for rejection will be raised. One such ground is whether the trade mark in question is descriptive and has no inherent distinctiveness. In the past, a foreign language mark could be rejected under section 41 if the mark consisted of foreign characters which were translations of English words that were not capable of distinguishing the applicant’s goods or services. Following the Cantarella decision, it appears that the translation of a foreign word mark will be of far less importance than the target audience’s understanding of the meaning of the foreign word. It is yet to be seen how the ATMO examiners will apply this new approach to the registrability of foreign language marks.

Implications for trade mark owners and rival traders

The Cantarella decision makes it clear that there is a two-step test that must be applied to determine whether a trade mark (including a foreign language mark) is inherently distinctive. For traders looking to register trade marks in Australia, it is necessary to first consider the “ordinary signification” of the trade mark to persons in Australia concerned with the goods to which the mark is to be applied and then consider whether other traders would wish to use that mark in connection with their goods. 

However, while the test for inherent distinctiveness may now be clear, it is less clear how this test will affect the registrability of foreign language marks as follows:

  • As noted above, it is yet to be seen how the ATMO will approach the registrability of foreign language marks, given the High Court’s approach.
  • In addition, there are difficulties in applying a consumer-focused test to foreign words, as the perceptions of consumers are fluid and often hard to determine. In the Cantarella decision, ‘ORO’ and ‘CINQUE STELLE’ were deemed to be distinctive even though Modena’s evidence showed that Italian is the second most spoken language in Australia and that these two words were used by dozens of rival traders to describe their coffee goods. However, despite this evidence, the ultimate decision was that Australian consumers of coffee would not consider that these two Italian words directly described the quality of the coffee goods on which they were used.

The Court’s application of the test to foreign language marks appears to give rise to a number of consequences:

  • There may now be a lower threshold for registering foreign words as trade marks. In the Cantarella decision, two simple Italian words used in relation to goods which often originate in Italy were found to be distinctive. This suggests that a descriptive foreign word from a language less common than Italian used in relation to goods (which may or may not originate from that country) might also now be registrable as a trade mark in Australia.
  • As a corollary to this, there may now be a much higher threshold for those wishing to challenge the use of foreign words as trade marks. This will be relevant to rival traders and importers of products that use foreign words in their branding, who may find themselves exposed to allegations of trade mark infringement where a particular foreign word has been registered as a trade mark in Australia.

Whether and how these consequences play out remains to be seen, but they do illustrate some of the difficulties in adopting a consumer-focused, rather than a trader-focused, approach to inherent distinctiveness.

Amendments to section 41 of the Trade Marks Act

Since the Cantarella decision, section 41 of the Trade Marks Act has been amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Raising the Bar Act), which came into effect on 15 April 2013. The Raising the Bar Act repealed and replaces section 41 to clarify that the presumption of registrability does apply to section 41. A trade mark will now be considered capable of distinguishing goods or services unless one of the exceptions listed in section 41 applies. It is possible that together with the Cantarella decision, the amendments to section 41 may contribute to further lowering the threshold for registering foreign words as trade marks.