Telstra Corporation Limited v Phone Directories Company Pty Ltd [2015] FCAFC 156

Trade marks – inherent capacity to distinguish – whether YELLOW has any inherent capacity – deceptive similarity – use as a noun compared with use as an adjective

The respondents (in separate proceedings heard together) successfully appealed decisions of the delegate of the Registrar to allow the Telstra parties (hereafter, just “Telstra“) to register the word YELLOW in respect of directories (among other things).

Based on extensive evidence from both sides as to the scope and use of the word “yellow” and the colour yellow in relation to online and hardcopy directories, the learned trial judge concluded that other traders were likely, without improper motive, to want to use the word “yellow” to signify their goods in a way that will infringe the YELLOW trade mark because the “yellow” is descriptive of the colour widely used in respect of directories, and because “it is likely that consumers recognise directories by reference to that colour”. His Honour held that, therefore, the YELLOW mark was not inherently adapted to distinguish Telstra’s goods and services, nor had it acquired the capacity to distinguish as a result of Telstra’s prior use, and hence section 41(2) of the Trade Marks Act 1995 (Cth) compelled rejection of the application.

His Honour also held that the YELLOW mark was deceptively similar to earlier marks that incorporated the word “yellow” and had been registered in respect of similar services or closely related goods, and so offended against section 44 of the Act.

Telstra appealed the learned trial judge’s findings in respect of sections 41 and 44. Telstra accepted that YELLOW was not inherently adapted to distinguish, and that traders might wish to use the colour it describes; this was consistent with the evidence of the “not infrequent” use of that colour in relation to directories. Telstra argued, however, that the trial judge erred in two main respects when applying section 41(3). First, Telstra argued that the evidence did not support a finding, or the trial judge failed to find, that YELLOW “signified” print and online directories. Secondly, even if the trial judge correctly found that YELLOW signified directories, he erred in finding that the mark therefore described directories (which are not inherently or necessarily yellow).

The Full Court (Besanko, Jagot and Edelman JJ) rejected these arguments. Their Honours referred to authority to the effect that words describing a colour may “necessarily be inherently descriptive” depending on the goods: for some goods colour is a key element (and for a subset of those goods, a colour might even be “the reverse of descriptive”, as with “red” for whitewash); while for other goods colour may have no “inherent significance”. Evidence may show – as it did in this case – that a particular word appeals to industry participants and has “such a place in the vocabulary of persons concerned” with the relevant goods that it could not be considered distinctive. Further, such evidence may help identify the “ordinary signification” of the mark and demonstrate that properly motivated traders might want to use the mark to describe their goods or services. Contrary to Telstra’s assertions, the trial judge did, in fact, consider and make findings as to the ordinary signification of “yellow” in relation to directories.

The Full Court accepted Telstra’s criticism that the trial judge incorrectly placed an onus on Telstra to the effect that if there were any doubt as to whether traders legitimately would wish to use the mark, the trade mark application should be refused. This reflected authorities applicable to the 1955 legislation, not the present approach to section 41. However, the error was of no consequence in light of the trial judge’s positive findings, not disturbed on appeal, that other traders would wish to use the mark, and that YELLOW was not at all inherently adapted to distinguish.

Those findings meant that Telstra’s attacks based on the trial judge’s treatment of section 41(5) were irrelevant, but the Full Court considered them. The Full Court did not disturb the finding at first instance that there was no use of YELLOW as a trade mark by Telstra before the priority date. The Full Court accepted that post-lodgement use may be relevant to the question of whether a mark might have sufficient capacity as at the lodgement date to distinguish the relevant goods and services given the use or intended use of the mark (although subsequent use that merely seeks to educate consumers about the connection between the mark and the applicant may not support an inference of capacity to distinguish).

Telstra’s main criticism focused on the trial judge’s failure to deal with the second of two (contemporaneous) survey reports that assessed the effectiveness of a post-lodgement campaign centred around the YELLOW mark. The Full Court considered that to be an error, and that the report was of such potential significance that, if the matter had depended on section 41(5), the appeal would have been upheld and a re-trial would have been ordered.

The Full Court also upheld Telstra’s grounds of appeal based on section 44, but given Telstra’s failure on the section 41(3) grounds this did not affect the overall outcome of the appeal. The Full Court accepted that the trial judge improperly placed weight on Telstra’s history of protecting its YELLOW PAGES marks and using other marks containing the word “yellow”, and whether that history was consistent with its contentions as to YELLOW application when assessing deceptive similarity. Such a consideration is irrelevant to the question of deceptive similarity. The Full Court agreed with the analysis of the delegate, and held that YELLOW was not deceptively similar to YELLOW ENVELOPE, YELLOW DUCK or YELLOW ZONE: “Even when considered in light of the limited overlap with the relevant Telstra service, the use of YELLOW as a noun gives rise to different ideas from its use as an adjective in the context of an ENVELOPE, DUCK ZONE or DOOR”.

The Full Court also held that it was now too late for Telstra to apply to limit the YELLOW applications to exclude goods and services not relevant to the findings at first instance.

No application for special leave to appeal to the High Court has been pursued by Telstra.