FEDERAL COURT OF AUSTRALIA

Delfi Chocolate Manufacturing S.A. v Mars Australia Pty Ltd [2015] FCA 1065

ON APPEAL FROM THE REGISTRAR OF TRADE MARKS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decisions of the delegate of the Registrar of Trade Marks made on 4 December 2014:

(a)    to refuse trade mark application No. 1546597; and

(b)    to award costs in favour of the respondent;

be set aside.

3.    The cross-appeal be dismissed.

4.    The trade mark “MALTITOS” the subject of application No. 1546597 proceed to registration in Class 30 for “Confectionery; biscuits; chocolate; cocoa; products made from or including chocolate and/or cocoa”.

5.    The respondent pay the applicant’s costs of this proceeding and of the application before the delegate.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ON APPEAL FROM THE REGISTRAR OF TRADE MARKS

REASONS FOR JUDGMENT

1    In this proceeding, the applicant, Delfi Chocolate Manufacturing S.A., appeals under s 56 of the Trade Marks Act 1995 (Cth) (“the Act”) from a decision of the delegate of the Registrar of Trade Marks, made on 4 December 2014, to refuse to register the trade mark “MALTITOS” (“the applicant’s mark”) in class 30, for “Confectionery; biscuits; chocolate; cocoa; products made from or including chocolate and/or cocoa”: Mars Australia Pty Ltd v Delfi Chocolate Manufacturing SA (2014) 110 IPR 593. In that decision, the delegate upheld the opposition of the respondent, Mars Australia Pty Ltd, under s 60 of the Act, upon the basis that the respondent’s existing registered mark “MALTESERS” (“the respondent’s mark”) had acquired a reputation in Australia and, because of that reputation, the use of the applicant’s mark would be likely to deceive or to cause confusion.

2    By cross-appeal, the respondent appeals from the same decision of the delegate, in which the respondent’s opposition to the registration of the applicant’s mark on the ground that it was substantially identical with or deceptively similar to the respondent’s mark within the meaning of s 44(1) of the Act was rejected.

3    Both appeals are in the nature of appeals de novo to be heard and determined in the original jurisdiction of the court. The question which confronts the court, therefore, is the same question as was dealt with by the delegate, namely, whether the applicant’s mark should be registered having regard to the extent to which any ground on which the application was opposed by the respondent has been established. The respondent’s grounds are the same as those taken before the delegate, namely, those available under ss 44(1) and 60 of the Act.

SECTION 44(1)

4    Section 44(1)(a) of the Act provides as follows:

(1)    Subject to subsections (3) and (4), an application for the registration of a trade mark (applicant’s trade mark) in respect of goods (applicant’s goods) must be rejected if:

(a)    the applicant’s trade mark is substantially identical with, or deceptively similar to:

(i)    a trade mark registered by another person in respect of similar goods or closely related services; or

(ii)    a trade mark whose registration in respect of similar goods or closely related services is being sought by another person; …

5    In the present case, the respondent does not suggest that the applicant’s mark is substantially identical with the respondent’s mark. It is contended, rather, that it is deceptively similar thereto. By s 10 of the Act, a trade mark is taken to be deceptively similar to another trade mark if “it so nearly resembles that other trade mark that it is likely to deceive or cause confusion”. Here, the respondent submits that the applicant’s mark is likely to cause confusion, rather than that it is likely to deceive.

6    In Registrar of Trade Marks v Woolworths Ltd (1999) 93 FCR 365, 382-383 [50], French J (Tamberlin J agreeing) said:

In Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd [(1954) 91 CLR 529 at 594-5], which concerned the 1905 Act, Kitto J set out a number of propositions which have frequently been quoted and applied to the 1955 Act. The essential elements of those propositions continue to apply to the issue of deceptive similarity under the 1995 Act. Applied also to service marks and absent the imposition of an onus upon the applicant they may be restated as follows:

(i)    To show that a trade mark is deceptively similar to another it is necessary to show a real tangible danger of deception or confusion occurring. A mere possibility is not sufficient.

(ii)    A trade mark is likely to cause confusion if the result of its use will be that a number of persons are caused to wonder whether it might not be the case that the two products or closely related products and services come from the same source. It is enough if the ordinary person entertains a reasonable doubt.

It may be interpolated that this is another way of expressing the proposition that the trade mark is likely to cause confusion if there is a real likelihood that some people will wonder or be left in doubt about whether the two sets of products or the products and services in question come from the same source.

(iii)    In considering whether there is a likelihood of deception or confusion all surrounding circumstances have to be taken into consideration. These include the circumstances in which the marks will be used, the circumstances in which the goods or services will be bought and sold and the character of the probable acquirers of the goods and services.

(iv)    The rights of the parties are to be determined as at the date of the application.

(v)    The question of deceptive similarity must be considered in respect of all goods or services coming within the specification in the application and in respect of which registration is desired, not only in respect of those goods or services on which it is proposed to immediately use the mark. The question is not limited to whether a particular use will give rise to deception or confusion. It must be based upon what the applicant can do if registration is obtained.

In respect of the last proposition, Mason J observed in Berlei Hestia Industries Ltd v Bali Co Inc (1973) 129 CLR 353 at 362:

“…the question whether there is a likelihood of confusion is to be answered, not by reference to the manner in which the respondent has used its mark in the past, but by reference to the use to which it can properly put the mark. The issue is whether that use would give rise to a real danger of confusion.”

7    With respect to item (v) in French J’s restatement, the respondent’s evidentiary case was confined to the first type of goods in respect of which the applicant seeks registration, confectionery. That is not to say that goods of the other types referred to are not relevant: it is to say only that the respondent did not seek to run a factual case in relation to those other types of goods. In the circumstances, the respondent will not succeed in its opposition to the registration of the applicant’s mark under s 44(1)(a) unless I find that there is a real likelihood that some people will wonder or be left in doubt about whether confectionery sold or offered for sale under the applicant’s mark comes from the same source as confectionery sold or offered for sale under the respondent’s mark.

8    The context in which this question must be addressed was stated by Dixon and McTiernan JJ in Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641, 658:

In deciding this question, the marks ought not, of course, to be compared side by side. An attempt should be made to estimate the effect or impression produced on the mind of potential customers by the mark or device for which the protection of an injunction is sought. The impression or recollection which is carried away and retained is necessarily the basis of any mistaken belief that the challenged mark or device is the same. The effect of spoken description must be considered. If a mark is in fact or from its nature likely to be the source of some name or verbal description by which buyers will express their desire to have the goods, then similarities both of sound and of meaning may play an important part. The usual manner in which ordinary people behave must be the test of what confusion or deception may be expected. Potential buyers of goods are not to be credited with any high perception or habitual caution. On the other hand, exceptional carelessness or stupidity may be disregarded. The course of business and the way in which the particular class of goods are sold gives, it may be said, the setting, and the habits and observation of men considered in the mass affords the standard.

9    In the present case, the respondent referred to the circumstances in which its own product is sold and offered for sale as providing the context for the presumptive use of the applicant’s mark. Confectionery of the kind upon which the respondent relies tends to be sold in supermarkets, convenience stores, petrol stations, specialty candy shops and cinemas (for example). Various kinds and brands of packaged confectionery are conventionally found displayed together on a rack, shelf or similar. When a rack, for example, displays confectionery under many different brands, the construction of the packaging used tends to be the same or similar (ie to be accommodated to the display environment). The same might be said of confectionery displayed, for example, on a shelf. But, from what appears in the evidence, the colours and graphic elements utilised by the different brands of confectionery presented in this way vary greatly. The impression created by display environments such as these would be one of vigorous competition for the consumer’s dollar between manufacturers offering closely substitutable products.

10    The putative consumers with which I must be concerned are, as Dixon and McTiernan JJ pointed out, “potential buyers of goods”. Thus the person who might, as a real likelihood, “wonder or be left in doubt” (per French J) is someone actively considering purchasing confectionery. While I accept the prospect that, because of the nature and presumed pricing of the goods in question, impulse buying must be an element of the relevant commercial landscape, I do not consider that the theoretical wonderings of a mere passer-by, not having the slightest intention of making a purchase of a product of any brand, can be the relevant touchstone. Rather – and this must be the high point of the respondent’s case in relevant respects – we are here concerned with someone of ordinary intelligence who has had some previous exposure to the respondent’s mark in contexts such as those described in the previous paragraph, who is of a mind to make a purchase of confectionery, and who sees the applicant’s mark used in the context of goods of the relevant kind.

11    In addressing the question referred to in the authorities, I am not permitted to assume that the applicant’s mark will be used in any particular style, colour or get-up: see eg Aldi Stores Ltd Partnership v Frito-Lay Trading Co Gmbh (2001) 54 IPR 344, 380 [155]. Much of the respondent’s case was concerned to demonstrate how confusing the applicant’s mark would be if used in the same lettering and font, in the same colour and against the same background colour, and in the same layout and style, including the same placement and angle with reference to the packaging being used, as the respondent’s mark commonly is. Considerations of these kinds would, of course, be central aspects of any passing off case brought by the respondent against the applicant, but they have no place in a proceeding in which the only issue is whether the applicant’s mark, a single word in upper case letters, should be registered.

12    Considered as a visual entity, and aside from aspects of get-up etc (as dealt with in the previous paragraph) and reputation (the province of s 60), the respondent’s mark has a certain catchiness to it and is, in my view, memorable to an extent. So is the applicant’s mark. But, at this level, I do not think that a consumer would wonder or be left in doubt whether confectionery sold under the applicant’s mark had a common source with confectionery sold under the respondent’s mark to which he or she had had some previous exposure. In the case of word marks, it is sometimes not easy to elaborate upon a conclusion such as this without straying into the forbidden territory of side-by-side comparison. However, if the notional consumer under contemplation was someone whose eye fell upon the applicant’s mark, in isolation, displayed on a package sitting on a rack or shelf, I am quite unpersuaded that it would, because of the limited similarities between that mark and the respondent’s mark, enter his or her mind that the product in question derived, or might have derived, from the same source as products sold under the latter.

13    It is, of course, not only the look of a mark which should be considered under s 44(1)(a) of the Act. In the case of a word mark it is also the sound of the word as spoken which should be taken into account for the purpose of considering whether the use of it would cause confusion. The reality is, however, that it is a mark that is registered, and presumptively used to associate goods or services with the trader from whom they derive. A sound, as such, cannot be registered. This does not mean that the sound of a word mark, as said, cannot influence the determination of the issue whether the use of the mark would cause confusion. But it does mean that the sound of the mark is not, or at least need not be, given directly by the word itself. To take two obvious examples even within the English language, it could not be said that either of the names “Mainwaring” and “Beauchamp” would unambiguously convey to every reader a single, definite, sound by reference to which to assess its potential for confusion with an existing mark.

14    In the present case, there does not appear to be any scope for variation in the pronunciation of the respondent’s mark. However, the situation with the applicant’s mark is not so simple. The parties appear to have assumed that the final syllable in the applicant’s mark is to be pronounced as in “toes”. The parties presumably took this approach because the applicant’s mark is not a recently-invented word, the product with which it is associated being sold, and the mark itself being registered, in many countries. Because the case was conducted on that basis, I am prepared to make the same assumption, but I note that, absent some understanding of this overseas use, and looking at the word itself in isolation, the pronunciation adopted by the parties would by no means be obvious: if this were a mark taken from a Greek surname, for instance, some other pronunciation might have been a more likely one.

15    Felicity Cox, Associate Professor in the Department of Linguistics at Macquarie University, gave evidence on behalf of the applicant. In her report dated 18 May 2015, A/Prof Cox said:

In the case of ‘Maltitos’ and ‘Maltesers’, both words comprise three syllables (containing three separate vowel sounds). There are various ways that syllable boundaries can be identified, but according to word morphology, the first syllable boundary would occur after the ‘t’ of ‘malt’ in both words. This first element represents a true word in itself, meaning ‘germinated grain (usually barley), used in brewing and distilling’ (Macquarie Dictionary, 2013) and is pronounced as MAWLT /mo:lt/ or sometimes MOLT /mɔlt/, in Australian English. The remaining two syllables would be pronounced differently in ‘Maltitos’ compared to ‘Maltesers’. In ‘Maltitos’, the ‘-itos’ component rhymes with ‘vetoes’, and in ‘Maltesers’, the ‘-esers’ component rhymes with ‘visas’. It is the pronunciation of the final two syllables in each mark that differentiates the words from one another just as these syllables differentiate the words ‘vetoes’ and ‘visas’.

16    A/Prof Cox said that the words with which she was concerned had the same stress pattern, with primary stress being placed on the middle syllable, secondary stress being placed on the first syllable, and the final syllable being unstressed. She likened the middle syllable in ‘Maltitos’ to the corresponding syllable in English loan words from Spanish like ‘burrito’ and ‘mosquito’, and from Italian in words like ‘bandito’ and ‘incognito’. By contrast, the ‘-ese-’ component of ‘Maltesers’ was a common English noun component that took primary stress in the same way as was to be found in such words as ‘Japanese’, ‘Balinese’ and ‘legalese’. She said that the unstressed final syllables in the words ‘Maltitos’ and ‘Maltesers’ were important differentiators, such as might be seen, for example, as between the two words ‘radios’ and ‘radius’.

17    In her report, A/Prof Cox also said:

In ‘Maltitos’, the consonant between the final two syllables is ‘t’, phonetically described as a voiceless alveolar stop sound /t/, whereas for ‘Maltesers’ it is ‘s’ pronounced as /z/, a voiced alveolar fricative sound. The difference between the two sounds /t/ and /z/ is a difference of manner of articulation (stop vs fricative) and also of voicing (voiceless vs voiced). /t/ is a voiceless speech sound whereas /z/ is voiced. These differences are highly functional in English and separate words like ‘seat’ vs ‘seize’, ‘shoot’ vs ‘shoes’.

In English there is a small select set of vowels that can occur in unstressed syllables. One of those vowels is ‘o’. It occurs in the final unstressed syllables in words like ‘silo’, ‘follow’ and ‘borrow’. This is the same sound used in the last syllable of the word ‘Maltitos’. Another vowel that occurs in unstressed syllables is the schwa vowel. Schwa occurs at the end of words like ‘sofa’, ‘doctor’, ‘collar’, ‘walker’. Note that in Australian English the final syllable of all of these words contains the unstressed schwa vowel. None of these words contains an ‘r’ sound at all because Australian English is a non-rhotic accent that only allows ‘r’ sounds before vowels. For example, there is no ‘r’ in ‘over’ when it occurs on its own, before a pause or before a consonant such as in ‘overboard’. The schwa vowel occurs in the final unstressed syllable of the word ‘Maltesers’. The final syllables in ‘Maltitos’ and ‘Maltesers’ remain distinct with respect the use of ‘o’ and the schwa respectively and this difference is analogous to the difference between words like ‘radios’ vs ‘radius’ which differ solely in the pronunciation of the final unstressed syllable.

The pronunciations of the final syllables of the two marks ‘Maltitos’ and ‘Maltesers’ are quite different. Firstly, they contain two different consonant sounds /t/ and /z/ that in themselves would be sufficient to signal a difference of meaning. Such a difference is functional in English for example in words like ‘writer’ vs ‘riser’. In addition to the consonantal difference, the marks ‘Maltitos’ and ‘Maltesers’ also contain a vowel difference in the final syllable (‘o’ vs schwa) which is also functional in English and would be similarly sufficient on its own to signal a difference in meaning. As both consonant and vowel differences occur to differentiate the marks, the effect is to enhance the difference between the two.

18    Neither in cross-examination nor in final submissions made on behalf of the respondent was the substance or, I would have to say with respect, the sense, of any of this evidence by A/Prof Cox undermined. Although I am not competent to engage with her in her field of technical expertise, what she said in the passages set out above closely aligns with what I, relevantly a layperson, would hold to be the aural impressions generated in the ear of someone who, having some familiarity with the respondent’s mark, encounters the applicant’s mark for the first time. All I need to add is the conclusion that, considered as words, there is not, in my view, such a close aural resemblance between the two marks as would be likely to cause confusion.

19    Additionally to visual and aural impressions as such, the respondent stressed that the exercise mandated by ss 44 and 10 of the Act was one which had to be made in the proper context. In the present case, we are concerned with confectionery and with the settings in which it is offered for sale, to which I have already referred. They include situations in which customers make their own selections from display racks, for example, and situations in which customers purchase by over-the-counter transactions. As to the latter, the respondent submitted that the aural similarity in the two marks, and the prospect of minor confectionery orders being placed over a counter in casual, even off-hand, phrases, would lead to misunderstandings and to the consumer being supplied with a product which he or she did not request. I do not think I am entitled to speculate upon that prospect, and, if I did, I would not be entitled to take it into account. The question is whether the resemblance, such as it is, between the marks would cause confusion, not whether an employee on a retail counter would make a mistake on account of having misheard or misinterpreted an order which was placed.

20    Beyond that, I would say only that, in my treatment of the aspects of visual and aural resemblance to date, I have assumed a context of the kind referred to. To the extent that the respondent invited me to note the typical presentation and get-up that is associated with the sale of confectionery, I refer to what I said in para 11 above: I must be concerned, and concerned only, with the applicant’s mark as such.

21    For the above reasons, I reject the respondent’s case under s 44(1)(a) of the Act.

SECTION 60

22    Section 60 of the Act provides as follows:

The registration of a trade mark in respect of particular goods or services may be opposed on the ground that:

(a)    another trade mark had, before the priority date for the registration of the first-mentioned trade mark in respect of those goods or services, acquired a reputation in Australia; and

(b)    because of the reputation of that other trade mark, the use of the first mentioned trade mark would be likely to deceive or cause confusion.

The applicant accepts that the respondent’s mark satisfies the requirements of para (a). The area of debate, therefore, is confined to para (b).

23    Until amended by the Trade Marks Amendment Act 2006 (Cth), s 60 read as follows:

The registration of a trade mark in respect of particular goods or services may be opposed on the ground that:

(a)    it is substantially identical with, or deceptively similar to, a trade mark that, before the priority date for the registration of the first-mentioned trade mark in respect of those goods or services, had acquired a reputation in Australia; and

(b)    because of the reputation of that other trade mark, the use of the first-mentioned trade mark would be likely to deceive or cause confusion.

24    Although the Explanatory Memorandum for s 60 as introduced, for the first time, in 1995 was quite unhelpful in understanding why the provision was introduced, the Explanatory Memorandum for the 2006 amendment supplied that deficiency:

1.    The intention of section 60 of the Act is to implement Australia’s obligations to protect well-known marks under the Paris Convention for the Protection of Intellectual Property and the 1994 World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The provisions have not been written so as to establish a new class of trade marks (“well-known” marks) or to prescribe a particular threshold of how well-known a mark must be. Rather, the test has been written so that it can be applied to all marks. The test depends on the extent of the reputation in Australia that has been acquired by a sign. In light of that reputation, the question to be asked is whether the use of a subsequent trade mark would be likely to result in deception or confusion. Section 60 is a ground for opposition to a trade mark application for registration, which can also be used under section 88 as a basis for cancellation of a registration by the courts.

2.    Under the current arrangements the provisions of section 60 require that the applied-for mark be substantially identical with, or deceptively similar to, the trade mark forming the basis of opposition before consideration of any deception or confusion, resulting from the reputation of the opponent’s trade mark, can take place. Substantial identity and deceptive similarity are tests undertaken in examination of an application before the opposition process, and have very well established scope.

3.    There have been a number of instances where a trade mark has an established reputation in Australia, and use of a subsequently applied-for trade mark would deceive or cause confusion, even though the subsequent trade mark is not substantially identical with, or deceptively similar to the original trade mark. However, because of the way paragraph 60(a) of the Act is written it is not possible to currently use this provision to prevent registration of a mark which fails the tests for substantial identity or deceptive similarity, but which nevertheless will cause confusion or deception in relation to a well-known mark. The tests for deception and confusion are all well established in judicial authority, and hinge on the question of whether or not a reasonable number of people may be caused to wonder if a trade connection exists between the marks. By removing the requirement for substantial identity or deceptive similarity from section 60, the ground for opposition under section 60 can be used to oppose the registration of a trade mark because of the possible deception or confusion arising solely from the reputation of a trade mark.

4.    Under the amended provisions the consideration of oppositions would take into account the extent of the reputation of the opposing mark at the time the opposed mark was applied for, and the likelihood of deception and confusion occurring in the marketplace because of this.

25    Because the words “likely to deceive or cause confusion” in s 60(b) are a reflex of the same phrase in s 10, and because s 10 feeds into s 44, the provision which gives protection to registered marks, it was argued on behalf of the applicant that the purpose of s 60 must have been the protection of unregistered marks which had acquired a reputation in Australia, including marks which were not actually used in Australia, and marks which might be registered in relation to goods or services other than those in respect of which a particular claim for protection is made. The section does not read in that limited way, and it is apparent from the 2006 Explanatory Memorandum that “the test has been written so that it can be applied to all marks”. Recourse to the memorandum for the purpose of confirming the ordinary meaning of the text is permissible: Acts Interpretation Act 1901 (Cth), s 15AB(1)(a).

26    I was for a time attracted to the view that, reputation aside, what sets s 60 apart from s 44 is the reference in s 60(b) to the use of the mark, whereas the comparison mandated by s 44 is between marks as such. On reflection, however, I have come to the view that this is a distinction without a difference. It is clear from the definition in s 17 that a “trade mark” is a sign used or intended to be used. A comparison abstracted from actual or intended use of the mark in question would be no more legitimate under s 44 than it would be under s 60.

27    In the result, I would hold that, in a case in which the “other” mark is registered, the only respect in which s 60 requires an exercise different from that arising under so much of s 44 as relates to deceptive similarity is that the reputation in Australia of the “other” mark must be the reason why the use of the mark proposed to be registered is likely to deceive or cause confusion. What this means in practice is that the notional consumer of average intelligence thinking of making a purchase by reference to goods in association with which the latter mark is used, or intended to be used, is no longer someone who has had no more than some exposure to the “other” mark: he or she is someone who is assumed to have that level of awareness of that mark as is consistent with the content and extent of the reputation of it.

28    I would find that the respondent’s mark is strongly embedded in the consciousness of many of those of average intelligence whose circumstances provide the template for the notional consumer of confectionery with whom I must be concerned. It is probably an overstatement to say that everyone has heard of Maltesers, but it is established on the evidence that a great many people have. As noted above, the applicant conceded that the respondent’s mark had a reputation in Australia as required by s 60(a), but I would go further and find that it has a very widespread, solid, reputation in the area of packaged confectionery.

29    I do not consider, however, that that circumstance would make it any more likely that the notional consumer of confectionery would have cause to wonder whether products displayed and sold under the applicant’s mark were from a common source with those displayed and sold under the respondent’s mark. Indeed, with a stronger awareness of the respondent’s mark, I consider that such a consumer would be immediately struck by the differences between the two marks, as discussed above. He or she may observe the limited similarities between the marks and, because the subject of the presumptive interest would be confectionery, may assume that the products were of the same nature as those sold under the respondent’s mark, but, giving the matter a moment’s reflection, would readily conclude that those products were not Maltesers. As I say, the strong reputation of the respondent’s mark would, if anything, make that conclusion a more likely one.

30    In other respects, under s 60 I would not wish to add to the reasons given above under s 44.

DISPOSITION OF THE PROCEEDING

31    For the reasons given above, I propose to dismiss the cross-appeal, to allow the appeal and to order that the applicant’s mark be registered.

Associate:

Dated:    1 October 2015