FEDERAL COURT OF AUSTRALIA

Ceramiche Caesar S.p.A v Caesarstone Ltd [2020] FCAFC 124

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be granted.

2.    The appeal be allowed.

3.    The orders made by the primary judge in proceeding NSD 166 of 2015 on 14 January 2019 be set aside.

4.    In lieu of the primary judge’s orders the Court orders:

(a)    the appeal from the decision of the Registrar of Trade Marks made by her Delegate on 4 February 2015 in respect of Australian Trade Mark Application No 1058321 be dismissed;

(b)    the respondent pay the appellant’s costs of the proceeding before the primary judge and of and incidental to the application for leave to appeal and the appeal.

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

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be granted.

2.    The appeal be allowed.

3.    The orders made by the primary judge in proceeding NSD 1187 of 2015 on 14 January 2019 be set aside.

4.    In lieu of the primary judge’s orders the Court orders:

(a)    the appeal from the decision of the Registrar of Trade Marks made by her Delegate on 9 September 2015 in respect of Australian Trade Mark Application No 1211153 be dismissed;

(b)    the respondent pay the appellant’s costs of the proceeding before the primary judge and of and incidental to the application for leave to appeal and the appeal.

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

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The orders made by the primary judge in proceeding NSD 1719 of 2015 on 14 January 2019 be set aside.

3.    Australian Trade Mark Registration No 1211152 be cancelled.

4.    The respondent pay the appellant’s costs of the proceeding before the primary judge and of the appeal.

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

REASONS FOR JUDGMENT

THE COURT:

OVERVIEW

1    There are three proceedings before the Court:

(1)    Ceramiche Caesar S.p.A’s (Ceramiche Caesar) application for leave to appeal from orders made by the primary judge allowing Caesarstone Ltd’s (Caesarstone) Australian Trade Mark Application No 1058321 for the word mark CAESARSTONE to proceed to registration for certain class 19 floor and wall goods (Caesarstone Goods Word Mark);

(2)    Ceramiche Caesar’s application for leave to appeal from the orders made by the primary judge allowing Caesarstone’s Australian Trade Mark Application No 1211153 for a stylised Caesarstone mark to proceed to registration for certain goods and services in classes 19, 35 and 37 (Caesarstone Device Mark); and

(3)    Ceramiche Caesar’s appeal from the primary judge’s orders allowing Caesarstone’s Australian Trade Mark Registration No 1211152 for the word mark CAESARSTONE to remain registered for services identified in classes 35 and 37 (Caesarstone Services Word Mark).

2    The first and second proceedings require leave to appeal: s 195(2) of the Trade Marks Act 1995 (Cth) (Act). Those proceedings relate to appeals that Caesarstone brought against the Registrar of Trade Marks’ decisions in opposition proceedings to refuse registration of the Caesarstone Goods Word Mark and the Caesarstone Device Mark.

3    The orders allowing the trade mark applications lodged by Caesarstone to proceed to registration were made in Caesarstone Ltd v Ceramiche Caesar S.p.A. (No 3) [2019] FCA 7 (Caesarstone (No 3)). Those orders gave effect to the earlier judgment in Caesarstone Ltd v Ceramiche Caesar S.p.A. (No 2) [2018] FCA 1096 (Caesarstone (No 2)). Unless otherwise noted, references to the primary judgment in these reasons will be to Caesarstone (No 2).

4    The third proceeding relates to an application made by Ceramiche Caesar under s 88 of the Act to rectify the Register of Trade Marks by cancelling the Caesarstone Services Word Mark. The appeal in the third proceeding is of right.

5    The agreed position between the parties was that the result in the first proceeding will entirely determine the result in the second proceeding and almost entirely determine the result in the third.

6    The appellant, Ceramiche Caesar, manufactures ceramic tiles for indoor and outdoor flooring and wall cladding. Ceramiche Caesar has promoted, manufactured and sold tile products in Australia since 1988. With effect from 23 November 2004, Ceramiche Caesar registered the following stylised Caesar Device Mark in Australia in class 19 for “ceramic tiles for indoor and outdoor use”:

7    The respondent, Caesarstone, is an Israeli company that manufactures and sells large quartz slabs. The underside of all Caesarstone slabs were, and had been since 1987, marked with the “CAESARSTONE mark”: J[230]. Prior to 2004, the Caesarstone slabs came in two sizes: 3080mm long x 1340mm wide; and 3060mm long x 1440mm wide: J[229].

8    From 2003, these large slabs were distributed in Australia through two distributors: Caesarstone’s licensee, Tessera Stones and Tiles Pty Ltd (Tessera) and Tessera’s sub-licensee, Carsilstone Pty Ltd (Carsilstone). Caesarstone came to have an Australian subsidiary, Caesarstone Australia Pty Ltd (Caesarstone Australia), incorporated in 2006.

9    Tessera and Carsilstone did not generally sell the Caesarstone slabs directly to individual consumers, but instead sold the slabs to stonemasons: J[237]. The stonemasons would convert the slabs into finished products, including benchtops and countertops, vanities and surrounds and splashbacks, and sell the finished product to consumers. There has never been a dispute between the parties in relation to Caesarstone’s right to use and register the Caesarstone trade mark for these products. The dispute concerns whether Caesarstone should enjoy registered trade mark rights for tiling for floors and walls.

10    On 2 June 2005, Caesarstone first applied for registration of the Caesarstone Goods Word Mark in class 19. The first thing the description of goods in the trade mark application mentioned was “[t]iles”. This was because Caesarstone was then contemplating expanding its business into tiles. The description of goods in the trade mark application was:

Tiles, 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.

11    Section 44 provides:

44 Identical etc. trade marks

(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; and

(b)    the priority date for the registration of the applicant’s trade mark in respect of the applicant’s goods is not earlier than the priority date for the registration of the other trade mark in respect of the similar goods or closely related services.

…

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

        (a)    it is substantially identical with, or deceptively similar to:

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

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

(b)    the priority date for the registration of the applicant’s trade mark in respect of the applicant’s services is not earlier than the priority date for the registration of the other trade mark in respect of the similar services or closely related goods.

…

    (3)    If the Registrar in either case is satisfied:

(a)    that there has been honest concurrent use of the 2 trade marks; or

    (b)    that, because of other circumstances, it is proper to do so;

the Registrar may accept the application for the registration of the applicant’s trade mark subject to any conditions or limitations that the Registrar thinks fit to impose. If the applicant’s trade mark has been used only in a particular area, the limitations may include that the use of the trade mark is to be restricted to that particular area.

(4)    If the Registrar in either case is satisfied that the applicant, or the applicant and the predecessor in title of the applicant, have continuously used the applicant’s trade mark for a period:

(a)    beginning before the priority date for the registration of the other trade mark in respect of:

            (i)    the similar goods or closely related services; or

            (ii)    the similar services or closely related goods; and

(b)    ending on the priority date for the registration of the applicant’s trade mark;

the Registrar may not reject the application because of the existence of the other trade mark…

12    In an examiner’s report dated 4 August 2005, a delegate of the Registrar of Trade Marks concluded that allowing an extension into floor and wall tiles would present a very high likelihood of deception or confusion with the prior registered Caesar Device Mark, which accordingly operated as a barrier to registration under s 44(1) of the Act. The reasons for not accepting Caesarstone’s application were expressed in the following way:

•    Your trade mark closely resembles the conflicting trade mark because the word Caesar, being the whole of the earlier filed trade mark, is the major element of your trade mark Caesarstone. Including the suffix stone is not sufficient to differentiate the trade marks.

AND

•    The goods are similar because your claim for tiles, panels for floors, floor coverings, wall cladding, flooring, and ceilings; non­metallic covers for use with floors and parts thereof; profiles and floor skirting boards includes similar goods to the claim for building materials (non-metallic) including tiles, floor coverings, angle beads, cove base sg, angle irons not of metal, stop ends, raised floor tiling systems, stair-treads, special finishing, pieces made by the earlier filed trade mark.

13    The report expressly invited Caesarstone to respond and indicated it could do so by providing “evidence of prior use, honest concurrent use and/or other circumstances” in accordance with the requirements of s 44(3).

14    In a letter dated 16 March 2007 to the Registrar, responding to the invitation in the examiner’s report, Caesarstone did not put forward honest concurrent use as it had been invited to do, but rather proposed restricting the statement of goods “in order to remove any remaining overlap with the goods covered by” the Caesar Device Mark. It proposed to do so by excluding tiles, putting forward the following statement of goods:

Panels for floors, floor coverings, wall cladding, ceilings; non-metallic covers for use with floors and parts thereof; profiles and floor skirting boards; none of the foregoing being in the nature of tiles.

15    Caesarstone’s amendment to exclude tiles led the examiner to accept the Caesarstone Goods Word Mark for registration.

16    Like the delegate, and it might be thought unsurprisingly, the primary judge found that the Caesarstone Goods Word Mark was deceptively similar to the Caesar Device Mark. His Honour also concluded that Caesarstone’s trade mark application sought registration in respect of closely related goods: J[688], [689]. The consequence of these findings was that, unless the requirements of s 44(3) or (4) of the Act were met, the trade mark application could not proceed to registration: s 44 of the Act.

17    The primary judge found that Caesarstone had engaged in “honest concurrent use” of the Caesarstone Goods Word Mark under s 44(3)(a) of the Act: J[744]. Accordingly, his Honour ordered that the Caesarstone Goods Word Mark be registered for the following goods (Caesarstone (No 3) at [84]):

Class 19: Panels for:

(i)    floors;

(ii)    floor coverings; and

(iii)    wall cladding;

formed of composite stone slabs; none of the foregoing being in the nature of tiles.

18    It may be seen that the class 19 goods that were ordered to proceed to registration were a narrower class of goods than those for which Caesarstone had applied, as set out in its letter of 16 March 2007.

19    His Honour declined to find that “because of other circumstances” it was proper to accept the trade mark within s 44(3)(b) of the Act: J[745].

20    For the reasons given below, the primary judge erred in concluding that there was honest concurrent use of the Caesarstone Goods Word Mark for the designated class 19 goods. In summary, his Honour concluded that there was concurrent use of the mark by Caesarstone in respect of floor panels and wall cladding. His Honour concluded that these goods fell within the meaning of “tiles”: J[675]. This finding of honest concurrent use could not operate to permit registration in circumstances where the goods which were the subject of the honest concurrent use finding were expressly carved out of the description of goods in the application for registration. It follows that the application for leave to appeal and the appeal in the first proceeding must be allowed.

21    As is explained below, it also follows that the application for leave and the appeal in the second proceeding and the appeal in the third proceeding should also be allowed.

THE FIRST PROCEEDING

22    There were two principal issues in dispute in the first proceeding. These were whether the primary judge erred in concluding that:

(1)    there was honest concurrent use of the Caesarstone Goods Word Mark for the designated class 19 goods;

(2)    if there was prior concurrent use, the prior use of the trade mark was authorised use under Caesarstone’s control.

23    A third issue, raised by way of the respondent’s Draft Notice of Contention, was whether the Caesarstone Goods Word Mark should be registered pursuant to s 44(3)(b) of the Act.

24    A fourth issue was raised by the appellant as an alternative, namely whether the primary judge should have refused registration as a matter of discretion.

Issue 1 – Honest concurrent use of the class 19 goods

Parties’ submissions

25    The appellant submitted that the primary judge erred in finding that there was honest concurrent use of the Caesarstone Goods Word Mark for the designated class 19 goods. The appellant advanced four propositions in this regard:

(1)    the relevant goods that were the subject of the primary judge’s concurrent use finding were floor panels and wall cladding in the nature of tiles – see: J[675], [696].

(2)    the phrase “none of the foregoing being in the nature of tiles” in the class 19 goods specification (the tile disclaimer), necessarily excluded the goods which were the subject of the honest concurrent use finding from the class 19 specification.

(3)    there was no finding of honest concurrent use in respect of the goods that remained in the class 19 specification after goods in the nature of tiles were subtracted.

(4)    to be of any legal consequence, a finding of honest concurrent use requires the concurrent use to be in respect of the goods that fall within the trade mark application.

26    The primary point of contention between the parties concerned the correct interpretation of the tile disclaimer.

27    The respondent’s argument was, in summary, that the tile disclaimer was “ineffectual” in the sense that it did not operate to limit the goods that were included in the class 19 specification. The respondent noted that the primary judge found that the tile disclaimer made the meaning of the whole of the class 19 specification uncertain or meaningless at J[675]:

I therefore find, in relation to Class 19, that the words “none of the foregoing being in the nature of tiles” with reference to the words which precede that phrase, make the meaning of the whole uncertain or meaningless. For example, to state “panels for floors” or “wall cladding” and then to say “none of the foregoing being in the nature of tiles” so qualifies the meaning of the former two expressions as to make the whole, at least, uncertain and, at worst, meaningless.

28    The respondent submitted that his Honour resolved this uncertainty by finding that the tile disclaimer was “ineffectual” (J[743]) and that this interpretation was the only interpretation consistent with his Honour’s finding on honest concurrent use. The respondent submitted that the conclusion that the tile disclaimer was “ineffectual” was supported by his Honour’s finding that the tile disclaimer did not “subtract all content from” the words “panels for floors” and “wall cladding” (J[756]) despite his Honour finding that these goods were “in the nature of tiles”: J[675].

Consideration

29    As a matter of plain English, the words “none of the foregoing being in the nature of tiles” operate to limit the class 19 goods to include only panels for floors, floor coverings and wall claddings which are not in the nature of tiles. The primary judge’s conclusion that the tile disclaimer did not “subtract all content” from the words “[p]anels for floors, floor coverings, and wall cladding” which are not “in the nature of tiles” was a statement of the obvious. For example, the exclusion of tiles might allow for carpet or carpet panels. It is not a statement which supports the conclusion that the tile disclaimer was “ineffectual” in the sense contended for by the respondent.

30    In relation to a submission that the tile disclaimer should be removed from the class 19 specification in the final orders, his Honour stated in Caesarstone (No 3) at [78]:

Tiles can be made of composite stone. Goods “in the nature of tiles” were expressly excluded in the original application and, consistently with s 65(7), may not now be included. Although the drafter may not have understood the overlap between goods made of composite stone and tiles, such that the exclusion creates uncertainty, I do not see that the express exclusion of goods “in the nature of tiles” may now be ignored. I refer in this respect to the Reasons at [756] where I held that the limitation did not subtract all content from the words which preceded it. If goods “in the nature of tiles” were not excluded then the rights that the registration would give would be extended to cover tiles.

31    The primary judge was clearly of the view that, if the tile disclaimer was removed from the description of the class 19 goods, the class of goods included in the specification would widen. The primary judge’s conclusion that the tile disclaimer “did not subtract all content” from the preceding words only makes sense if the tile disclaimer has the effect of limiting the words which precede it.

32    The appellant’s submission that the primary judge erred in finding that there was honest concurrent use of the goods outlined in the class 19 specification should be accepted. A finding of honest concurrent use must be a finding of use in respect of goods that are in fact specified in the trade mark application. The goods which were the subject of the primary judge’s honest concurrent use finding were all “in the nature of tiles”. These were expressly excluded from the class 19 specification. There was no other finding of honest concurrent use.

33    It follows that the primary judge erred in ordering that the Caesarstone Goods Word Mark should proceed to registration given that his Honour found that the Caesar Device Mark operated as a barrier to registration of the Caesarstone Goods Word Mark under s 44(1) and (2) of the Act.

Issue 2 – Authorised use of the trade mark under Caesarstone’s control

34    Given the conclusion in relation to the first issue, the second issue does not strictly arise. In deference to the parties’ submissions, it is dealt with briefly.

35    Caesarstone did not itself engage in the prior use of the Caesarstone Goods Word Mark. Caesarstone sold its slabs in Australia to two distributors, Tessera and Carsilstone (Australian distributors). The primary judge held that the Australian distributors’ prior use of the Caesarstone Goods Word Mark was taken to be a use of the trade mark by Caesarstone, on the basis that such use was “authorised use” that occurred under Caesarstone’s “control” in accordance with ss 7 and 8 of the Act: J[722] to [735].

36    Section 7(3) of the Act provides:

An authorised use of a trade mark by a person (see section 8) is taken, for the purposes of this Act, to be a use of the trade mark by the owner of the trade mark.

37    Section 8 of the Act provides:

8     Definitions of authorised user and authorised use

    (1)     A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark.

    (2)     The use of a trade mark by an authorised user of the trade mark is an authorised use of the trade mark to the extent only that the user uses the trade mark under the control of the owner of the trade mark.

    (3)     If the owner of a trade mark exercises quality control over goods or services:

(a)     dealt with or provided in the course of trade by another person; and

(b)     in relation to which the trade mark is used;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

    (4)     If:

(a)     a person deals with or provides, in the course of trade, goods or services in relation to which a trade mark is used; and

(b)     the owner of the trade mark exercises financial control over the other person’s relevant trading activities;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

    (5)     Subsections (3) and (4) do not limit the meaning of the expression under the control of in subsections (1) and (2).

38    The appellant argued that, if (contrary to its position in relation to issue 1) there was honest concurrent use, the primary judge erred in finding that the prior concurrent use of the trade mark was “authorised use” because it could not be said that the use was under Caesarstone’s “control”.

39    Authorised use requires the trade mark applicant to establish “control as a matter of substance”: Lodestar Anstalt v Campari America LLC (2016) 244 FCR 557 (Lodestar) at [97]. What constitutes control as a matter of substance is informed by the function of the trade mark, which is to indicate a connection in the course of trade with the registered owner – see Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 (Pioneer) at 683 per Aickin J:

[T]he essential requirement for the maintenance of the validity of a trade mark is that it must indicate a connexion in the course of trade with the registered proprietor, even though the connexion may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. Use by either the registered proprietor or a licensee (whether registered or otherwise) will protect the mark from attack on the ground of non-user, but it is essential both that the user maintains the connexion of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive. Conversely registration of a registered user will not save the mark if there ceases to be the relevant connexion in the course of trade with the proprietor or the mark otherwise becomes deceptive.

40    What constitutes sufficient “control” in a context such as the present is highly fact dependent. Three overarching matters of context should be referred to at the outset.

41    First, Caesarstone did not ever sell manufactured or finished products in Australia. It sold raw material in the form of approximately 3 x 1.4 metre slabs to the Australian distributors. The slabs are not the designated goods: J[674], [675].

42    Secondly, the sale of the raw material to the Australian distributors was a sale to unrelated entities made on an arm’s length basis. The parties were both at arm’s length and dealing with each other at arm’s length: Granby Pty Ltd v Federal Commissioner of Taxation (1995) 129 ALR 503. There was no relevant association from which inferences of control might be drawn – cf: Trident Seafoods Corporation v Trident Foods Pty Ltd (2019) 369 ALR 367 at [45]-[52].

43    Thirdly, the quality of the finished product, namely the designated goods, depended upon the work of stonemasons who did the cutting, shaping and polishing. The evidence demonstrated that it was the craftsmanship of a stonemason which determined the quality of the finished product. The craftsmanship of a stonemason transformed the slab into a wall or floor panel. This involved a significant amount of work and skill. It involved cutting, shaping and polishing to produce the designated goods. Approximately two thirds of the costs of the final product sold to a consumer related to the cutting and installation of the Caesarstone slabs, and only one third of the cost related to the purchase of the Caesarstone slabs: J[296].

44    The primary judge concluded that there were two bases for the finding that Caesarstone exercised “control” within the meaning of s 8 of the Act: first, Caesarstone exercised quality control within the meaning of s 8(3) of the Act (J[728]); and secondly, Caesarstone exercised control “on a wider basis than … exercising quality control” (J[729]). The appellant submitted that both conclusions involved error.

Quality control

45    The primary judge’s conclusion that Caesarstone exercised quality control within the meaning of s 8(3) was based on three main conclusions, namely that Caesarstone:

(1)    gave instructions regarding slab transport and storage to the Australian distributors;

(2)    provided technical and marketing support services to the Australian distributors;

(3)    sought 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.

46    Relevant to the first and third matters, the primary judge stated at J[727]:

I find that Caesarstone as the owner of the trade marks exercised quality control over the goods and services. By way of example, Caesarstone gave its Australian licensees and distributors instructions as to the transport and storage of the goods so as to ensure quality and its fabrication and installation manuals were directed to the same end.

47    Relevant to the second and third matters, the primary judge concluded at J[724]:

I further accept the evidence of Mr Dixon that Caesarstone, at all relevant times, had provided technical and marketing support services to its Australian distributors, including samples of the Caesarstone slabs and content for brochures and technical documents. I find that Caesarstone Australia, and its predecessors as distributors of the Caesarstone slabs, created their own brochures and technical documents for the Australian marketplace using as a base the content received from Caesarstone.

48    The appellant submitted that:

(1)    the provision of instructions in relation to transport and storage of the slabs was not an exercise of quality control over the designated goods as the slabs were not the designated goods and s 8(3) of the Act requires quality control to be exercised over the designated goods;

(2)    quality control over the designated goods required Caesarstone to have actual control over the stonemasons or the work performed by them, which it did not have;

(3)    the quality of the designated product depended on the skill of the particular stonemason;

(4)    the fact that the Australian distributors, in fabrication and instruction manuals promulgated as their own, used as a base, certain material, including technical content, from documents provided by Caesarstone, was not sufficient to conclude that Caesarstone exercised quality control.

49    The respondent submitted that:

(1)    the quality of the floor and wall panels depended on the quality of the slabs, and therefore by exercising quality control over the slabs, Caesarstone was exercising quality control over the final product;

(2)    the distribution agreement between Caesarstone and Tessera required the distributors to instruct its employees and contractors to “follow Caesarstone’s fabrication and installation instructions and technical manuals”: J[716]; there was, however, no contract between Caesarstone and the stonemasons;

(3)    it was a “mixture” of the stonemason’s work and the quality of the slab which determined the overall quality of the finished product.

50    As to the first matter relied upon by the primary judge, it is to be accepted that the exercise of quality control over the slabs is not irrelevant. Quality control over designated goods may be achieved through a number of means. Quality control in relation to an ancillary matter which might affect the quality of the designated goods, such as the raw material used to produce the designated goods, is not irrelevant to the critical inquiry. However, the critical inquiry is whether there was quality control with respect to the designated goods.

51    The instructions provided in relation to storage and transport of the slabs was insufficient, at least of itself, to conclude that Caesarstone exercised quality control over the designated goods. The storage and transport instructions did not ensure that the designated goods would be of a certain quality; the instructions, if followed, simply meant that the slabs were less likely to be damaged during storage or transportation.

52    As to the second and third matters relied upon by the primary judge, the evidence of substance concerning “technical support” was fabrication manuals provided by Tessera and Carsilstone to the stonemasons. The primary judge concluded that Tessera and Carsilstone created fabrication manuals using content provided by Caesarstone “as a base”: J[724]. The provision of technical information is not, at least of itself, the exercise of quality control.

53    The May 2005 version of the Caesarstone fabrication manual, being the manual which existed shortly before the priority date, was expressed to provide “guidance only”. It was marked “© Carsilstone Pty Ltd”. It stated that the panels were not suitable for indoor and outdoor flooring. It did not contain instructions regarding how to fabricate or install floor panels or wall panels or cladding panels that were not splashbacks. Those matters tell against the provision of the fabrication manual by Caesarstone to its suppliers constituting a means of exercising quality control.

54    So far as the May 2005 fabrication manual contained content relevant to applications other than flooring, the “Forward” stated:

This manual is not meant to limit or constrain the methods of fabrication, or in any way impede your creativity with the product. Nor are we here to judge the quality of the fabrication or installation.

55    The August 2005 fabrication manual, being the manual as it existed shortly after the priority date, contained a comment to similar effect. It was not relevantly different in content to the May 2005 fabrication manual.

56    The fabrication manuals were provided to stonemasons by the Australian distributors. Under the Distribution Agreement, Tessera’s duties included to:

instruct its employees and contractors to follow CaesarStone’s fabrication and installation instructions and technical manuals, which will be provided by CaesarStone from time to time.

57    Tessera’s duty to instruct contractors to “follow Caesarstone’s fabrication and installation instructions and technical manuals” meant contractors were instructed to follow something which provided guidance only. The fabrication manuals, to the extent they could properly be described as “CaesarStone’s fabrication and installation instructions”, left stonemasons free to do what they wished with the slabs and were not a means by which Caesarstone exercised quality control over the designated goods.

58    The Distribution Agreement between Caesarstone and Tessera did not contain terms in the nature of quality control standards, brand guidelines, marketing approval mechanisms or rights of inspection of fabricated product.

59    In the case of the marketing brochures, the evidence was to the effect that the distributors were free to put such content as they wished into their brochures, without Caesarstone’s supervision or approval.

60    Quality control must be real. It must be an exercise of quality control as a matter of substance. Not only did Caesarstone not have any contractual relationship with the stonemasons, but there was no evidence that Caesarstone ever inspected the stonemasons’ work or conducted any quality control regarding the final product.

61    The matters relied upon by the primary judge, taken together, were insufficient to demonstrate an exercise by Caesarstone of quality control in respect of the designated goods within the meaning of s 8(3) of the Act.

Control on a “wider basis”

62    The primary judge’s conclusion that the Australian distributors used the trade marks under the control of Caesarstone on a wider basis than Caesarstone exercising quality control over the goods was based principally on three matters:

(1)    the visible presence of the Caesarstone mark on each Caesarstone slab;

(2)    the circumstances concerning quality control;

(3)    evidence given by Mr Dixon referred to at J[287].

63    His Honour said at J[729]:

I also find that Caesarstone’s Australian licensees and distributors used the trade marks under the control of Caesarstone on a wider basis than Caesarstone exercising quality control over the goods and services, although this remains relevant. I reach this conclusion in light of the visible presence of the Caesarstone mark on each Caesarstone slab as supplied to the Australian licensees and distributors under the terms of the Distribution Agreement. It was on that basis that the Caesarstone slabs were supplied by Caesarstone. I also take into account Mr Dixon’s evidence set out at [287] above. In relation to Caesarstone Australia I note as well that it was a subsidiary of Caesarstone but began distributing only from 2008.

64    As to the first matter, the slabs to which the mark was applied were not the designated goods. The application of the mark to a slab is not indicative of control over the designated goods.

65    The meaning of “under the control of” in s 8 of the Act is informed by the principle that the trade mark must indicate a connection in the course of trade with the registered owner: Lodestar at [95], referring to Pioneer at 683. The mark on the slab, being the raw material, does not indicate a connection in the course of trade between the designated goods and the registered owner.

66    In this context, it is also relevant to note that Tessera and/or Carsilstone were applying a Caesarstone mark to the inferior tiles of a Turkish competitor, apparently without Caesarstone’s knowledge for a period of six years: J[490]. An inference available from this fact is that control as a matter of substance was not exercised by Caesarstone.

67    As to the second matter, the question of quality control has largely been addressed earlier. It is relevant to mention a few further matters.

68    In finding that Caesarstone exercised control the primary judge stated at J[726]:

More particularly I find that: Caesarstone’s website was drawn to the attention of prospective end users in Australia and, in the context of the Caesarstone trade marks, set out applications to which the Caesarstone slabs could be put; Caesarstone Australia received technical documents from time to time from Caesarstone; Caesarstone would at times review the Caesarstone Australia website and inform Caesarstone Australia that the website needed to be updated; and the drafter of Fabrication Manuals, Mr Skentzos, worked closely with Ms Grinfeld of Caesarstone in Israel concerning what the contents of the Fabrication Manuals should be in Australia.

69    The appellant submitted that the finding that the Caesarstone website “set out applications to which the Caesarstone slabs could be put” was in error. The appellant noted that the only flooring content on Caesarstone’s website was an image of a staircase and it submitted that displaying an online image of a staircase should not be considered an exercise of “control” in respect of flooring. The appellant also submitted that pictures of splashbacks on the website could similarly not be a basis for a finding of control in regards to wall cladding.

70    The appellant’s submission should be accepted. The evidence did not establish that, by making the website available, or displaying images on the website, Caesarstone exercised any control as a matter of substance over the designated goods. At most, these pictures provided suggestions regarding the possible uses of the slabs. The images do not operate to constrain or demand the stonemasons to use the slabs in any particular way or require fabrication in any particular way.

71    The primary judge found that “Caesarstone would at times review the Caesarstone Australia website and inform Caesarstone Australia that the website needed to be updated”, which contributed to the finding of control on a wider basis: J[726].

72    The appellant submitted that this finding was in error. Caesarstone Australia was a company incorporated after the relevant priority date, and did not start operating until 2008: J[7], [137], [729]. Therefore, the appellant submitted, evidence regarding the Caesarstone Australia website was not relevant to the finding of control before the priority date. The respondent submitted that the Caesarstone Australia website commenced in 2004, and was originally run by one of the Australian distributors of Caesarstone. However, the content of the website during 2004 was not in evidence, and as such could not form a basis for the primary judge’s findings. The appellant’s submissions in this regard should be accepted.

73    As to the third matter, the primary judge relied on the evidence of Mr Dixon referred to at J[287]:

Mr Dixon said he was aware that the use of the Caesarstone Goods Word mark, the CAESARSTONE Device mark and the Caesarstone Services Word mark by Caesarstone Australia and Caesarstone’s former Australian distributors had been under the direction and control of Caesarstone. It was his understanding that since at least 2004, Caesarstone Australia and Caesarstone’s former Australian distributors had reported back to Caesarstone at regular intervals regarding: sales made of the Caesarstone slabs; marketing efforts relating to sales of the Caesarstone slabs; and marketing and advertising materials which had been created and used to promote and offer for sale the Caesarstone slabs. From reviewing the books and records of Caesarstone Australia and Caesarstone, Mr Dixon understood that Caesarstone’s former Australian distributors reported back to Caesarstone at regular intervals regarding these matters and had done so since at least 2001. I accept this evidence.

74    The appellant submitted that this evidence did not, and could not, establish control in respect of the designated goods. Mr Dixon’s claim was not supported by any documentary record. It was submitted that the records of Tessera and Carsilstone contained little or no information about what goods had been fabricated by the stonemasons using the slabs. The appellant submitted that there could not have been reporting back in respect of the designated goods because the primary judge found that the Australian distributors did not know the ultimate application of the Caesarstone slabs.

75    The respondent submitted that the reporting that occurred was important to the finding of quality control, because it gave Caesarstone the capacity to “step in” if they were not satisfied with the figures that were being reported back to them.

76    The primary judge concluded at J[237] that Tessera and Carsilstone “did not know the ultimate application of the Caesarstone slabs when they were purchased and could not control the applications that the slabs were used for once sold and collected”. That does not necessarily mean that those entities did not come to learn about the ultimate application of the slabs. Nevertheless, it is difficult to see how the generalised evidence of communication by the Australian distributors to Caesarstone of the various matters referred to at J[287] can translate into a finding of “control” over the designated goods. Those general matters do not permit a finding of control as a matter of substance.

Conclusion on control

77    The primary judge erred in finding that Caesarstone exercised control over the designated goods, whether by the exercise of quality control or “on a wider basis”.

78    The respondent submitted that the court should consider the issue of control by looking at the “whole picture”, not only by considering “individual instances”. That proposition should be accepted. The “whole picture” does not substantiate control.

Issue 3 – Should the application for the Caesarstone Goods Word Mark be registered pursuant to s 44(3)(b) of the Act?

79    Caesarstone contended in a Draft Notice of Contention that the primary judge erred in not finding, for the purposes of s 44(3)(b) of the Act, that “because of other circumstances” it was proper to accept the Caesarstone Goods Word Mark application. In his reasons the primary judge referred to the matters relied upon by Caesarstone in support of its case based on s 44(3)(b) which his Honour said “… largely repeated Caesarstone’s submissions in relation to honest concurrent use”.

80    Although his Honour does not say so in terms, it is apparent that, having upheld Caesarstone’s case based on honest concurrent use, he considered that it was not open to him, on the basis of what were essentially the same circumstances as were relied upon by Caesarstone for the purposes of that case, to permit the application to proceed to registration “… because of other circumstances”. This is consistent with the language and structure of s 44(3) which requires there be other circumstances (apart from those that would support a finding of honest concurrent use) in order to justify registration under s 44(3)(b). Given his Honour’s finding in relation to honest concurrent use, the decision not to find for Caesarstone on the basis of s 44(3)(b) is understandable.

81    Given our finding that the primary judge erred in accepting Caesarstone’s case based on honest concurrent use, the question then arises as to whether Caesarstone’s application for the Caesarstone Goods Word Mark should be permitted to proceed to registration “because of other circumstances”. The relevant paragraph of Caesarstone’s Draft Notice of Contention states:

Having found that there was honest concurrent use of trade mark application no. 1058321 for the Caesarstone Goods Word Mark pursuant to section 44(3)(a) of the Act, the primary judge erred in not finding that “because of other circumstances” it was proper to accept the application in circumstances where the primary judge found that:

(a)    there was significant use of the Caesarstone Goods Word Mark in respect of the goods and in respect of the wholesale services and maintenance of those goods during the relevant period;

(b)    no instances of confusion were proved; and

(c)    there would be considerable inconvenience to Caesarstone if no effect were given to the fact that Caesarstone had significant sales and significant presence in the Australian marketplace over many years.

82    It can be seen that Caesarstone’s contention in relation to s 44(3)(b), at least in the terms set out in the Draft Notice of Contention, assumes that there had been honest concurrent use of the Caesarstone Goods Word Mark. We have explained why his Honour’s finding that there was such use was erroneous.

83    In its submissions Caesarstone relied on the fact that it had made significant use of the Caesarstone Goods Word Mark in respect of walling and flooring and that there were no proven instances of confusion. Those matters together with what was said to be the considerable inconvenience that Caesarstone would suffer if it lost trade mark protection for those goods was said to provide sufficient justification for allowing registration of Caesarstone’s application pursuant to s 44(3)(b).

84    There are a number of difficulties with Caesarstone’s contention based on s 44(3)(b). Crucially, however, for reasons previously explained, the primary judge erred in finding that Caesarstone used the Caesarstone Goods Word Mark in respect of designated goods (including walling and flooring). In those circumstances, the Draft Notice of Contention must be rejected.

Issue 4 – Should registration have been refused as a matter of discretion?

85    The fourth issue does not arise.

SECOND PROCEEDING

86    The parties agreed that the resolution of the second proceeding turned entirely on the outcome of the first proceeding. The Caesarstone Device Mark was not used before its August 2007 priority date. Accordingly, a finding of “honest concurrent use” was unavailable: J[761]. The primary judge found that “other circumstances” made it proper to accept the mark for registration under s 44(3)(b) of the Act: J [754], [761]; Caesarstone (No 3) at [85]. The “other circumstances” were the primary judge’s orders that the Caesarstone Goods Word Mark should proceed to registration, and a desire for conformity in the goods to be registered: Caesarstone (No 3) at [86]. It follows from the fact that the application for leave to appeal and the appeal in the first proceeding should be allowed, that the application for leave and the appeal in the second proceeding should also be allowed.

THIRD PROCEEDING

87    The third proceeding concerned the Caesarstone Services Word Mark registered for tile related services. The primary judge held that the grounds for rectification under s 88(2)(a) and (c) of the Act were made out, because the use of the Caesarstone Services Word Mark was likely to deceive or confuse: J[762]-[775]. His Honour exercised a discretion under ss 88 and 89 of the Act to permit the mark to remain registered notwithstanding the grounds for rectification being made out, on the basis that there should be conformity of result.

88    The appellant submitted that the appeal in the third matter should be allowed for two reasons:

(1)    Adopting the primary judge’s approach to “conformity”, the registration of the Caesarstone Services Word Mark ought to be cancelled for floor and wall related services on the basis that his Honour erred in deciding that the Caesarstone Goods Word Mark and Caesarstone Device Mark should proceed to registration: see J[782], Caesarstone (No 3) at [86], [88].

(2)    Irrespective of the outcome in the first proceeding, the appellant submitted that there is no broad discretion under s 88 of the Act to permit a trade mark to remain registered where the trade mark owner does not satisfy the court that the grounds for rectification have not arisen through any act or fault of the registered owner.

89    The respondent agreed that the third trade mark should follow the result of the first trade mark, but disputed the appellant’s argument in (2).

90    As the appeal should be allowed in the first two proceedings, it is unnecessary to consider the point raised by the appellant in 88(2) above. The appeal in the third matter should be allowed.

CONCLUSION

91    The applications for leave and the appeals should be allowed.

Associate:

Dated:    28 July 2020