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Monday, December 7, 2015

And it was all Yellow, Not.

Telstra Corporation Limited v Phone Directories Company Australia Pty Ltd

By Brydon Wang, Lawyer

A recent Trade Mark case heard on appeal by the Full Court of the Federal Court Australia has upheld the finding that the word 'Yellow' is descriptive and unable to aid in distinguishing print or online directories. The case looked at an older version of section 41 of the Trade Marks Act 1995 (Cth) (TMA) but the principles laid down by the court are relevant to the current version of section 41.

The case offers a number of points for clients:

  • When considering the level of distinctiveness of a trade mark, the court will consider whether other traders would use the same sign in the ordinary course of their business and may even consider commercial practices overseas to inform a 'hypothetical' trader in Australia.
  • Where appealing a rejected application over a broad range of goods and services, clients should consider limiting the range of goods and services for which registration is sought as the court will be reluctant to exercise its discretion to reduce and grant registration over a narrower range of classes sought.
  • The onus of proof is on the opponent to prove on the balance of probabilities that a trade mark has no inherent capacity to distinguish.
  • While not part of the ratio of the case, the court continues to provide further guidance on acquired distinctiveness (s 41(5) of the previous version of the TMA).
  • The Full Court has again clarified that marks have to be viewed as a whole and where an essential feature of a mark is taken, it may not necessarily be deceptively similar.

Background

Telstra sought to register the word YELLOW as a trade mark over a large range of goods and services. A delegate of the Registrar of Trade Marks held that the word YELLOW was registrable, but this decision was overturned by Justice Murphy of the Federal Court who held that the word YELLOW had no inherent adaptation to distinguish Telstra's directory services and goods from those provided by other traders.

Telstra appealed on a number of grounds, including that the primary judge had erred:
  • in 'not allowing some of the services to proceed to registration' under the presumption of registrability (raised only at the hearing);
  • as the word YELLOW was not descriptive in the same way words like 'business directories, advertising directories and classified directories' were descriptive. Further, his Honour had considered the application as if it were an application for the registration of the actual colour yellow rather than the word describing the colour. This meant that the test applied was too onerous for Telstra to succeed;
  • as his Honour had considered what other traders had done overseas with the colour and word yellow in respect of their directory goods and services, and erred in his treatment of the evidence; and
  • as his Honour had reversed the onus of proof under s 41(3).
Narrowing classes of goods and services sought for registration

Counsel for Telstra submitted the primary judge had erred in failing to exercise the court's power under s 65(7) of the TMA to allow, on the presumption of registrability, only some of the services to proceed to registration. The Full Court observed at [14] that this was raised only at the hearing and not in the Draft Notice of Appeal. Telstra's opponents had suggested that Telstra's failure to amend the application meant that it could no longer do so and, where all goods and services sought for registration could not be satisfied, the entire application must be refused. The Full Court left undisturbed the primary judge's stance that unless Telstra made an application to 'reduce the breadth of the designated goods and services', or where there was 'a principled basis' by which the court should undertake such a reduction in breadth, the court should not exercise its power under s 65(7).

Yellow is descriptive of print and online directories

The Full Court rejected Telstra's arguments that the word YELLOW was not descriptive, saying at [118] that if the colour yellow signified print and online directories to the relevant consumers, then the word 'yellow' would be similarly descriptive in the same way the words 'business directories' would be. The Full Court cited the judgment in the first instance of Blue Paraffin Trade Mark [1977] RPC 473 at 494, noting that there may be situations where the word for a colour would not be descriptive, for example if the word YELLOW was used to describe goods that were blue in colour. On that basis, the Full Court held that section 41(6) was the appropriate provision (not s41(5)) and the trade mark was wholly lacking in distinctiveness.

Telstra also sought to challenge the decision claiming the primary judge had erred in considering the application for registration as one for the colour yellow. At [149]-[150], the Full Court expressed scepticism towards Telstra's arguments that the primary judge had conflated the two concepts. The court noted that there were clear links between a colour and its describing word, which meant that authorities that looked at the registrability of a colour mark would have bearing on the registrability of a mark consisting of a word describing a colour.

Overseas practices

In challenging the primary judge's decision, Telstra pointed to Cantarella Bros Pty Ltd v Modena Trading Pty Ltd [2014] HCA 48 where the High Court stated that the test for inherent distinctiveness required a preceding consideration of the 'ordinary signification' of the word before the court considered if other traders might wish to use a word mark (see [125]). The Full Court rejected Telstra's arguments that the primary judge had erred as there had been no finding that either the colour yellow or the word YELLOW signified print and online directories.

Interestingly, the second part of the test for inherent distinctiveness required consideration of whether other traders would, 'in the ordinary course of their business and without improper movie', want to use the same sign in relation to the same or similar goods / services (citing Lord Parker in Registrar of Trade Marks v Du Cros). The Full Court affirmed at [145] that commercial practices based overseas could validly be considered by the Court in the second limb of this enquiry, given these extraterritorial practices were 'at minimum' a good indication of how a hypothetical trader in Australia might act in relation to the mark (see also [108]). However, the Full Court also agreed with the primary judge that any consideration of overseas commercial practices must not stray into 'impermissible' reasoning where because a colour or a word describing a colour 'were not distinctive overseas, they could not be distinctive in Australia'.

Onus of proof

At [136], the Full Court held the primary judge's reliance on Chancellor, Masters and Scholars of the University of Oxford (Trading as Oxford University Press) v Registrar of Trade Marks (1990) 24 FCR 1, 25 (Gummow J) was 'misplaced' as that decision was made in relation to the Trade Marks Act 1955 (Cth) where the onus of proof was on the applicant. Under section 41(3) of the current TMA, the onus is on the opponent to prove, on the balance of probabilities, that a proposed trade mark has no inherent capacity to distinguish. The Full Court rejected that the opponent's onus is to the standard that the trade mark 'should clearly not be registered'.

However, the Full Court at [146] dismissed Telstra's arguments that the primary judge had reversed the onus of proof under section 41(3) by taking into account overseas practices in determining if there was improper motive. The Full Court held that the evidence of use of the same and similar signs overseas went to the 'ordinary signification' of the mark and whether a trader would want to use the mark (see [126]). This evidence of overseas use was not considered by the primary judge in looking at whether there was improper motives – a separate and 'essentially… hypothetical inquiry' – and as such there was no error.

Acquired Distinctiveness under section 41(5)

While not quite the ratio of the case, it may be instructive to note that, at [169] the Court indicated that it would have allowed the appeal and ordered a retrial if the word YELLOW had been found to have at least some inherent capacity to distinguish Telstra's directory goods and services (and been considered under section 41(5), rather than 41(6)). Instead, the Full Court pointed to the primary judge's error in considering a marketing report that showed that Telstra had achieved a successful shift in the minds of consumers and that the word YELLOW had become sufficiently distinctive by reason of the promotion and use subsequent to lodging its application.

Prior Registered Marks The Full Court disagreed with the primary judge at [181] that the YELLOW mark sought was deceptively similar to prior registrations. The court stated that the prior registered marks of THE YELLOW ENVELOPE, YELLOW DUCK and YELLOW ZONE conveyed different ideas to the YELLOW mark sought by Telstra and would not infringe on these marks despite the common word YELLOW. On this issue, the Full Court confirms the shift away from the Optical 88 case, which unfortunately focused on the essential and distinguishing feature of the mark. The Full Court has put paid to the idea that just because an essential feature of a mark is taken, it is therefore infringed (see also the judgment in Millennium & Copthorne International Ltd v Kingsgate Hotel Group Pty Ltd (2012) 97IPR 183 where the marks in question were held not to be deceptively similar despite both having 'Kingsgate' in them).

Conclusion

If the situation is akin to that line in the famous Coldplay song… 'and it was all Yellow' in the market overseas and locally, it might be better to take the yellow brick high road and reconsider the registrability of that YELLOW word mark.

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