Hail Caesar! Caesarstone given “thumbs down” by the Federal Court 

It is not uncommon for an entity to licence use of its trade marks to a third party. 

If the licensor wields sufficient control over the licensee’s use of a trade mark, then the licensor has used its trade mark for the purposes of the Trade Mark Act 1995 (Cth) (the Act). 

Failure to control a licensee’s use of a trade mark can cause problems for the licensor. 

This issue was recently considered by the Full Court of the Federal Court of Australia in Ceramiche Caesar S.p.A v Caesarstone Ltd.¹ 

Background 

Caesarstone Ltd (Caesarstone) manufactures and sells quartz slabs. Its products are well known in the Australian market.

From 2003, Caesarstone imported quartz slabs into Australia through its licensee, Tessera Stones and Tiles Pty Ltd (Tessera). 

Tessera then sold the quartz slabs to stonemasons, who would convert the slabs into finished products which were then sold by the stonemasons to customers. 

Therefore, despite customers knowing the Caesarstone name and brand, Caesarstone was only responsible for importing the raw quartz slabs into Australia. The contributions of Tessera and the stonemasons had the effect of converting the raw slabs into the high-end products known to Australian consumers. 

In 2005, Caesarstone applied to register the word “CAESARSTONE” as a trade mark. The application was rejected at first instance in light of a prior registration for “Caesar” which was owned by Caramiche Caesar S.p.A (Caramiche) and registered with effect from 23 November 2004.

In order to overcome the rejection, Caesarstone provided evidence of honest concurrent use of the word “CAESARSTONE” in Australia. The argument was successful, and the Federal Court of Australia ordered that the “CAESARSTONE” application be registered. 

Caramiche appealed to the Full Court of the Federal Court of Australia.

The decision

One issue raised on appeal was whether Caesarstone had used the word “CAESARSTONE” as a trade mark in Australia, prior to Caramiche’s 2004 registration. 

It was accepted that Caesarstone had not, itself, used the mark in Australia. However, Caesarstone argued that:

• Tessera;
• Tessera’s sub-licensee; and
• the stonemasons,

had used the mark, and that such use was “authorised use” that occurred under Caesarstone’s “control”. 

“Authorised use” and “Authorised user” are defined in section 8 of the Act as follows:

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 mark.

…

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

          o  dealt with or provided in the course of trade by
              another person; and 

          o  in relation to which the trade mark is used;

the other person is taken…to use the trade mark in relation to the goods or services under the control of the owner;
…

The Full Court considered that:

• Caesarstone imported raw slabs into Australia, which were not the goods designated under the trade mark application; 
• Caesarstone and Tessera were unrelated entities dealing at arm’s length; and
• Tessera and the stonemasons were not subject to standards of quality control imposed by Caesarstone.

Ultimately, the stonemasons were responsible for the quality of the final product and Caesarstone had no real oversight or control over that process.

In rejecting Caesarstone’s argument, the Full Court stated:

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.²

Accordingly, the Full Court concluded that Caesarstone did not exercise sufficient control over the use of the mark “CAESARSTONE” in Australia. 

Lavan comment

Use is an important issue to consider when dealing with trade marks. 

As outlined above, Caesarstone’s inability to prove “authorised use” jeopardised its trade mark registration. 

A trade mark licence should be in writing, and include express quality control provisions. That way, the licence can be relied upon in order to evidence “authorised use”. These same issues should also be considered when licensing use of a trade mark outside of Australia. 

If you require assistance in preparing a trade mark licence, or in reviewing your current arrangements, do not hesitate to contact Iain Freeman or Andrew Sutton.