What happened
Aldi Foods Pty Ltd and Aldi Pty Ltd (together "Aldi") operate a well-known discount supermarket chain that markets household goods, including hair care products, under house brands with the advertising slogan "Like brands, only cheaper". In or around 2011 Aldi identified that argan oil hair care products were "on-trend". It already sold products under the PROTANE house brand and a sub-brand called NATURALS. Aldi therefore introduced a range of low-priced argan oil shampoo, conditioner, hair treatment oil and dry shampoo sold as PROTANE NATURALS Moroccan Argan Oil. The products were priced between $4.99 and $9.99. Most sales occurred from "Special Buy" wire cages in the centre of Aldi stores, often in a jumbled pile or in their outer cartons; a small proportion of the shampoo and conditioner were sold for seven months from the core-range shelves.
The packaging prominently displayed the words "Moroccan Argan Oil" (later "Argan Oil of Morocco") together with performance claims such as "Helps strengthen hair and restore shine", "Helps protect hair from styling, heat and UV damage", "Leaves hair soft and silky" and "Restores shine and provides long term conditioning". The word "NATURALS" appeared in smaller font as part of the composite "PROTANE NATURALS". The rear of the packaging contained an ingredients list that included water and only small quantities of argan oil.
Moroccanoil Israel Ltd ("MIL") is an Israeli company that since 2007 has sold high-end argan oil hair and skin care products under the brand MOROCCANOIL in distinctive turquoise packaging featuring a large bronze "M" and an "apothecary-style" brown bottle for its signature oil. The products are expensive ($35–$60) and are marketed as luxurious. MIL's products achieved substantial success in Australia after launch in September 2009 and created a "buzz" in the industry. MIL applied to register the word mark MOROCCANOIL in class 3 for a wide range of hair care items. The application was filed on 7 December 2011. Aldi opposed registration.
MIL commenced Federal Court proceedings alleging that Aldi's use of "NATURALS" conveyed that the products were wholly or substantially made from natural ingredients (which was untrue if water was disregarded) and that the performance claims conveyed that the argan oil was responsible for the touted benefits (which could not be substantiated given the low concentration). MIL also defended the trade mark opposition. The primary judge upheld both ACL claims, finding breaches of ss 18 and 29(1)(a) of the Australian Consumer Law, and allowed the MOROCCANOIL word mark to proceed to registration. Aldi appealed to the Full Court.
The Full Court (Allsop CJ, Perram and Markovic JJ) allowed the appeal in part. It set aside the findings on the NATURALS representation and held that the word mark was not registrable, but upheld the performance benefits findings. The Court ordered the parties to bring in short minutes of order and remitted the question of trial costs.
Why the court decided this way
The Full Court's reasoning is grounded in three distinct but overlapping strands: the principles governing appellate review of evaluative judgments, the objective assessment of what packaging conveys to the ordinary reasonable consumer in its true sales context, and the proper construction and application of s 41 of the Trade Marks Act 1995 (Cth).
On appellate review, Allsop CJ and Perram J delivered extensive joint reasons emphasising that this Court is bound by High Court authority in Warren v Coombes, Fox v Percy and State Rail Authority (NSW) v Earthline Constructions. They rejected any formulaic "plainly and obviously wrong" test derived from Eagle Homes Pty Ltd v Austec Homes Pty Ltd as contrary to Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd. Instead, for matters of impression—whether packaging is misleading or whether a word is capable of distinguishing—the appellate court must form its own view but must give "proper weight" to the primary judge's advantages. Intervention is justified only where the appellate court harbours a "sufficiently clear difference of opinion" that the primary judge was wrong, even after weighing those advantages. Perram J noted that the primary judge's conclusions on performance benefits, although open to a different view, were not shown to be erroneous having regard to her Honour's immersion in the evidence. By contrast, the NATURALS and trade mark conclusions involved identifiable legal errors (over-focus on dictionary definitions and misapplication of the s 41 decision tree) that justified appellate intervention.
On the NATURALS claim the Full Court held that the primary judge had asked the wrong question. Rather than asking what the word conveyed in context, her Honour had used dictionary definitions ("not manufactured or processed", "not artificial") to ask whether the ingredients were in fact natural. That approach ignored the smaller font of "NATURALS", its appearance as a sub-brand, the cheap price, the discount-bin sales environment, and the fact that ordinary reasonable consumers would understand the word as indicating the presence of some natural ingredient (argan oil) rather than a quantitative representation that the product was substantially natural. The Court accepted that there were "perfectly good reasons" a trader might use "NATURALS" without implying substantial natural content. Error having been demonstrated, the Full Court substituted its own finding that no misleading representation was conveyed.
The performance benefits claim was assessed differently. The primary judge had found that ordinary reasonable consumers would infer from the prominent product name "Moroccan Argan Oil" placed next to the claims that the argan oil was "wholly or largely responsible" for the benefits. Aldi argued that the claims referred to the product as a whole, that the font of the claims was small, that no consumer evidence of confusion existed, and that the discount environment reduced the likelihood of close reading. The Full Court accepted that a different view was open but held that the primary judge had considered the packaging as a whole, the proximity of the name to the claims, Aldi's own internal substantiation documents that expressly linked the benefits to argan oil, and the Campomar principle that a trader's intention may support an inference that the desired impression was in fact created. Markovic J agreed with Allsop CJ that the primary judge's conclusion should not be disturbed because the Court agreed with it; Perram J, while personally tending to a different view, could not detect error warranting appellate intervention.
On the trade mark, the Court held that the primary judge had misapplied the s 41 "decision tree". After determining that the mark was not inherently adapted to distinguish (a finding the Full Court upheld), the primary judge had erroneously analysed the matter under s 41(5) rather than s 41(6). Under the latter provision MIL was required to prove that its pre-filing use of the plain word had caused it to distinguish its goods. The Full Court found that most use was stylised, formed part of elaborate turquoise-and-gold branding, was directed at the trade rather than end consumers, and was often accompanied by the ® symbol. Perram J quoted Jacob J in British Sugar to the effect that "use equals distinctiveness" is an illogical assumption; no matter how much a trader uses the word "SOAP" on soap it will not become distinctive. Given the short period (roughly two years), the descriptive nature of "Moroccan oil", and the existence of multiple competitor products using similar expressions, MIL had not discharged its onus under s 41(6). The mark was therefore not registrable.
Before and after state of the law
Prior to this decision the law on appellate review of evaluative judgments in intellectual property and consumer cases had become clouded by competing Full Court dicta. The line of authority descending from Weinberg J in Eagle Homes suggested that appellate intervention required the primary judge's finding to be "plainly and obviously wrong". That phrase had been criticised but not authoritatively rejected. The Court in this case stated clearly that the Eagle Homes line is wrong and should not be followed. It reaffirmed Branir as the governing authority and explained that Robinson Helicopter had been misunderstood when applied to matters of impression; the High Court's references to "incontrovertible facts or uncontested testimony" and "glaringly improbable" findings were directed at credibility-based fact-finding after a long trial, not to evaluative assessments of packaging or trade mark distinctiveness. The decision therefore restores a nuanced, non-formulaic approach that requires the appellate court to form its own view while giving "full weight" to the trial judge's advantages, intervening only where error is demonstrated.
On the consumer law side the decision reinforces that the ordinary reasonable consumer test is always contextual. It is not sufficient to seize on a single word and consult dictionary definitions. The sales environment (discount supermarket, "Special Buy" bins, low price, jumbled presentation) forms part of the surrounding circumstances that Campomar requires to be taken into account. The decision also confirms that internal corporate documents evidencing a trader's intended impression can be probative of the impression actually conveyed.
In trade mark law the judgment provides a lucid restatement of the Clark Equipment test for inherent adaptability and clarifies the interaction between ss 41(3), (4), (5) and (6). It confirms that if a mark is not to any extent inherently adapted the inquiry moves directly to s 41(6) and that modest use over a short period, especially when stylised or trade-directed, will rarely suffice to confer distinctiveness on a descriptive word. The practical effect is to make registration of geographic or descriptive terms that other traders might legitimately wish to use more difficult, thereby protecting the "common heritage" of language.
Key passages with plain-English translation
Paragraph [7] (Allsop CJ quoting Branir at [28]-[29]): "The appeal court must make up its own mind on the facts. Secondly, that task can only be done in light of, and taking into account and weighing, the judgment appealed from … if a choice arises between conclusions equally open and finely balanced and where there is, or can be no preponderance of view, the conclusion of error is not necessarily arrived at merely because of a preference of view of the appeal court for some fact or facts contrary to the view reached by the trial judge."
Plain English: Appeal judges cannot simply substitute their own opinion. They must weigh what the trial judge thought, especially where the question is one of impression. Only if the difference of opinion is strong enough to show the trial judge was actually wrong can they overturn the decision.
Paragraph [49] (Perram J): "Allsop J said in such cases an error may be manifest where the appellate court has a sufficiently clear difference of opinion: Branir at 437-438 [29]."
Plain English: Sometimes the packaging or name is so obviously not misleading, or the trade mark so obviously descriptive, that the appeal court can say the trial judge must have erred even without pointing to a specific legal mistake.
Paragraph [85]-[87] (Perram J on the NATURALS reasoning): "The Appellants' submission that the primary judge was too focussed on dictionary definitions should be accepted … Armed with the dictionary definition her Honour was understandably seduced into asking whether the ingredients in the products could be described as 'natural' when the correct question was what did the use of the word 'NATURALS' convey to ordinary reasonable consumers. This involved error."
Plain English: Looking up "natural" in a dictionary and then asking whether the ingredients were natural missed the point. The real question is what shoppers in an Aldi store would actually think when they saw the word on a $4.99 bottle in a bargain bin.
Paragraph [124] (Perram J quoting Kitto J in Clark Equipment): "The question is whether other traders, actuated only by proper motives, might legitimately wish to use the word in connexion with their goods."
Plain English: If other honest companies selling argan oil shampoo would naturally want to say their product contains "Moroccan oil", then no single company can own the name as a trade mark.
Paragraph [161] (Perram J quoting Jacob J in British Sugar): "There is an unspoken and illogical assumption that 'use equals distinctiveness' … no matter how much use a manufacturer made of the word 'Soap' as a purported trade mark for soap the word would not be distinctive of his goods."
Plain English: Just because MIL spent a lot of money advertising MOROCCANOIL does not automatically make the plain English words distinctive. You cannot turn a descriptive phrase into your private property by heavy marketing.
What fact patterns trigger this precedent
This decision will be triggered whenever an appellate court is asked to review a first-instance evaluative finding that particular packaging or labelling conveys a representation to the ordinary reasonable consumer. It applies with particular force to claims under ACL ss 18 and 29(1)(a) involving house brands, sub-brands or ingredient claims sold in discount or supermarket environments. The emphasis on sales context means that cheap pricing, bin merchandising, and the relative prominence of words will be decisive.
The trade mark analysis is directly relevant to any opposition or appeal concerning a word mark that combines a geographic name with a common noun (e.g. "Australian Oil", "Italian Leather", "Swiss Chocolate") where the goods have a natural association with that place. The clarification of the s 41 decision tree and the strict approach to s 41(6) evidence will affect any applicant seeking to register a descriptive term on the basis of use that is predominantly stylised, trade-directed or of short duration.
The appellate review principles are of general application in intellectual property, passing off and consumer law appeals and will be cited whenever a party argues that the trial judge's impression-based conclusion should not be disturbed.
How later courts have treated it
Although the judgment is relatively recent (22 June 2018), it has been cited with approval in subsequent Full Court decisions on appellate review. In particular, the rejection of the "plainly and obviously wrong" formula and the reaffirmation of Branir have been followed in cases involving get-up, misleading conduct and trade mark distinctiveness. Courts have quoted the passages at [7] and [49] when explaining the nuanced weighing exercise required for matters of impression. The trade mark analysis has been applied in oppositions to geographic or descriptive marks, reinforcing that short-term or stylised use will rarely suffice under s 41(6). The NATURALS reasoning has influenced cases concerning "natural", "organic" or "pure" claims on supermarket products, with judges emphasising the need to consider the whole context rather than dictionary meanings. No court has sought to confine or distinguish the appellate review passages; instead they are treated as the authoritative statement of Full Court practice in this area.
Still-open questions
The judgment leaves open the precise degree of deference to be given to a primary judge who has viewed actual products in court over many weeks. While the Court stressed that immersion is an advantage, it did not articulate a bright-line test for when that advantage becomes decisive. Future cases will therefore continue to turn on whether the appellate court perceives "a sufficiently clear difference of opinion".
Another open question is the extent to which internal corporate documents can prove the conveying of a representation when the documents are not shown to consumers. The Court accepted their relevance but did not explore the limits of that principle. Similarly, the decision does not finally resolve the weight to be given to the absence of consumer confusion evidence in a case where the products have been on the market for several years.
On trade marks, the Court left undecided whether the ® symbol on pre-registration use can ever be severed from the word mark for the purpose of assessing distinctiveness under s 41(6). It also left open the precise boundary between use "as a trade mark" and use as part of branding when the two are intertwined. These issues will require further litigation, particularly in relation to marks that combine descriptive words with stylised elements.
Finally, the decision does not address how the principles apply to online sales or social-media marketing where the "sales context" is a screen rather than a physical supermarket bin. That factual matrix will test the limits of the contextual approach endorsed by the Court.