Caporaso Pty Ltd v Mercato Centrale Australia Pty Ltd (No 3)

This Federal Court decision is a costs ruling that followed a larger trade mark dispute between Caporaso and Mercato Centrale Australia. The Court was not deciding again whether the branding infringed. That had already been dealt with at trial and on appeal. The remaining question was how the trial costs should be divided.

The answer was not a simple winner-takes-all result. Mercato Centrale had succeeded overall because Caporaso's application had been dismissed and the cross-claim had succeeded, including cancellation of the Plain Word Mark. But Mercato Centrale had not succeeded on every issue it ran. At the same time, Caporaso had abandoned several claims during the trial. The Court balanced those two features and ordered Caporaso to pay 80% of Mercato Centrale's costs and all of Mr Muto's costs.

Caporaso started the proceeding as the registered owner of three marks incorporating the word "mercato": a Plain Word Mark, a Fancy Word Mark and a Red Man Logo. It alleged that Mercato Centrale had used or intended to use marks incorporating the same word for the same or similar goods and services. Caporaso sued for trade mark infringement and also added claims under the Australian Consumer Law and for passing off. It also sued an individual, Mr Eddie Muto.

Mercato Centrale responded with more than a denial. It filed a cross-claim seeking cancellation of the Plain Word Mark and the Fancy Word Mark, and a limitation on the registration of the Red Man Logo. That changed the commercial shape of the case. The dispute was no longer only about whether Mercato Centrale's branding was too close. It also became a fight about whether Caporaso's registrations should remain on the register in the form relied on.

The costs judgment records that the Full Court later dismissed Caporaso's originating application, allowed the cross-claim, and ordered cancellation of the Plain Word Mark in its entirety. Importantly, the judgment also records that the Full Court concluded two of Mercato Centrale's marks were deceptively similar to the Plain Word Mark. Even so, Caporaso's infringement case failed because the mark itself was cancelled. That is a useful reminder that success on similarity does not help much if the registration relied on does not survive.

The case also became more expensive because Caporaso narrowed its case late. During the trial it abandoned the ACL and passing off claims, abandoned all claims against Mr Muto personally, and also abandoned some trade mark infringement claims. By that stage, the respondents had already incurred costs preparing to meet those allegations.

Readers unfamiliar with court procedure can think of this dispute in three stages. First, there was the trial decision in 2024. That was where the evidence was heard and the main factual and legal issues were argued. Second, there was the appeal decision in 2024. The Full Court reviewed the challenged parts of the trial outcome and made orders dismissing Caporaso's application, allowing the cross-claim, and cancelling the Plain Word Mark.

Third, there is this judgment, described as "No 3". It is not another appeal and it is not a fresh trial. The Full Court remitted the matter so the Federal Court could resolve a costs dispute about the trial. In other words, the Court here was deciding how much of the trial bill Caporaso should pay after the overall merits outcome had already been settled.

That distinction matters because costs judgments often read differently from merits judgments. They assume the reader already knows the background. They focus on which issues took time, which arguments succeeded or failed, whether claims were abandoned, and whether some issues were separate enough to justify reducing the successful party's costs recovery. That is exactly what happened here.

So if you are reading this as a business owner, do not treat this case as a full statement of trade mark infringement law. Treat it as a practical example of how courts deal with costs after a mixed and hard-fought intellectual property dispute.

The legal issue was costs apportionment. The ordinary starting point is that costs follow the event, meaning the successful party usually gets its costs. Because Mercato Centrale had ultimately succeeded overall, that starting point favoured a costs order in its favour. But that was not the end of the matter.

The Court also recognised that costs can be apportioned where a successful party failed on discrete factual or legal issues that were significant and separable. The judgment referred to the Full Court's decision in Les Laboratoires Servier v Apotex Pty Ltd for that principle. Caporaso argued that Mercato Centrale should recover only 50% of its costs because Mercato Centrale had failed on important issues, including arguments under s 41 and s 88(2)(c), and because Caporaso had succeeded on deceptive similarity in relation to the Plain Word Mark.

The Court therefore had to weigh several things at once. It considered Caporaso's success on deceptive similarity, the significance of Mercato Centrale's failed distinctiveness-related arguments, the fact that Mercato Centrale's success on ownership rested on a narrower factual basis than the broader case it had advanced, and Caporaso's complaint about the cost of two senior counsel. It also had to consider the effect of Caporaso abandoning ACL, passing off, personal and some infringement claims during the trial.

This is a very practical issue for businesses. A costs dispute is often not about who won every point. It is about whether the unsuccessful points were substantial enough, and separate enough, to justify reducing the successful party's recoverable costs, and whether the losing party itself caused unnecessary expense by the way it ran the case.

The Court accepted that some reduction was appropriate. It found that the issues at trial were sufficiently discrete to allow broad identification of issues on which Mercato Centrale had been unsuccessful. In particular, the Court accepted Caporaso's submissions about the scope and significance of the issue concerning the ordinary signification of the word "mercato" and the failed arguments under s 41 and s 88(2)(c). The Court also accepted that Mercato Centrale's success on ownership rested on a significantly narrower factual finding than the evidentiary case it had put forward, and gave that some weight.

However, the Court did not accept that these matters justified the 50% apportionment Caporaso wanted. A major reason was Caporaso's own conduct. The Court found that Caporaso narrowed its case only after Mercato Centrale had already incurred expenses preparing to answer allegations that were later abandoned. The passing off and ACL claims had been supported by a significant body of evidence and were not abandoned until after Mr Giovanni Caporaso had been cross-examined. That meant real wasted costs.

The Court also dealt separately with Mr Muto. Because the claims against him personally had been abandoned, and because he was not a cross-claimant or party to the appeal, the Court ordered Caporaso to pay his costs of the originating application without issue-based apportionment. The Court left any detailed division between the respondents' total costs to taxation if not agreed.

The final orders were that Caporaso pay 80% of Mercato Centrale Australia's costs of and incidental to the originating application and the cross-claim, and pay Mr Muto's costs of the originating application on a party-party basis, with costs to be taxed if not agreed. The Court also noted that the Full Court had already ordered that Mercato Centrale's trial costs be assessed on a party-party basis.

The first commercial lesson is that a registered trade mark is not always a secure platform for enforcement. The judgment records that two of Mercato Centrale's marks were found deceptively similar to the Plain Word Mark, yet Caporaso still failed overall because that mark was cancelled. For a business owner, that means an apparently strong infringement complaint can collapse if the registration itself is vulnerable.

The second lesson is that issue-based costs can matter a lot. Even a successful party may not recover all of its costs if it spent substantial time on arguments that failed and can be separated from the issues on which it succeeded. That is especially relevant in intellectual property disputes where multiple statutory grounds, ownership arguments and factual theories are often run together.

The third lesson is about discipline in pleadings and evidence. Caporaso's late abandonment of ACL, passing off and personal claims materially affected the costs result. Businesses sometimes add every available cause of action at the start of a dispute to increase pressure. This case shows the downside. If those claims are not maintained, the Court may treat the preparation and trial work on them as wasted and make a heavier costs order.

The fourth lesson is that a defendant should not assume the only option is to deny infringement. A cross-claim attacking the registration itself can change the whole balance of the case. Here, the cross-claim was ultimately decisive because cancellation of the Plain Word Mark meant the infringement claim based on that mark could not succeed.

For many businesses, the most useful part of this case is not the technical trade mark doctrine but the litigation management lesson. A focused case built on a defensible registration is usually safer than a broad case with multiple fallback claims that may later be dropped. Once a matter reaches trial, changing course can be expensive.

Likewise, if your business is defending a claim, this judgment shows that attacking the registration itself may be more effective than arguing only about similarity. But that strategy also carries costs risk if too many distinct grounds are run and some fail. The Court may later separate those issues out when deciding costs.

The costs judgment was delivered on 13 June 2025 by Charlesworth J in the Federal Court of Australia. The matter had been remitted by the Full Court for resolution of the costs dispute. The judgment was determined on the papers after submissions dated 15 April 2025.

This page should be read as a costs-focused case note. The earlier trial and appeal decisions are referred to in the judgment and are important to the full merits story, but this page only describes them to the extent this costs decision itself does.