The regulator, Intellectual Property Australia, turned down the application because the word 'Linux' was not distinctive enough to be trademarked.
The registration would have prevented companies from claiming the name as their own, or using it in trade paying royalties to the Linux Mark Institute, a global body established by Linux creator Linus Torvalds.
In a letter dated 31 August addressed to Perth-based lawyer Jeremy Malcolm, who represents Torvalds, Intellectual Property Australia official Andrew Paul Lowe said: "For your client's trademark to be registerable under the Trade Marks Act, it must have sufficient 'inherent adaptation to distinguish in the marketplace'.
"In other words, it cannot be a term that other traders with similar goods and services would need to use in the ordinary course of trade."
However, as IP Australia found, it was highly likely that other traders would also need to use the word Linux.
The letter also called into question Malcolm's right to speak for Torvalds in providing evidence to support the application.
"It is not clear from the declaration in what way Mr Jeremy Malcolm is authorised and qualified to make this declaration on behalf of Mr Linus Torvalds," the regulator said.
The applicant used Wikipedia and Google to back its claim but IP Australia dismissed the examples. "The entry from the Wikipedia encyclopaedia indicates 'Linux is a computer operating system and its kernel' ... demonstrating generic use rather than trademark use.
"Additionally, the Google searches provided simply show that the word Linux is a frequently used term on the Internet, and do not demonstrate trademark usage."
Andrew Paul Lowe, IP Australia
The regulator also rejected the application on the basis it was similar to existing trademarks owned locally -- for example, 'LinuxWorld' is owned by publisher IDG -- and that consumers could subsequently be led to believe that services around such marks were provided by the same organisation.
Malcolm declined to comment on the decision, citing the need to consult with his client.
IP Australia initially set 7 September as the deadline for further submissions but this has been extended.
Linux Australia president Jonathan Oxer told ZDNet Australia the organisation would seek its members' advice on whether to proceed with the application, and bear the cost of $100 per month payable to IP Australia.
Oxer said the Linux Australia executive committee was in favour of continuing with the process, although there might be "a fairly low chance of success".
But ultimately, the rejection could be just what the doctor ordered.
"My understanding is that if Linux Australia can't register that [Linux] as a trademark, then nobody else could either.
"Our goal was to make sure the name is used in a reasonable way. If it's not possible [for anyone else] to register it as a trademark, then that has to some extent been achieved," Oxer said.
Linux Australia's other aim was to prevent the name 'Linux' from being used inaccurately, and the organisation was considering asking IP Australia to provide a written statement that there was no chance of any other organisation registering the trademark.