Israeli Supreme Court : Infringement or not?    

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The Israeli Supreme Court has recently discussed whether an industrial product can be protected even if it wasn’t registered as a design?

The Facts of the Case:

Fisher Price sells baby rocking chairs with different colored illustrations. One of Fisher Price’s products is a rocking chair with an illustration of a colorful lion. An Israeli company named Devron marketed an identical rocking chair with a similar figure to that of Fisher Price’s lion.

Fisher Price’s Product                                                               Devron’s Product   

Fisher Price filed a lawsuit with the District Court against Devron claiming copyright infringement in the rocking chair, in the lion’s figure and in chair’s instructions manual.

The District Court’s Ruling: 

The District Court rejected the Fisher-Price claim and ruled that the rocking chair is not a  registered design and therefore is not entitled to copyright protection.

Fisher price has appealed the decision to the Supreme Court.     

The Supreme Court’s Ruling:  

The Supreme Court overturned the decision of the District Court. The Court ruled that copyright laws and the designs laws indeed do not coexist. A product that is a registered design or is entitled to be a registered design shall not be entitled to copyright protection.  This is with the exception of products that are not marketed commercially and there is no intention to market them commercially.

Based on this ruling, it was found that the rocking chair in question is eligible for the registration as a design but was marketed commercially and therefore should not be entitled to copyright protection. 

However, it was held that under certain conditions, art work that is fixed upon an product that qualifies to be a registered design shall be entitled to copyright protection.

The conditions necessary to enable copyright protection for such work are

 1. The product / design is eligible to be registered

2. The art work can be separated from the product (physical and material separation)

3. The art work is protected under copyright law

Separation from the Product

The court held that separation could be physical or material. When it is not clear whether physical separation is possible, the court shall examine whether substantial separation can occur. Substantial separation takes place when the art work can exist without the product as a separate creation without harming its basic form. That is, for example, it could appear as a painting on canvas.

The Supreme Court held that the lion illustration meets these tests since it is possible to separate the sample from the chair and it is entitled to protection under copyright law. However, the rocking chair on which the painting appeared did not receive protection because it was not a registered design.

Eventually the Supreme Court overturned the decision of the District Court and ruled that there was copyright infringement of the illustration and returned the hearing to the District Court in order to decide on the question of damages. 

The court also noted that even after the entry into force of the new Israeli Designs Law, the precedents established in this judgment will continue to apply.

The conclusion is that in certain cases intellectual property protection can also be enforced with respect to industrial products that have not been registered as a design. For example in the case of a piece of furniture bearing a unique illustration which is entitled to copyright protection. However, the illustration or print should be sufficiently unique and worthy of protection under copyright law independently. 

This does not constitute as a legal opinion, and it is recommended to consult with knowledgeable lawyers in this field.

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Attorney Yossi Sivan

Attorney Yossi Sivan

Owner and Genenral Partner

Yossi Sivan & Co. Law Offices has been recommended by the LEGAL 500 2017 edition as an Israeli leading firm in the Intellectual Property Disputes category. Also recommended by the World Trademark Review.

 

Israel’s New Design Law – New Protection for Designs

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On July 26, 2018 the new Israeli Designs Law will come into force and it is vital to be aware of the changes it brings to the legal regime concerning designs in Israel, as these effect both new and old designs.

These changes bring the Israeli law in line with European law and international trends. The following are the new law’s most prominent changes from the Patents and Designs Ordinance of 1924 which it replaces.

  • Unregistered Designs Will be Protected

While under the previous law no protection was provided for unregistered designs, the new law provides certain protection for up to 3 years for unregistered designs.

However, unregistered designs are protected exclusively when the copy was made by an entity that was aware of the original design. In the previous regime unregistered designs that were published could not be registered and therefore could not be protected.

  • Grace Period

The new regime provides a “grace period” in which designs that are marketed in Israel as  non-registered designs, may, within 12 months, be registered. These provisions allow limited protection to unregistered designs, similar to the European law.

  • Broader Definition of the Protected Items

The new law will replace the term “article” with the term “product”. Therefore, it will also cover graphical symbols and screen displays, thus bringing the law into the 21st century.

  • Extended Duration

The duration of the protection for registered designs under the new law will be extended to 25 years (as opposed to 15 years according to the existing law subject to a timely renewal every 5 years).

Following this change, the Patents and Designs Ordinance was revised and now allows an additional extension period of 3 years, thus totaling at 18 years for designs registered before the new law comes into force.

  • Changing the Novelty Requirement

The new law has changed the requirement for novelty. Designs will be considered new only if they haven’t been published in Israel or outside of it. The previous law only required that the design is new in Israel (unless proven that it was published online in certain terms).

  • Statutory Damages

Another addition to the existing law are the provisions stating that the court is authorized to award statutory damages for up to ILS 100,000 (about 28,000$ US) per infringement. This is another modernizing change as statutory damage for designs was not addressed in the existing Patents and Designs Ordinance.

When considering statutory damaged the court may take into account considerations such as the scope and severity of the infringement, the damages caused to the plaintiff, the gain acquired by the defendant etc.

  • Designs Created by the Employee and Work Made for Hire

Under the new law the rights to a design that was created by an employee executing its duties or when using his employer’s resources will be owned by the employer.

Similarly, all rights to a design that made for hire under a commissioned work will be owned by the person who commissioned it. However, these exceptions to the rule (i.e., the rights to a design belong to the designer) stand only when there is no other agreement between the parties.

 

Israeli Court: Renuar is liable for copying a local designer’s dress  

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Gadi Elimelech is an Israeli fashion designer who launched his independent career on 2010. His work includes designing fashion for television, magazines and personal styling for artists and celebrities.

Recently Gadi Elimelech sued the fashion company Renuar, a chain of women’s clothing, for selling a dress that was confusingly similar to his design.

The dress was presented in Renuar’s 2014 collection and Elimelech’s dress was presented at 2013 collection.

Gadi sued Renuar for passing off and unlawful enrichment and requested damages and permanent injunction against Renuar.

The unique disputed design feature is presented above. The one on the right is Elimelech’s and that on the left is Renuar’s.

The Tel Aviv District court has accepted Elimelech’s claims and ruled that Renuar’s dress was confusingly similar to Elimelech’s dress.

The Court ruled that the disputed dress constitute passing off and that Elimelech has proved goodwill.

In assessing goodwill, the Court based his ruling primarily on the fact that some celebrities were shown wearing Elimelech’s dress, such as Ninet Taieb, an Israeli young singer.

The Judge express his doubts that a well-known figure such as Ninet Taieb would have choose to wear a dress unless designed by a well-known designer that gained goodwill.

The Court ruled that Renuar was aware of Elimelech’s design. Eventually, the court awarded damages of 55,000 Shekels and a further legal expense.

In order to prove passing off in Israel, theplaintiff needs to show two basic elements:

First, that the designer has gained goodwill in the specific design in a way that that the relevant consumer would recognize the design only with the plaintiff.

Second, the plaintiff needs to show that there is likelihood of confusion between the products.

It should be noted that assessing reputation should be based on the familiarity of the specific design not the identity of the celebrity who was wearing it.

The fact that some celebrities were seen wearing some fashion item doesn’t necessarily shows that the item or the designer has gained goodwill.

Many young fashion designs are struggling daily to promote their products in an extremely competitive market and usually don’t have the financial resources to invest in traditional marketing such as advertising to build up a brand.

So, they use alternative methods such as giving some items to celebrities hoping they will actually wear them and maybe endorse their products or even just so they could take some photos with them for marketing purposes.

Proving reputation in the fashion design cannot be based on few photos of celebrities wearing the design but rather must be examined also on hard evidence such as extent of use, advertising, numbers of sales, consumer surveys that shows that the relevant consumer actually recognize the design with the designer etc’.

From reviewing the decision, it seems that the plaintiff did not present any consumer surveys or hard proof that establishes sufficient reputation in the eye of relevant consumers.

In addition, the so called “unique” feature of Elimelech’s dress might be considered as a quite common feature in the fashion market. What do you think?

The Court was persuaded that since Renuar wasn’t able to explain the similarity between the dresses, his conclusion was that Renuar has copied the design.

It seems that The Court has given too much weight to the visual comparison instead of analyzing whether such a design entitles for such a protection at all.

It should be noted that according to the Israeli law the design of a fashion item per se (not the brand name or logo which is protected under trademark law) cannot be protected by copyrights or any other law, but only as a registered design. There is also an alternative to claim an unlawful enrichment but the Court chose not to do so.

Since the said dress wasn’t registered as a design and since the Renuar dress was sold under Renuar’s logo the only valid alternative was to use the passing off lawwhich depends on proving actual reputation in the specific design, which can be a high burden for young designers.

Although copying designs by international fashion companies seems to be quite a common practice in the last years, in some cases, it is possible to prevent such common practice.

On the other hand, it is very important to avoid from protecting obvious or common features designs in a way that might limit the competition in the market and eventually damage the consumers.

Disclaimer –  Nothing in this article is considered to be any kind of legal opinion whatsoever.

Recommended by the World Trademark Review as an Israeli Trademark Expert

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We are pleased to inform you that our firm has been recommended by the World Trademark Review as an Israeli Trademark Expert:

Other recommended experts category:

“…. Yossi Sivan & Co’s storied entertainment star Yossi Sivan has represented giants such as Sony, Electronic Arts and Microsoft; he is as formidable at enforcing trademarks as he is at filing them…”

 

Who Filed the Most Trademark Applications in Israel?

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2016 has shown a considerable decrease in trademark filing in Israel according to the 2016 Patent and Trademark Office Report.  

There is a reduction of 8.7% in the number of National trademark application filed by local attorneys in Israel. There is also a reduction of the number of international applications) Madrid Protocol) filed in Israel (6.13%).

Apple Inc. has filed the most trademark applications in Israel (54).

Abercrombie & Fitch has filed the most international trademark applications in 2016 (46 applications, with no national applications at all).

A total of 1,365 national trademark applications have been filed in Israel and a total of 708 international trademark applications have been filed by foreign applicants.

 

Legal 500 Recommendation as a Leading Intellectual Property Firm for 2017

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Legal 500 2017 Recommendation: 

Yossi Sivan & Co. Law Offices has been recommended by the LEGAL 500 2017 edition as an Israeli leading firm in the Intellectual Property Disputes category:

“Yossi Sivan & Co. has ‘extraordinary knowledge and expertise in trade mark and copyright litigation’. The ‘practical and personable’ Yossi Sivan has extensive experience of IP cases involving international clients…” 

The Diamond of the Crown – No likelihood of Confusion between IGL and CGL

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Israel’s diamond industry is estimated at around 4 billion dollars a year. Israel considered as one of the strongest players in the international diamond market. Naturally, there is fierce competition in the industry, a competition that sometimes reaches the court’s doorstep.

Recently the Israeli District Central Court has ruled a very important decision in trademark matters concerning the diamond industry.

IGL, a gemological laboratory that provides assessment, analysis and grading services of diamonds jewelry and gemstones under mark IGL, has sued another gemological laboratory for the use of the mark CGL.

IGL has claimed that the mark CGL is an infringement of the IGL registered trademark.

In addition to a monetary compensation of NIS200,000 and a permeant injunction,  IGL has also filed a motion for a temporary injunction to prevent the use of the mark CGL until the final decision by Court.

IGL’s claims

IGL has claimed that the use the mark CGL and the designed logo constitutes trademark infringement, passing off and unlawful exploitation of its reputation.

IGL also claimed that the use of the similar logos and colors (black and gold) causes confusion in the market.

Below are the design marks of IGL and CGL:

CGL’s claims

CGL, represented by Yossi Sivan & Co. Law Offices has claimed that the motion is groundless, and that its sole purpose was to temper the successful activities of CGL.

CGL has claimed and demonstrated that the use of the words I, G and L are a common practice in the gemological diamond industry and that the acronyms IGL are not identified exclusively with IGL.

CGL has also claimed that the use of a round designed seal next to three acronyms letters are a common practice in the gemological industry, therefore cannot be identified by the consumers as related specifically to IGL.

CGL further argued that there is no likelihood of confusion between the marks based on the triple test: The visual test, the phonetic test and type of goods and consumers test.

CGL further argued that they provide professional diamond and gemstone evaluation services primarily to diamond dealers and merchants and that this is a sophisticated audience that is well acquainted with the companies involved in the field and can distinguish very well between the services provided by the IGL and the services of CGL ie, professional evaluations of diamonds, which are also accompanied by different visual appearance.

CGL has also claimed that diamonds are considered to be the most expensive products and require careful examination, which eliminates any likelihood of confusion in the market.

In addition, CGL argued that it’s manager has a considerable reputation of almost 40 years in the diamond market therefore, there is no reasonable possibility that a diamond merchant will arrive to CGL’s laboratory and will erroneously believe that it is related to IGL, who are unknown in the field.

The Court’s Decision

Following the submission of pleadings, conducting cross-examination of the party’s witnesses and oral summaries, the Central District Court of Lod has decided as follows:

The Court has found that, despite the alleged similarity of the round shape that symbolize a seal, there are substantial differences in the decorations of the logo, which add additional differences in the letters and wording of the marks.

The Court stipulated that these differences exclude a reasonable possibility of visual likelihood of confusion between the marks.

Applying the type of goods and consumers test, the District Court has accepted the CGL’s position that gem and diamond assessment services are services based on professional criteria, which include careful examination of a laboratory, preparation of a report, evaluation and finally the issuance of an appropriate certificate.

The Court was impressed that providing such services will usually be accompanied by the purchase of precious stones in a considerable amount of money and that it’s not a “shelf product,” but rather a unique product, that is directed to a sophisticated customer, which reduces the likelihood of confusion.

The District Court was also impressed that the CGL’s owners are veteran and well-known in the diamond industry, and that these circumstances do not support the claims of IGL that CGL “rides” on the reputation of IGL, considering the relatively short period in which IGL operates in the diamond market.

The District Court also relies on many trademarks submitted by CGL’s attorneys, whose mark consists of a circular seal structure, three capital letters in English and an accompanying inscription to the side or below the combination of the letters and the logo.

Naturally, as befits gemstone products, the combination of colors with the same symbols and letters is done in gold, black and blue, colors that symbolize prestige.

The District Court also accepted CGL’s position that the initials in the IGL sign represent the words “international gemological and laboratory” and that these are generic names which, for the most part, enjoy less protection than arbitrary names.

Under these circumstances, the District Court held that the IGL’s registered mark has a weak inherent distinctive character, and that IGL did not present any significant evidence indicating that the registered mark had required a distinctive character, meaning that the consumers are linking it to the services provided by IGL.

In conclusion, the District Court held that the triple test did not support the claim of a likelihood of confusion.

The Court also rejected the passing off claim and ruled that there is no likelihood of confusion between the services and that CGL did not prove their reputation.

Applying the balance of convenience test, the District Court has ruled that it was not convinced that the use of the CGL mark would cause irreversible damage or serious damage to IGL.

In conclusion, the District Court rejected the motion for a temporary injunction and ordered IGL to pay legal costs of NIS 9,500 to CGL.

Disclaimer: Nothing in the foregoing shall constitute any legal advice or any opinion whatsoever. This is an informative article only and it is well recommended to consult with a specialized attorney.

CGL was represented by Yossi Sivan & Co. Law Offices


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Foreign Brand Owner was allowed to manage TM Opposition without Posting a Guarantee

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Generally, the Israeli case law requires foreign companies to post guarantee before managing a litigation, including Trademark Oppositions.

A very important decision of the Israeli IP Commissioner enabled a Nederland company to manage a Trademark Opposition against a local applicant without posting a guarantee, based on its wide reputation, evidence of extensive commercial activities in Israel and the valuable registrations.

Lifestyle Equities CV a Nederland company has filed an Opposition to a trademark application filed by David Ivgi as shown below:

Lifestyle Equities CV has claimed that the requested mark is confusingly similar to their well-known and registered mark “Beverly Hills Polo Club” as shown in the below logo:

Lifestyle Equities CV has claimed that the requested mark features a polo rider on a running horse and a circle element confusingly similar to Lifestyle Equities CV’s mark.

Ivgi requested that Lifestyle Equities CV post a bank guarantee to cover the expected costs should the Opposition be denied, according to the applicable law concerning corporations.

Ivgi’s Claims:

Ivgi has claimed that Lifestyle Equities CV is a Dutch  entity and therefore it would be very difficult to collect the expenses from them, should the opposition be rejected.

Ivgi also claimed that the chances of Lifestyle Equities CV prevailing were extremely small given the visual differences between the marks, therefore a guarantee must be posted.

In addition, Ivgi claimed that Lifestyle Equities CV didn’t prove actual assets in Israel since it has failed to file an affidavit to support its claims.

Ivgi also claimed that the burden of proof lies on Lifestyle Equities CV to prove that it has enough financial capabilities.

Lifestyle Equities CV’s claims:

Lifestyle Equities CV has claimed that Ivgy’s motion must be rejected and that Ivgi is acting in bad faith trying to register this mark.

Regarding the guarantee, Lifestyle Equities CV has claimed that the Trademark Registrar has a wide discretion not to order a guarantee to cover the expenses and that actually Ivgi did not prove that Lifestyle Equities CV would have difficulty in covering the expenses if their opposition was denied.

Lifestyle Equities CV has also claimed there is no need for posting a guarantee in light of their financial capabilities and the fact the Lifestyle Equities CV was a foreign entity was not by itself a ground for requesting a guarantee.

Lifestyle Equities CV has further claimed that since it owned the well-known Beverly Hills Polo Club fashion brand, who has a very high financial value there is no risk of not covering the expenses.

Lifestyle Equities CV further claimed to have valuable assets in Israel based on the high royalties collected from its licensees in various categories.

In addition to that, Lifestyle Equities CV has claimed that it has shown a good chance of winning the opposition case.

Lifestyle Equities CV further argued that the requirement of posting a guarantee was undermining their basic (constitutional) ownership property rights to access the judicial system in Israel, relative to local companies.

Lifestyle Equities CV further claimed that Lifestyle Equities CV is a Dutch company and the Nederland is a signatory of The Hague Treaty of 1954.

The Hague Treaty of 1954 prevents discrimination against foreign companies in relation to local companies, therefor the fact that Lifestyle Equities CV is a Dutch company cannot by itself justifies posting a guarantee.

The Decision

The IP Commissioner, Mrs. Yaara Shoshana Caspi, has accepted Lifestyle Equities CV’s claims that it should not be discriminate just based on the fact the it’s a Dutch company.

Lifestyle Equities CV has managed to show a considerable financial capability, even without submitting clear evidence such as financial reports.

Lifestyle Equities CV has proved (based on its evidence) a wide commercial activity in Israel, that it has valuable brand and that its brand is well known around the world.

The Commissioner further ruled that Lifestyle Equities CV’s trademark registrations in Israel are valuable enough and considered to be a tradable asset.

In addition, the Commissioner has ruled that there is a certain similarity between Lifestyle Equities CV’s mark and the requested mark and that Lifestyle Equities CV’s claim that this could confuse customers is not baseless.

The IP Commissioner has decided that there wasn’t reasonable chance that Lifestyle Equities CV could not cover the expenses and she actually suspects the sincerity of his claims.

Finally, Ivgi’s motion was denied and costs of 1500 Shekels were awarded to Lifestyle Equities CV.

Lifestyle Equities CV was represented by Yossi Sivan & Co. law Offices

Parallel Export of Cosmetics on eBay Allowed – Denying the Manufacturer’s Attempt to Control the Distribution

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Another important achievement for our firm (for the previous decision see this link) is a recent decision in a motion for a temporary injunction, this time on parallel export of Israeli cosmetic products via eBay and copyright law.

The question that was raised in this proceeding was whether an Israeli cosmetic manufacturer can prevent from an eBay store to sell its cosmetics via eBay.

Our firm represented an eBay store named Beauty Shop that has purchased cosmetic products under the brand HOLYLAND from different suppliers in Israel, including from the manufacturer, Pharma Cosmetics (HL), and marked them on eBay.

The manufacturer (HL) has filed a motion for a temporary injunction against Beauty Shop in order to prevent Beauty Shop from selling the cosmetics products on eBay. HL has also claimed for damages of NIS400,000.

HL’s Claims:

HL claimed that the sale of its cosmetics on eBay for very low prices has caused considerable damages to it brand, and also may cause the exclusive distributers of HL worldwide to cancel the distribution agreements with HL, causing irreparable damage to HL.

Furthermore, HL contended that the sale of cosmetics on eBay also constitutes a breach of a contract, based on a restriction clause that was added to some of the invoices between HL and Beauty Shop, concerning some previous direct small purchases from HL.

HL has claimed that those past invoices prohibit Beauty Shop from selling the cosmetics on eBay forever, even if those products have been legally purchased from third parties and not from HL.

In addition, HL has claimed that the use of photos of the cosmetics products and of informative texts about the products that belong to HL constitutes a copyright infringement.

Beauty Shop’s Claims:

Beauty Shop, represented by our firm, has argued that the whole purpose of the motion is to block fair competition in the market and to control prices in the cosmetics industry, ultimately causing harm to the consumers.

With regards to HL’s claim concerning the possible termination of the exclusive distribution agreements around the world, Beauty Shop has argued that these claims were groundless, that they have not been proven at all, and that in any case there is no connection between those agreements and Beauty Shop’s activities.

Beauty Shop also has claimed that no distribution agreement was made between Beauty Shop and HL concerning the limitation of distribution outside of Israel.

Beauty Shop has also claimed that the added restrictive clause on the invoices cannot substitute a distribution agreement which requires the existence of negotiations and other basic contractual terms.

Beauty Shop has also claimed that even if HL can prove any contractual distribution limitations, there is no liability on Beauty Shop’s behalf since Beauty Shop has legally purchased the cosmetics from third party suppliers, which have not been restricted to any distribution limitations, and that the sale of the cosmetics on eBay is allowed according to the Israeli Supreme Court precedent in case no. 371/89 Ilan Labovitch v. Y. Elyahu, in which “The manufacturer chooses his preferred marketing channels that he intends to market his merchandise through. The decision to whom to sell his merchandise is in his hands. Nevertheless, after the manufacturer has sold his merchandise and transferred the property ownership in it to others, he may not continue to control the distribution channels of his merchandise by virtue of his goodwill”.              

With regard to the claim of copyright infringement, Beauty Shop has argued that standard photos of cosmetics packaging or informational texts are not protected by copyright in accordance with the Merger Doctrine, especially when it comes to photos of products used for marketing purposes.

Court’s Decision:

The District Court (the Honorable Judge Magen Altuvia) rejected the Motion for a Temporary Injunction and fully accepted Beauty Shop’s claims.

With regard to the motion to prevent the cosmetics distribution on eBay, the District Court accepted Beauty Shop’s argument that the cosmetics have been purchased from third parties who were not bound by any distribution limitations, and therefore there is nothing that can prevent their distribution overseas based on the Supreme Court precedent in case no. 371/89 Ilan Labovitch v. Y. Elyahu.

In this matter the District Court has ruled the following:

“It should be noted that the identity of the respondent’s suppliers is known to the applicants (S. 21 P. 6 of the court record dated 04/20/15) and they have the option not to sell HL’s products to the respondent’s suppliers or to prohibit them from selling these products to the respondent or out of Israel. During the cross-examination, HL’s CEO has avoided answering the question: can he prevent HL’s customers, the respondent’s suppliers, from selling to the respondent, and he replied: “This is an issue” (ibid, ’23 P 6). It should be added that the CEO was then asked whether such limitation applies to the respondent’s suppliers, and he testified as follows: “I do not know. I do not think so “(ibid, S. 29, P 6). It should be added that the applicant did not attach sales invoices to the respondent’s suppliers, therefore HL did not demonstrate any prohibition of those suppliers from selling HL’s products out of Israel or to the respondent. For this reason, I do not accept the applicant’s claim as if the respondent’s suppliers could not sell the respondent the right to sell HL products out of Israel, since such a right was not in their hands (Article 22 of the respondent’s summaries). “

Regarding HL’s claims of copyright infringement, the Court has ruled that it is doubtful that using photos of products or texts that appear on the packages that where legally purchased, constitutes copyright infringement.

The Court has also contended that the chances of HL to win the case are not good and that the balance of interests lies in the favor of Beauty Shop.

Finally the District Court rejected the motion for the temporary injunction and ordered HL to pay costs of NIS39,500 to Beauty Shop.

Beauty Shop was represented by Yossi Sivan & Co.

Disclaimer
Nothing in the above shall be considered as any legal advice or any legal opinion whatsoever. This is just an informative article. We strongly recommend consulting with a professional attorney in such matters.

 

 

Does Parallel Import of Baby Strollers without Serial Numbers Constitute an Infringement of Intellectual Property rights?

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Many international brands are being imported to Israel not only by the official importers, but also by Parallel importers.

As far as the consumer is concerned, as long as these products are authentic and not counterfeit, this parallel import is an acceptable and legitimate phenomenon, since it improves competition and results in lowered prices.

It is well known that brand owners are repeatedly trying to protect the interests of their local official importers by locating the source of the overseas parallel import to Israel for the purpose of stopping the parallel import and controlling the level of prices.

Locating the details of the supplier is possible through reading the bar codes and the serial numbers labels that appear on the imported products.

Does the manufacturer have any legitimate interest to prevent the removing of those serial numbers? This question has recently come up in a very interesting case ruled by the Central District Court in Israel.

Background:

STOKKE is a Norwegian Company and manufacturer of baby strollers that are distributed to many countries around the world.

Baby Love is an Israeli Company that imports STOKKE Strollers among other baby products, by parallel import.

STOKKE has filed a motion for a temporary injunction against Baby Love for importing and selling STOKKE baby strollers by parallel import without labels bearing the serial numbers of the manufacturer.

Stokke’s claims:
STOKKE argued that the original serial numbers have been removed by Baby Love and that the new labels that appear on the Baby Love strollers consist faked serial numbers.

STOKKE claimed that the sale of these parallel imported strollers is actually causing the nullification of any warranty granted by the manufacturer and preventing STOKKE from the  ability to trace the strollers for the purpose of consumer service and warranty.

STOKKE has also claimed that the Baby Love strollers are damaging its goodwill and its contractual relationships with the official importer in Israel, a company named Shem Tov.

In addition, STOKKE has claimed that these actions of Baby Love are harming its ability to perform a recall to handle any problems in the strollers.

Concerning the warranty issues, STOKKE has claimed that Baby Love’s actions are causing the consumers to think that they have purchased a STOKKE stroller with full warranty while in fact those
strollers have no official warranty by STOKKE.

STOKKE has also claimed that the removal of the serial numbers and the relabeling with faked serial numbers endangers the consumers, plain and simple.

Baby Love’s Claims:
Baby Love represented by Yossi Sivan & Co. has argued that the real purpose of the motion for injunction was to unlawfully block the commercial activity of Baby Love as a parallel importer in order to prevent competition in the market and to exaggerate the prices of the strollers with no interference.

Baby Love has argued that it doesn’t remove the labels, but purchases the strollers AS IS from the supplier outside Israel, that the parallel imported strollers are identical to the strollers imported by the official importer of STOKKE and that they are sold at lower prices compared to the strollers imported by Shem Tov.

Baby Love has also argued that the removal of the serial numbers is a consequence of the fact that STOKKE is trying to trace the origin of the strollers in order to prevent the parallel import to Israel, forcing the supplier to remove the labels.

Baby Love has also claimed that STOKKE is trying to trace the origin of the strollers in order to prevent the parallel import, to control the prices of the strollers and to dictate exaggerated prices, extremely harming the competition.

In addition, Baby Love has argued that the manufacturer has no legitimate right to control the distribution of the strollers and in fact, STOKKE has exhausted its rights after it sold the strollers to some supplier around the world according to the rules of exhaustion of intellectual property rights.

Baby Love has claimed that the interest lying in the parallel import by preventing STOKKE from tracing the details of the supplier overrides the interest of STOKKE to control the market and to exaggerate prices by blocking the market.

In addition, Baby Love has claimed that the strollers are not required to any recall according to the regulations of the Standards Institution of Israel and that the strollers are not products that require a safety standards such as safety chairs for cars.

Baby Love has also clarified that there is no misleading of the consumer since the name of the parallel importer appears all over the purchasing documentation and that the consumer knows that it is a product of parallel import.

Court’s Decision:
The Central District Court has denied the motion for the temporary injunction and ruled that allegedly there is no misleading of the consumer and that the consumer is aware that he is purchasing a parallel imported stroller and that the warranty is given by the parallel importer not by the official importer.

The court also ruled that Baby Love doesn’t remove the original labels and doesn’t fake the original labels but sticks on different labels that include its own serial numbers according to the regulations of the Standards Institute of Israel.

The court has also mentioned the active involvement of the official importer of STOKKE which implies that most of the claimed damage arising from the parallel import activity is the commercial damage of the official importer, not STOKKE.

The court also has clarified that parallel import is a positive phenomenon in its essence in light of the Supreme Court’s decision in case No. 7629/12 TOMMY HILFIGER V. Swisa and that the recognition of the legitimacy of parallel import is based on the doctrine of the exhaustion of intellectual property rights which is well based and obvious.

The District Court has also mentioned the proposed bill of the Restrictive Trade Practices Law (Antitrust Law) (removal of import barriers 2015) applying limitations that would prevent official importers from the exploitation of their status and abuse of their rights by opposing parallel importers.

The court also rejected the comparison between the number on a motor vehicle chassis to the serial number sticker on a stroller and determined that this comparison indicates the weakness in STOKKEs arguments.

The court has also rejected the claim that the removal of the labels (bar codes) “endangers the public” and ruled that this claim is very farfetched and lacks evidential basis.

Ultimately the Court dismissed the Motion of Temporary Injunction and ordered STOKKE to pay Baby Love expenses worth 15,000NIS and to deposit a guaranty of 75,000NIS within 20 days otherwise the lawsuit will be dismissed.

Although this decision is a temporary decision, it still constitutes a great victory for free competition and the legitimacy of parallel import in Israel.

Baby Love was represented by Yossi Sivan & Co. Law Offices

Disclaimer
Nothing in the above shall be considered as any legal advice or any legal opinion whatsoever. This is just an informative article. We strongly recommend consulting with a professional attorney in such matters.