In a groundbreaking legal ruling that has captured attention, the Tel Aviv District Court has recently delivered a record – breaking trademark infringement award with far-reaching implications.
Rami Levi, one of the biggest supermarket chains in Israel, has been ordered to compensate Lifestyle Equities, the owner of the iconic BEVERLY HILLS POLO CLUB, in one of the highest awards in Israel for trademark infringement.
This landmark decision sets an extraordinary precedent in Israel’s legal arena, representing a remarkable triumph in the realm of trademark infringement.
The court ruling concluded a long-standing dispute between the parties, which lasted nearly a decade.
Here’s the story in a nutshell:
The plaintiffs, Lifestyle Equities C.V. and Lifestyle Licensing B.V., own the rights to the well-known BEVERLY HILLS POLO CLUB (BHPC) brand, featuring the iconic horse, rider, and polo stick, marketed in many countries worldwide, primarily in the fashion, footwear, bags, and more.
The plaintiffs granted a license to an Israeli company for the design, production, and distribution of BHPC products in Israel, specifically in the category of underwear.
The license included various restrictions, including a prohibition on distributing the products in food stores and marketing products not approved by the plaintiffs.
In 2014, the plaintiffs discovered that underwear products bearing their trademark, which were not approved as required, were imported to Israel by Yafiz and sold in Rami Levy stores.
The plaintiffs also learned that the license holder transferred her operations to another company without informing the plaintiffs or obtaining their approval. Under these circumstances, it was alleged that the products sold in Rami Levy stores were infringing.
In 2014, the plaintiffs sent warning letters to Rami Levy and Yafiz, demanding they cease the distribution of the infringing products.
However, the infringing products continued to be sold in Rami Levy stores despite the plaintiffs’ warnings, and this continued even after the license agreement was terminated and a lawsuit was filed against the company, claiming that it had stepped into the shoes of the license holder.
When Rami Levy and Yafiz refused to cease the distribution of the infringing products, the plaintiffs filed a lawsuit in 2017 against Rami Levy, Yafiz, and other importers.
The lawsuits led to a prolonged and complex legal battle, during which numerous pieces of evidence were presented regarding the trademark infringement, including findings by private investigators and expert opinions.
In 2022, the parties agreed to submit the dispute to the District Court (Judge Guntevenik) for a decision based on oral summaries by the parties, without cross-examinations.
On April 27, 2023, the court issued its judgment in the case.
The Tel Aviv District Court ruled that Rami Levy Shikma Marketing 2006 Ltd. and Yafiz Fashion Ltd. must compensate Lifestyle Equities C.V. and Lifestyle Licensing B.V., the owners of the BEVERLY HILLS POLO CLUB brand, in the amount of over 3,000,000 ₪ (2,413,836 ₪ plus interest and expenses) for trademark infringement.
This is one of the highest amounts awarded in Israel in recent years in the field of trademark infringement.
This landmark case sets a new benchmark in Israel’s legal landscape, representing one of the most substantial trademark infringement awards in recent years.
According to attorney Yossi Sivan representing Lifestyle Equities, there are several important and interesting elements in the court’s ruling:
One of the Highest Awards in Israel for Trademark Infringement
Firstly, the trademark infringement award is one of the highest awarded in Israel in recent years for trademark infringement. It includes compensation of all gross profit made by the Defendants amounting to approximately 2.4 million ₪, plus additional amounts for the filing date of the lawsuit and reimbursement of expenses, totaling over 3,000,000 millions NIS.
Attorney Yossi Sivan: “One of the Highest Trademark Infringement Awards in Israel”
Third-Party May be Liable for Trademark Infringement
Secondly, the court ruling indicates that a commercial party that received warnings about products it distributes cannot evade responsibility for potential intellectual property infringements and cannot place all the responsibility on the product supplier.
Failing to conduct a thorough investigation of the allegations while continuing to sell the infringing products might exposes the distributor to liability for trademark infringement.
The Judgment marks the first trademark case law in Israel where a third party (a commercial client such as supermarket chain of stores, who purchased the products from a supplier) is held responsible for trademark infringement and grants the brand owner a substantial compensation, one of the largest ever given in Israel.
Distribution Limitation of a License Agreement May Be Enforceable Against Third Parties
The third, ruling acknowledges that Rami Levy’s chain stores are “food stores” according to the license agreement. This establishes that the distribution of products bearing the trademark in food stores is prohibited.
The court accepted the plaintiffs’ position in this context, stating that distributors and marketers who did not directly contract with the rights-holding company are subject to the terms of the license agreement following the notices.
Compensation Based on Unlawful Enrichment – Good News for Brand Owners
The court’s compensation mechanism in this case is truly groundbreaking. Unlike typical instances of trademark infringement, where compensation is often estimated due to the challenge of proving financial damages, the court took a different approach.
Through meticulous analysis, the court accurately calculated the defendants’ actual gross profit, taking into account operational expenses. The plaintiffs provided comprehensive data, including import records, invoices, and receipts, enabling a precise calculation of compensation.
Rather than relying on the traditional compensatory damages mechanism established by the Trademark Law, the court applied an alternative remedy based on the unlawful enrichment law. This approach ensures that the compensation is directly tied to the actual gross profit derived from the infringement.
“… It should be noted here that “the rights holder can demand an injunction and compensation, but as an alternative to compensation, they can claim the unjust enrichment on the basis of unlawful enrichment act”.
Licensing Royalties Should Not Be The Basis of Compensation
The court firmly dismissed the defendants’ argument that only reasonable royalties should be awarded for using the plaintiffs’ trademark. Instead, it deemed the disgorgement of profits as the appropriate remedy, considering the nature of the case and the relationship between the parties.
The court recognized the plaintiffs’ efforts to trace the actual profits made, reinforcing the principle that compensation for trademark infringement should reflect the third party’s actual gross profit from the unauthorized sale of products.
” In light of the circumstances, it seems that returning the profits is indeed the suitable remedy… Therefore, it does not seem appropriate to award compensation in the form of reasonable royalty fees, a place where the profits can be traced.”
Furthermore, the court ruled that Rami Levy and Yafiz are jointly and severally liable for compensation, despite being separate entities. Their close collaboration and intertwined business activities justified this decision.
It’s worth noting that Rami Levy and Yafiz initially attempted to prevent the publication of the court ruling. However, the district court sided with the plaintiffs, acknowledging that there was no valid reason to withhold the ruling from public knowledge.
This trademark infringement award was granted under the provisions of Section 79A of the Israeli Court’s Law, wherein both parties consented to the Court exercising its discretion and making a judgment based on the available evidence and pleadings, without conducting cross-examinations.
The plaintiffs in this landmark case were represented by our law firm: Attorney Yossi Sivan of Yossi Sivan Law Firm
Case Number TA 13671-02-17 Lifestyle Equities CV and others v. Rami Levi and Others (Tel Aviv District Court).
We would like to express our gratitude to Attorney Avi Ordo of Shorowitz & Co., who successfully cooperated with our firm and jointly represented in this case.
An appeal to the Supreme Court has been filed.
Please be aware that the information provided in this article is intended for general informational purposes only and should not be considered legal advice. For specific legal matters, it is recommended to consult with a licensed attorney.