New Israeli Precedent Decision on Parallel imports in a Situation of Different Ownership of the Same Brand

The Israeli Supreme Court addressed the following question in a unique judgment delivered by Judge Stein: 

Does the parallel importat from Ukraine to Israel of beverages under the mark “Schweppes”, which was purchased from the Ukrainian trademark holder (“Schweppes”), constitute trademark infringement of the same registered trademark in Israel held by another owner (which is also the local manufacturer of the same products in Israel, not affiliated with the Ukrainin trademark holder)? 

Let’s simplify it.

In the case of split ownership (different owners of the same mark in different countries), does the importation of the same products from country A to Israel under the same mark without the permission of the Israeli trademark holder constitute trademark infringement?   

Here are the Facts:

Yafora Ltd produces and markets soft drinks in Israel. Yafora Ltd owns the “Schweppes” trademark in Israel and in the territory of the Palestinian Authority.

In 2006, Yafora acquired the trademark “Schweppes” in Israel from Cadbury Schweppes PLC. “Schweppes” beverages, marketed by Yafora Ltd in Israel, are manufactured by Yafora in Israel.

Ben Shlush Ltd imports various products from abroad into Israel in a parallel import process. Products imported by a Ben Shlush include food and beverages.

The parlell imports scheme can be presented as follows: 

On March 12, 2019, Ben Shlush Ltd imported the first shipment of beverage bottles with the “Schweppes” trademark, which they allegedly purchased from Supreme Trading LLC. This company purchased the beverages from official resellers, who purchased them from the beverage manufacturer in Ukraine, European Refreshments Limited. Coca-Cola owns the rights to the “Schweppes” trademark in Ukraine through its subsidiary ERL.

Ben Shlush received a cease-and-desist letter from Yafora on April 29, 2019, stating that the marketing of Ukrainian beverages under the “Schweppes” trademark infringes on Yafora’s Israeli trademark registration “Schweppes”.

In light of the above, Ben Shlush filed a motion for a declaratory judgment asking the District Court to declare that Schweppes’ beverages imported from Ukraine, which were purchased from ERL, were lawful and did not infringe on Yafora’s Israeli trademark “Schweppes”.

The District Court Decision  

On October 19, 2020 the District Court has accepted the motion for a declaratory judgment and ruled that the fact that Yipora manufactures its products in Israel and does not import them to Israel from abroad does not deprive Ben Shlush of the status of a legitimate parallel importer.

In this context, it was pointed out that a certain difference between the products – those of the owner of the trademark rights and those imported in parallel import from another country – does not detract from their originality for the purpose of protecting the parallel import, whenever the product manufacturer holds the trademark rights in that country.

Along with this legal determination in principle, it was determined that Yafora in any case did not prove to the required extent its factual claim regarding the difference between the products.

The district court ruled that the legal doctrine concerning the exhaustion of intellectual property rights also applies in situations of territorial split ownership of trademark rights.

In this context, the district court has argued that the parallel import was a commercial risk that Yafora had to consider while acquiring the rights to the “Schweppes” trademark from Cadbury – in view of its awareness of the territorial, voluntary and agreed split of the Schweppes trademark rights.

The District Court ruled that this split of ownership was made when Cadbury sold its rights to various entities in different countries.

Accordingly, the District Court has awarded Ben Shlush with a declaratory judgment in which Ben Shlush is entitled to import the products purchased by ERL under the “Schweppes” trademark and that it is not considered to be a trademark infringement.

Yafora has filed an appeal to the Israeli Supreme Court.     

The Supreme Court Decision:

Judge Stein has decided to accept the appeal together with Judge Elron, against the minority opinion of Judge Hendle.     

Majority Opinion (Judge Stein)

The Court has ruled that the basic mistake that the district court made was to attribute a notion of internationality to the Israeli trademark “Schwepps” and its affiliation with the global “Schweppes” brand, which in fact does not exist. It is a fact that the trademark “Schweppes” is no longer associated with Cadbury, which at the time sold it to Yafora.  

Second, and this is the point: a trademark – “Schweppes” in this case, is limited to the borders of the state in which it is registered and gives its owners exclusive territorial rights, as opposed to extra-territorial rights unrelated to the local mark. Thus, the trademarks of “Schweppes” that have been registered and recognized in countries outside Israel are not relevant at all – this is because their scope is essentially limited to the borders of each country and its laws.

When Cadbury controlled 50 or 100 Schweppes trademarks in 50 or 100 different countries – even then it did not hold any international-global trademark, but fifty (or one hundred) different local trademarks, that were distinct from each other and unrelated to each other.

This basic principle will be hereinafter referred to as the principle of territorial protection for trademarks or, in short, the principle of territorial protection.

The principle of territorial protection and the exclusive right that Yipora has in the marketing and distribution of “Schweppes” products in Israel, lead the court to the following conclusion: Such importation shall violate Yafora’s exclusive right as defined in section the Israeli trademark law, will harm the ability of consumers in Israel who wish to buy Yafora’s Schweppes’ products, and not from another company, and will lead to the erosion of Yafora’s incentive to invest in the quality of “Schweppes” products that are sold in Israel.

The Supreme Court then continued to define what is considered to be a legitimate Parallel Import in Israel:

Parallel import is a legitimate commercial practice whenever it respects and does not infringe on the existing trademark regime. Parallel or other imports that infringe the rights of the trademark owner in his own country are illegitimate and shall not be permitted.

In this case, in the absence of a contractual relationship between Yafora and the rights holder of the “Schweppes” trademark in Ukraine, there is no basis for claiming that the sale of the products by the Ukrainian manufacturer – between them and Yafora products – exhausts Yafora’s rights in Israel.

The Yafora company exercises its trademark rights only when it sells its own beverages under the “Schweppes” brand – and this, of course, only in relation to the beverages it has sold and received in return. These drinks – and only they – can be put up for further sale in Israel without infringing Yafora’s trademark. The Ukrainian brand bearing the “Schweppes” mark is not related to the Israeli brand which is identified with Yafora through the trademark “Schweppes” owns by Yafora. Therefore, the Ben Shlush “Schweppes” drinks imported to Israel are considered as infringing goods.

Minority Opinion

Judge Hendler presented a different opinion.

In his opinion the use of the mark “Schweppes” by Ben Shlush should be considered as “true use” of the mark in accordance with section 47 of the trademark ordinance. Judge Hendler contended that the use of the “Schweppes” mark on the bottles, even though they were produced by the rights holder in Ukraine and not in Israel, provides real and valuable information for the consumer about the brand.

In his opinion, the legally split of ownership did not change the reputation of the “Schweppes” brand in the eyes of the consumers. The Schweppes bottles enjoyed the reputation of “Schweppes” prior to the transfer of ownership, and the reputation of “Schweppes” continues to accompany them. This is therefore a true use of the “Schweppes” mark.

Judge Hendler continued and explain his opinion that marketing the imported bottles as ” Schweppes ” should considered as true use of that mark. The reason for this is not because in Ukraine the use of the mark was lawful, nor because the name of the rights holder in Ukraine (or his predecessor) was indeed “Schweppes”. The reason is that both the rights holder in Ukraine and Yafora both acquired rights in the same mark with an international reputation. In such a case the mark “Schweppes” on the imported bottles contains the correct information about the same brand.

In view of this conclusion, Judge Hendler continued to evaluate whether such import may cause confusion in the market. In his opinion, the consumers probably did not know that there are two ” Schweppes ” manufacturers operating in Israel that are not currently legally related to each other. There is also no guarantee, in these circumstances, that the taste or composition of the imported beverages is the same as some of the beverages produced by Yafora, or that such an identity will be preserved in the future.

Although the back of the bottles contains data about the manufacturer, it is highly doubtful whether this caption allows the consumer to know effectively about the existence of two different and independent manufacturers who legally use the “Schweppes” mark.

In these circumstances, and since Yafora produces its beverages independently, it was decided by Judge Hendler that the marketing of the bottles as they are, eventually  does not meet the criteria of “true use”, in view of the likelihood of market confusion test.

Nevertheless, Judge Hendler believes that this difficulty can be overcome by affixing a “Disclaimer” sticker to the front of the imported bottles, in a prominent place and adjacent to the “Schweppes” trademark. The sticker must make it clear enough that the drink is produced by the rights holder in Ukraine, and that the taste of the drink may be different from that produced in Israel by the trademark holder in Israel. Judge Hendler believed that such a disclaimer should overcome the confusion test.

Judge Stein objected to Judge Hendler’s view. In his opinion the Court should not provide legal guidance to the defendant. Judge Stein sees no reason to give Ben Shlush legal advice regarding its future operations in the Israeli soft drink market. In his opinion, giving such advice is not part of the judicial role.                

Conclusion:

The Supreme Court has decided to accept the appeal in accordance with the majority opinion of Judge Stein and Judge Elron who agreed with Judge Stein.

The Supreme Court decided to set aside the district court’s ruling and award a declaratory judgment which states that Ben Shlush is not allowed to import products made in Ukraine bearing the trademark “Schweppes” without the permission of Yafora.

The Supreme Court has also ordered Ben Shlush to pay Yafora legal expenses in both instances in the total amount of NIS 70,000.

This new decision materially limits the scope of legitimate parallel imports in Israel and define the legal ruling for a situation of a split ownership of same brand by unaffiliated companies in different countries.     

Our estimation is that an additional hearing will be requested by Ben Shlush since this decision could potentially have a major influence on the parallel import market in Israel.

Disclaimer: Nothing in the above constitutes any legal opinion whatsoever and the user is required to get a professional legal consultation.

 

       

Israel: New 2022 WTR Ranking for Yossi Sivan Law Firm

We are glad to share with you that this year again, Yossi Sivan was ranked by the WTR 1000 with this amazing review:

”… A contentious ace who regularly racks up the wins before both courts and customs authorities, he runs his practice out of the eponymous Yossi Sivan & Co. … he won an unusual temporary seizure order on the real estate properties owned by the defendant’s shareholders.”

Yossi Sivan Law Firm was ranked in the following categories:

A. (Individual) Enforcement and litigation
B. (Individual) Prosecution and strategy

A big thank you to all of our clients and colleagues across the world. Contact Us.

 

Is There a Likelihood of Confusion Between EZ and EZ PUT?

We are happy to inform you of a great win of our firm in a trademark opposition case.
One of the questions reviewd in this case is whether merchandise of a rapper constitute trademark use beyond his music services?

EZ, An Israeli rapper singer has opposed our client’s trademark application EZ PUT, a company that sells mobile phone accessories (class 9). The rapper claimed that the mark EZ PUT is confusingly similar to his mark, registered in class 41, that his mark is well known and should gain a wider protection based on his sales of merchandise of shirts and hats.

EZ PUT claimed that there is no likelihood of confusion, that both marks have a different design, style and meaning, that his mark is not well known and that there is no material connection between music services and mobile accessories.

EZ PUT has also claimed that the sale of the fasion merchandise cannot considered as valid trademark use in other classes beyond the music services.

The TM Registrar rejected the opposition entirely while fully accepting EZ PUT claims including the use of merchandise claim:

“A man who purchase a shirt with the name METALLICA doesn’t do so beacause the sign of the band shows the quality or origin of the shirt, but to convey the symbols of the band on his chest as a cultural massage and to show his musical preferences”

EZ PUT was represented by Yossi Sivan – Law Firm

Can a Fin Shape Jewelry be Eligible for a 3D Trademark in Israel?

Ronit Kopel filed a trademark application for a three-dimensional mark for a fin shape in class 14 for “jewelry and key holders” that looks like this:

The Trademark Office has issued a refusal based on the claim that the mark merely describes the goods as a three-dimensional product and therefore lacks a distinctive character, meaning that the mark is the product itself.

In Israel, it may be possible to register the shape of a good as a trademark in special cases, where sufficient evidence is provided to demonstrate three cumulative conditions ruled by the Supreme Court in the case of August Storck KG B v Alfa Intuit Food Productions Ltd (CA-11487- 03, March 23 2008) (The Toffefe Case), as follows: 

1. The image requested to be registered, in practice, functions as a trademark, namely it indicates the source of the goods intended to be sold under the mark. 

2. The image requested to be registered, does not serve solely an aesthetic or functional purpose.

3. As a result of use, the mark has acquired a distinctive character that indicates the source of the good. 

The above requirements were described later as the “Three Requirements Test” and was also adopted by the Israeli Trademark Registrar as the official requirements for the examination of three-dimensional marks.

The applicant responded that her mark meets the Three Requirements Test, that it is well known in Israel and that it has acquired distinctive character due to intensive use in the market.

The Trademark examiner rejected the applicant’s claims, so the applicant requested an oral hearing, trying to persuade the IP Commissioner that the Examiner’s decision was wrong.

The IP Commissioner relied upon the Supreme Court’s decision in The Toffefe Case, and analyzed the case as follows:

  1. Function as a Trademark

The IP Commissioner ruled that the fin shape functions as a trademark only for the bags and packages, sold under the mark, but not for the jewelry product itself, as can be seen from the following photos:

The IP Commissioner decided that the mere sale of fin shaped jewelry does not prove that the requested mark functions as a trademark, since it doesn’t serve as an indicator of origin that differentiate from other goods been sold in the market. The following are photos of  some of the applicant’s products: 

  1. Aesthetic or Functional Purpose

The IP Commissioner ruled that the shape of a fin as a jewelry or work of art is based purely on aesthetic reasons, since the consumer buys them for their aesthetic value of a fin, that attracts the eyes, and not for any other reason. Therefore, the aesthetic character of the fin shape is so material, it prevents any trademark protection.

  1. Acquired Distinctiveness – Secondary meaning  

Following the rejection of two of the three requirements test, IP Commissioner decided that there is no need to analyze if the mark has acquired distinctive character through intensive use in the market. The IP Commissioner’s opinion was that even if such acquired distinctiveness was established, the fact that the shape is based on a pure aesthetic character prevents any trademark protection.

The Applicant then claimed that the reason for applying for a three-dimensional application is to prevent competitors from selling confusingly similar fin shaped jewelry.

The IP Commissioner rejected this claim and decided that this reason does not justify a trademark protection and in fact was a reason NOT to approve the application.

The IP Commissioner ruled that the applicant should have filed for a registered design  for a limited protection under the law and that the registration of the three-dimensional trademark as the product image and as a defensive step in order to prevent others from using the fin image or similar figures does not meet the basic purposes of trademark law.

The application was denied. 

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.

Israel Joins Hague Convention for Industrial Designs

Industrial Designs in Israel:

The State of Israel has joined The Hague System for the International Registration of Industrial Designs.

The Hague System provides a practical business solution for registering up to 100 designs in 70 contracting parties covering 88 countries, through the filing of one single international application.

Israel has now formally approved the Hague System which will come into effect in Israel on 3 January 2019.

In Israel, an industrial design provides protection to the ornamental or aesthetic visuality of an article. An industrial design protects the shape of two- or three-dimensional features subject to novelty and individual character requirements. The term of protection for a registered design in Israel is 25 years effective from the Israeli filing date.

Like other countries, in Israel, disclosure of an industrial design to the public within 12 months prior to the filing date of the application in Israel, or before its priority date, will not be considered as prior art (Grace Period).

The Hague Agreement Concerning the International Deposit of Industrial Designs enables citizens of all member states to register an industrial design by filing a single application designating any of the member states.

Every application must be examined by the local Patent Office in accordance with the local law and regulations.

As of January 3, 2020, foreign applicants (out of Israel) can file an industrial design application in their local Patent Office and designate Israel saving considerable expenses required in using local attorneys for the filings.

It should be noted that the examination process in Israel is sometimes more complicated and time consuming than in other countries. A typical design application can have more than 2 office actions before getting registered. The Israeli Patent Office has strict policy in technical issues, drawings and novelty requirements.

Therefore, we recommend getting an advice of a local professional attorney before starting the process of registering an Industrial Design using the Hague System.