The IP Factor

Karashi is a leading manufacturer of mass-produced Judaica with some 1800 product lines, and 200-300 new products a year. One successful line they do is a series of challah and matzah cloths, for ritual leavened and unleavened bread, that have the words Shabbat and Yom Tov (Sabbath and Festivals) embroidered on a translucent material, within a contrasting and opaque framework.

One of their clients decided that this style was so successful that they ordered a large quantity to be made directly for them in China. Understandably Karashi was somewhat annoyed by this and sued for IP infringement.

Since the products were conceived for mass production, they are not protected by copyright. They could have been protected by filing for registered designs but Karashi failed to do this. The main grounds for filing charges were thus Unjust Enrichment and Passing Off.

Judge Yosef Shapira of the Jerusalem District Court reviewed the various decisions he considered relevant and issued a temporary injunction against the defendants, forbidding them from marketing illicit challah covers with the words Shabbat and Yom Tov on a translucent material surrounded with opaque borders.

Comment

After the Supreme Court upheld the A.Sh.I.R. decision back in 1994, there are unregistered intellectual property rights available in Israel under the doctrine of unjust enrichment, at least where the court is convinced that the copying was with intent.  Since Shapira is supposed to follow legal precedent, it is not unreasonable to rule unjust enrichment. That said, though resplendent with references to the case-law, the decision appears to apply tests for the likelihood of confusion regarding trademarks to other areas of IP and in general shows little understanding of basic IP issues. Personally, I cannot see the unique design contribution of the words Shabbat and Yom Tov embroidered on a challah cloth. This seems to me to be totally generic to products of this nature. 

Shapira relates to property rights and infringement when there is no property and no infringement. It may be that there is unjust enrichment, but maybe not. Perhaps after a full trial, the defendants will find pre Karashi examples of challah cloths of similar designs. Whilst accepting that the A.Sh.I.R. Ruling is a relevant legal precedent, I was never happy with the decision. Registered rights last for a specific period of time and follow various rules. Unjust Enrichment is too vague both with regard to scope and with regard to duration. The interaction between Unjust Enrichment and the Basic Law, freedom of business activity, is not clear.

Granting a temporary injunction is particularly problematic on the basis of unjust enrichment, as there are no prima facie rights infringed, and temporary injunctions are by their nature, issued before weighing up the evidence, so the defendants should be considered guiltless until the plaintiffs rights to a monopoly are established. Competition that drives the price down is generally public interest and monopolies are not. If one can get preliminary injunctions under the laws of unjust enrichment, then why bother registering designs at all? Why limit oneself to something objectively new, why pay registration fees and why limit one’s protection to 15 years if you can sue under unjust enrichment without any of these limitations?

What is really missing, of course, is an up-to-date Israel Design Law rather than an out-dated ordinance. There should be limited period unregistered design protection, and probably a grace period. Novelty should be universal and not local.

The temporary injunction prohibits the defendants from manufacturing or selling their made-in-China challah cloths to third parties, directly or indirectly.  Somewhat surprisingly, in this intermediate ruling Judge Shapira has forbidden the defendants from directly or indirectly selling similar challah cloths in Israel or abroad. Thus these non-registered design rights are extra-territorial! I think this is a little beyond Judge Shapira’s jurisdiction.

The range of Karashi designs are found on their website. See

http://www.karshi.co.il/shop/retail/store/listCategoriesAndProducts.asp?idCategory=70

The intermediate ruling relates to rectangular cloths with opaque borders, translucent centers and the word Shabbat and Yom Tov embroidered thereon, with additional decoration being possible.  Not that difficult to have filed a design for that. In most things there are trends. Should the first person to introduce low slung jeans or some other clothing variation to be able to prevent others from doing similar designs? I can’t see why they should be able to without registration. It leaves too much at the discretion of the judge.  

Intermediate Ruling 8858/09 in 3402/09 (Jerusalem District Court)  Karashi International LTD., vs. Gift Center 2006 LTD., Ezer Deker, Ami decorative Products LTD. and Shlomi Nahisi.