Riding on the wave of campaigners for social justice, the Israel franchise of Toys R US have threatened to bypass the authorized importer and to import Lego in parallel, thereby driving the prices down so that, as they put it, everyone can afford Lego, not just rich children.

I have some sympathy with the exploited classes. As a parent of an eight year old boy, I had to buy and bring back to Israel a Lego castle from INTA in San Francisco last year. None of the exhibitors were giving out Lego, so I actually went to a toy shop and bought the damn thing. I would have preferred Hogwarts but Matan had other ideas and thought that the toy was primarily for him.

I therefore would tend to see parallel imports of staple products like Lego as being in the public interest, and would see attempts of an importer licensee  to attack parallel imports of trademarked goods with a jaundiced eye. I am not sure how the Israel courts will view the issue, but suspect that we will learn shortly.

The packages have a specific shape, are coloured yellow and show instructions for use and various warnings in Hebrew and English. They also include a Use By Date.

The packages are manufactured in by Tianjin Comfort in China where they are sold as Body Warmers. Popper, however, sells these devices as High Quality Body Warmers.

Apparently, over a 10 year period, during which Popper had a significant market share if not an absolute monopoly, Popper sold some 5,000,000 units.

EliKal LTD. was created by a Mr Eli Even-Chen in 2005 after Even-Chen served as Head of Logistics and Equipment of the IDF over the years 2002 to 2004.

After several failed attempts, EliKal succeeded in winning the army tender.

EliKal’s body warmers were also sold as High Quality Body Warmers, had the same shape, were coloured yellow and had very similar texts printed on them. Furthermore, EliKal used a similar website with similar content to that of Popper’s companies, to advertise his products.

Popper sued, claiming passing off, unjust enrichment, famous mark infringement and copyright infringement, claiming statutory damages of NIS 100,000 and absolute damages of a similar sum.

In analyzing the two cases, Judge Avraham Yaakov noted that the general issue of to what extent suppliers had rights in markets they were dominant and where fair competition allows others to compete. Essentially the issue was one of where lied the public interest. He went on to point out that one could ask for statutory damages or actual damages, but not both in tandem.

Somewhat confusingly, Yaakov rigorously applied the triple test, and related to the sounds of the two names, as well as to the appearance of the products. Ruling that High Quality Body Warmer was simply a laudatory version of Body Warmer, who rejected the complainants allegations that he had somehow acquired rights in the product name through good will and reputation. However, the bottom line was that the term High Quality Body Warmer was simply a laudatory version of Body Warmer, and the shape of the article was not unique to the complainant, since the product was available from Chinese suppliers as an off-the-shelf product.

Since the IDF knew exactly who they purchased goods from, at least as far as the army was concerned, there was no case of passing off to answer for. Regarding the private market, the complainant stated having some 1,000 regular clients, but did not substantiate this claim, so the charges of passing off were also rejected.

Judge Yaakov went on to rule that despite the close similarity in instructions and warnings printed on the two packages, the Hebrew text was largely dictated by the army mil. spec. and the English language version was largely supplied by the manufacturer. For such products, the scope for creativity in instructions and warnings was limited. Consequently, Popper did not have copyright in the instructions.

Judge Yaakov also accepted the argument that the colour yellow was considered a warm colour and was widely used in packaging for products such as matches, lighter fluid and the like.

Having rejected all claims regarding the product itself, Judge Yaakov then considered the websites and, since the defendants site was clearly based on that of the complainant, with similar text, including some creative uses of the packages such as keeping animals warm in transit, he ruled copyright infringement and awarded NIS 70,000 out of the maximum discretionary NIS 100,000 statutory damages and a further NIS 20,000 in costs.

T.A. 15307-11-09 SPB Equipment et al. vs. Elikal LTD. before Judge Abraham Yaakov, 26 August 2011.

COMMENT

When analyzing the different elements like colour, text, name, etc. individually, one comes to the conclusion that Judge Yaakov is correct. However, we note that following the A.Sh.I.R. ruling by the Supreme Court, it is clear that in lieu of other grounds provided by IP legislation, Israel case-law provides the possibility of seeking redress on grounds of Unjust Enrichment, at least where a product design is copied. What is required is some additional element indicating bad faith. Regular readers will no doubt be aware that I am not a great fan of this doctrine, but it is, nevertheless, good case-law which is supposed to be binding on lower courts.

In this instance, the defendant copied the trade dress, including colour, shape and the name of the product. The copying of the website is further indicative that the defendant was copying Popper’s product.

Although the body warmer is a product made in China, it is not generic in the sense that potatoes or plain tee-shirts are generic. There is a peculiarity in Israel’s outdated design law (Patent and Design Ordinance 1925) which requires absolute local novelty to register a design in Israel. It is therefore possible that the product design could have been registered by Popper.  I therefore wonder if the clear indications of EliKal targeting Popper’s market with an identical product in identical packaging shouldn’t be considered unjust enrichment? Even-Chen’s winning the army tender deserves a second look as well. In principle, as a tax-payer, I am in favour of the army purchasing identical products from the cheapest supplier. Did this happen here? I suspect that Even-Chen had extremely good contacts with the decision makers…

Presumably, once damages are awarded for copyright in this specific case,  the point is moot. Nevertheless, it seems to me that the courts are moving away from A.Sh.I.R. and favour free market competition which I see is a good thing.

This decision does illustrate the importance of distinctive names and packaging schemes to develop a reputation for a product. It also indicates that there is no protection for market share or importer’s rights. None of this should be surprising, but we constantly meet clients who want to patent a device they’ve seen abroad that they want to import into Israel, and descriptive and laudatory names are only too common.

The decision relates to a temporary injunction regarding the identical coloured product that was apparently infringed, and this case was firstly wrongly filed in the Magistrate’s Court.

We note that body warmers have been required by Israel’s generals since time immemorial. See Kings I 1:1-3.

Red Hat is an open-source software company that provides programs for the Linux operating system. The company is the world leader for Open Source and their software product is called Fedora.

The firm has a registered trademark in Israel, number TM 133565-133567 for a logo showing the mystery man, a face under a fedora.

Another firm, called Start Commercial, provides open source software solutions and consulting. They had used a logo including a face under a fedora, which was taken down at Red Hat’s request. Since they had a second logo including a Fedora, Red Hat were not satisfied and filed suit claiming registered trademark infringement and famous mark infringement.

Additionally, Eddy Nig (Nick), a blogger identified with Start Commercial, uses a photo of himself wearing glasses and a fedora.

The judge ruled that there was no likelihood of confusion between First Commercial’s logo and Red Hat’s since Red Hat’s fedora was red with a black ribbon and the other hat was black with a blue ribbon. Furthermore, First Commercial’s mark did not include the face of the mystery man. Instead, the second logo included a couple of arrow heads (chevrons) and a square. As to Eddy Nig wearing a fedora and glasses, this was considered his right.

The case: H.P. 3768-121-10 Red Hat vs. Stuart Commercial LTD et al. (Tel Aviv – Jaffa District Court, before Judge Shoshana Almagor

OUR COMMENTS
This case relates to an important issue as to how similar the logo of a minor service provider / auxiliary service to a major player can be to the major player’s logo, so as to graphically indicate this to the public, without implying that the minor service provider benefits from recognition from the major player and is somehow endorsed. Unfortunately, the honorable judge doesn’t seem to have been aware of this.

She discusses the law regarding identical trademarks, based on court decisions, and then notes that this is irrelevant to the present case. It is not clear why she didn’t delete these irrelevancies.

Apparently the fact that there are only about 600 Red Hat users in the country was considered of more significance in deciding whether their mark is well-known in the open source community than the fact that the defendant acknowledges that Red Hat is the Microsoft of the Open Source movement. One wonders how many Rolls Royce cars are on Israel’s road, and whether that indicates that Rolls Royce is not a well-known mark.

The mark, as registered, is monochrome. There is no colour limitation. Thus the judge’s learned discussion regarding the colours of the two fedoras and their ribbons is a red hat herring.

I would suggest that most software is developed by people and the distinctive element of the trademark is the fedora, not the face thereunder, which is partially concealed anyway. The fact that the name of the complainant is Red Hat and the name of their flagship product is Fedora reinforces this conclusion.

From the description of rectangles and arrow heads in the decision, it is a little difficult to visualize what the competing mark looks like. Since a picture is worth a thousand words, I’ve reproduced the logo above.

In my opinion, the logo is meant to represent a fast forward button with a fedora on top, i.e. a fast track to Fedora.

I can see merit in the argument that this is free-riding on Red Hat’s reputation, but would argue that the firm is simply advertising consulting and programming services for open source products, including Red Hat’s Fedora. This conclusion is, in my opinion, strengthened by the fact that the blog originally included a different logo, a Fedora over a face which was taken down at Red Hat’s request.

The issue that should have been addressed by the court is whether a mark that is a variation on a theme and which intentionally includes similar elements to recall the mark of a major player, but which is not similar to the mark it recalls, but is distinctive therefrom, nevertheless is infringing. I believe the criterion that the court should have addressed in this case, is whether the graphic mark implies authorization from Red Hat, i.e. that is an authorized service provider.

There are three other points of note:

1. This intellectual property dispute concerns open source branding.
2. There is a typo in the court ruling and leading Trademark lawyer Ms. Ellen Shankman is written as Ilan – a male name.
   One of the parties refers to the Fedora as being a Sherlock Holmes hat, which is what Robert Downey Jr. wore when playing the part. However Basil Rathbone and most of the other 100 or so dramatizations of Conan Doyle’s character, have Holmes wearing a deerstalker – although the hat does not appear in any of the original Conan Doyle stories.

All in all, a poor decision. What went wrong?

In one of the more compelling Israel court rulings on an IP issue I’ve seen in a while, Judge Michal Agmon-Gonen dismissed claims by Adidas against Galel Yassin, a West Bank Arab who imported cheap training shoes from China.

Yassin imported trainers for retailing by market traders at NIS 20-30 (about $6-9). The shoes included four parallel diagonal stripes on each side and Adidas claimed that this infringed their famous three-stripe logo.

Judge Agmon-Gonen ruled that there was neither an objective nor a subjective likelihood of confusion. Customers was aware that the shoes were cheap substitutes and not the brand leaders.  The importer clearly marked the shoes with the brand ‘Sydney’ in three places and did not write Adidas or use the three-leaf symbol. 

The importer had tried to negotiate a compromise with Adidas, and had offered to add a line crossing through the four stripes, or to add a big cross on top, either solution to be implemented before release from the docks, but to no avail.

The gist of the ruling is that Agmon-Gonen is not enamoured with recent trends that see brands and trademarks as property themselves, and believes that trademarks should simply be an indication of the supplier or manufacturer of the goods thus marked. With such a narrow interpretation of trademark law, the legal issue is simply one of likelihood of confusion. Whilst prepared to acknowledge that the inspiration of the four stripe mark may well have been Adidas’ product line, there was, nevertheless, no likelihood of confusion. Rather Yassin was providing a cheap alternative for the financially deprived. 

Yassin provided evidence that other shoe manufacturers, notably Skechers, also used a four stripe decoration. Adidas cited previous rulings in their favour, both in Israel and abroad. Agmon-Gonen suggested that Adidas was aggressively throwing its weight against weak competitors, generally unable to suffer the financial strain of defending themselves and saw this as trademark abuse. Freedom of Occupation allows others to import footware and the public interest is for competition. In addition to leading brands, there is a market for unbranded, generic products, and the 4-striped trainer was such a generic alternative for those unable to pay for the brand leaders’ products.  

Whilst accepting the existence of various legal doctrines such as dilution of famous marks, Agmon-Gonen considered these trends an issue of policy, and generally considered the public good and competition of more importance.

Although some Israeli case-law was cited, the 46 page ruling is more notable for referring to both recent and classical journal articles and textbooks, and for quoting the minority opinion in the A.Sh.I.R. case. 

In conclusion, Adidas’ case was dismissed, Yassin is able to continue importing generic, non-branded training shoes and was awarded NIS 85,000 (about $23,600).

T. A. 2177/05 Adidas-Salomon vs Galel Yassin and others. 

COMMENTS
This ruling reminds me of a tweet put out by http://twitter.com/AntiIsraelPorn – a tongue-in-cheek satirical propaganda forum:

Israel refuses to lift the ban on left footed shoes into Gaza. Forces Gazans to walk uncomfortably.
Posted 8:19 PM Dec 28th, 2010 via Twitter for iPhone

Three stripes is a registered trademark of Adidas since 1949 and is well known worldwide.

For a general overview of other litigation on the subject, see http://en.wikipedia.org/wiki/Three_stripes

The ruling appears to be a departure from current trends. Although the job of setting legal policy should best be left to the Supreme Court, I suspect that Judge Agmon-Gonen’s ruling will be upheld if challenged on appeal, and even if not appealed, will be influencial since it makes a compelling case. Indeed, if she continues like this, I suspect she will be promoted to the Supreme Court eventually.

10 February 2011 – An appeal has been filed.

There is also a new decision from Italy that maintains that there is infringement  - see http://www.internationallawoffice.com/newsletters/detail.aspx?g=26e8f27a-005b-4861-949f-d422b1fa7ee9

In a very interesting ruling, Tel Aviv Judge Abraham Yaakov ruled that Israel Customs were wrong for attempting to charge Levi Strauss for the cost of storing and eventually destroying counterfeit jeans confiscated, according to Customs, on behalf of Levi Strauss.

Israel Customs attempted to argue that Section 200a of the Customs Ordinance provides that Customs can impound goods believed to infringe copyright or registered trademarks for three days, but further action requires the rights holder to post a deposit. Customs argued that the deposit was not only to compensate the importer if he were to prevail in court, but also to cover Customs expenses should the importer prove untraceable,  go into bankrupcy or liquidation, or otherwise default.   

The judge’s ruling included the following reasoning:

1. The Customs Authority itself acknowledged that the primary party responsible for paying for destruction of infringing goods is the importer. Since the rights holder has done nothing wrong, why should they have to pay costs?
2. Although Customs claimed that the rights holder is proactive in the legal proceedings, this is not necessarily the case.  Customs can seize and hold goods without the rights holder being an active party.
3. Even if the rights holder informs Customs, about their rights and about an infringing shipment, Customs are obligated to act as a law enforcement agency, not merely as protecting the financial interest of the rights owner.
4. Although Section 53(1) of the TRIPS agreement includes such a provision, the judge ruled that Section 200b of the Israel Customs Ordinance instituted in the wake of TRIPS rejected billing the rights holder for the actions performed by customs and established that the deposit paid by the rights holder to cover the seizure of goods should be refunded in full if the courts rule that the goods indeed infringe.

 The court pointed out that the interpretation of the Customs Authority was equivalent to arguing that the rights holder should serve as a guarantor the infringing importer.

As to the claim by Customs that the only party that benefits from destruction of the infringing goods is the rights holder, the judge succinctly stated that it would have been better had this never been claimed, and went on to rule that it was in the national interest to uphold intellectual property rights and to enforce the criminal law. Indeed, having signed TRIPS, the State had accepted the obligation to enforce IP rights.

In summary, the court ruled that the only reason for posting bond was to prevent frivolous actions and to protect the rights of wrongfully charged importers.

Levis was awarded NIS 100,000 for statutory damages and NIS 10,000 costs from the first defendant who did not attend the hearing, with the second defendant who did show up, having to pay a mere NIS 2500 costs with the goods to be destroyed.  The Customs and VAT Department of the State of Israel was ordered to pay NIS 10,000 in legal fees to Levis.

The Case: T.A. 3261-03/10 Levi Strauss & Co. vs. Algamal, Alnazer Odeh and The State of Israel Customs & VAT Authority 

The import taxes and VAT on the shipment should have been some 2.3 million shequels. 

The importer has bene found guilty of smuggling, false labeling of the container and supplying false information. Due to failure to provide certified records from the trademark department of the Israel Patent Office, the importer was acquitted on charges of trademark infringement.   

 T.P. 1482-06 State of Israel Justice Dept. vs. Wexler, Menachem

Trademark and Branding Seminar a Sell-out

On Sunday 5th September 2010, JMB, Factor & Co. and Ellen Shankman Law Offices cosponsored a trademark seminar with the Association of Israel Boards of Trade. The large conference venue was totally packed, and additional chairs had to be brought in.

Chairperson, Ex-MK, Adv. Uriel Lyn

Chairperson of the Association, Ex Knesset Member Adv. Uriel Lyn welcomed everyone to the event and emphasized the importance of strong international trademark portfolios for business.

 Dr. Dan Herman, CEO of Competitive Advantage Ltd. argued that the choice of name and logo was less important than how it is used for successful branding.

I gave a brief introduction to trademarks, and showed why company and brand names and logos should be registered or one could find oneself losing one’s painstakingly developed identity.

Moty Cory - IP Director, NICE Systems

Moty Cory, the Intellectual Property Director of NICE Systems gave a valuable insight into protecting a challenging mark. It seems that NICE was actually an acronym that was used for branding purposes before the firm realized that the mark is arguably laudatory, is the name of a French town, was used by others and lacks distinctiveness. Nevertheless, Moty demonstrated that even with a less-than-ideal company name, with cooperation between the trademark attorney, (in this case, Adv. Ellen Shankman) an in-house IP manager who was on the ball, and the marketing people, good results were, nevertheless, obtained.

Adv. Ellen Shankman

Adv. Ellen Shankman herself then spoke about new Top Level Domains coming in, and the possibility to register domain names in Hebrew and Chinese. She also spoke about the increasing importance of trademarks and branding on the Internet, and informed us that real world products were being launched in virtual worlds.

Adv. Aharon Factor

Adv. Aharon Factor who manages the trademark department of our firm wound up the proceedings by explaining the advantages and disadvantages of the Madrid Protocol and presented statistics regarding typical user profiles, providing insights of when the Madrid system was appropriate and when its use was not recommended. As usual, Jeremy Ben David, managing partner of JMB, Factor & Co. chaired the event. We toasted the incoming Jewish New Year on boutique wine provided by one of our clients, who also provided a good example of why early registration of trademarks can prevent unnecessary legal headaches when a third party decides to adopt a similar name.

After going up to the US Supreme Court and back, Victoria’s Secret have managed to obtain a 2 to 1 majority in the courts to prevent a shop selling sex goods calling itself Victor’s Little Secret. The US Supreme Court ruled that the standard to be considered was likelihood of dilution, not actual, demonstrated dilution.

We suspect that Victor has made a fortune over the past decade due to the publicity that this case has brought him. Victoria’s Secret, on the other hand, comes over as a Goliath like bully (albeit in her undies).  Like the famous South Butt case, where an unknown student working from a garage has become known nationally, I am not convinced that there was much sense in filing suit in the first place.

We think that a better strategy for the corporate giant is to get a small timer to sue them for infringement, to pay his costs and to milk the publicity for all it’s worth. Romour has it that the naked cowboy vs. M&M case was funded in this manner.

Jerusalem’s Hebrew University has filed a lawsuit against the American automotive giant General Motors over an advertisement containing a likeness of Albert Einstein.

Einstein willed the University his publicity rights, and has been generating royatlies for them since his depth in 1955.

GM ran a four-page ad in People magazine last fall, that included a photo of a shirtless model with Einstein’s face, and a tattoo on his shoulder reading “E=MC2″. On a separate page, the GMC Terrain was featured with the slogan “Ideas can be sexy too”. The ad was created especially for People’s “Sexiest Man Alive” issue.

According to suit filed by Adv. Antoinette Waller on behalf of the university, “the tattooed, shirtless image of Dr. Einstein with his underpants on display is not consummate with and causes injury to [the university's] carefully guarded rights in the image and likeness of the famous scientist, political activist, and humanitarian,”.

Forbes magazine ranked Einstein as the fourth most lucrative famous dead people in 2008, with profits of some $18 million a year.

 The authoress, Ms. Tamar Borenstein, created the well known (in Israel) character “Kofeeko”, a mischevous monkey who appears in children’s books.

Five months ago, “Almost Free Stores”, a supermarket chain started selling a breakfast cereal called Kofeefo, using a monkey with that name.

Ms. Borenstein claimed that the cereal was trading on her copyright and that the supermarket chain was guilty of Unjust Enrichment. The supermarket owners claimed to have purchased the character from Fotolya, a website selling images.

The main decision is pending, but Judge Yehuda Zeft, Deputy President of the Tel Aviv District Court decided that Under section 11 of the 2007 Copyright Act, the authoress had exclusive rights to do what she liked with her character and on balance, the supermarket chain would suffer little loss if they were given a month to use up supplies and has issued a temporary injunction against the supermarket chain.  One of the things that swayed him was that an employee of the supermarket chain apparently gave a receipt for Kofeeko instead of Kofeefo.

Comment

A monkey in Hebrew is Kof.

Kofeef is a pet name for a monkey rather like “doggie” as a pet name for a dig. It is a singularly generic name for a monkey character. Googling Kofeefo in Hebrew produces a wide range of pet monkeys from both the old and new world and miscellaneous marmosets, lemurs, etc.

Kelloggs used a monkey called Jose to sell Cocoa Krispies in the US when the cereal was introduced in 1958, and since 1986 when he replaced (fellow magician) Sooty, Coco the Monkey has been used for the UK branding of the cereal - Coco Pops.

Children’s books often have monkey characters. One of Noddy’s friends in Toy Town is Martha Monkey.

I am not sure that the character Kofeefo is more similar to Kofeeko than to other monkeys of the genre. Unlike the judge, I do not see the fact that the monkey is clothed as being particularly significant.  I think the names are similar, but the name Kofeefo is so similar to monkey that it is fairly generic.

I think the Right Honerable Judge Zeft is wrong in his understanding of Section 11 of the Copyright Law. The copyright in Kofeeko is infringed by copying a substantial portion of the creative work. The image here is not a substantial part of the book. The image of the monkey is not obviously identifiable with Kofeeko. The monkeys are different.

The correct grounds should be trademark infringement. Borenstein has a number of trademarks.   

We await the main trial with interest.

T.A. 8820-01-10 Borenstein Lezer  vs. A.R. Zim Direct Marketing LTD.