Hsin Lung Accessories Co. Ltd., a Taiwanese company has developed and patented or registered designs for collapsible aluminium scooters that are distinguished by having two back micro-wheels and one front wheel, and that they incorporate a split base with a propulsion mechanism such that by alternatively shifting weight from one foot to another and twisting the body, it is possible to drive the scooter forwards. The scooter is sold in Israel as “Streeter” and worldwide as “Fliker”. It is patented in the US, Germany and China.
The US Patent Number US 7,073,805 titled “User-propelled riding toys and methods”, has the following abstract:
This invention is a user-propelled riding toy. A platform on which a user stands is supported by a steering mechanism that transfers a directional force from the platform; and a geartrain mounts to the wheels. The geartrain is adapted to receive a downward force from the platform, and translate a portion of the downward force into a rotational force on the wheels. The geartrain also provides an upward return force acting on the platform, and translates a directional force into a lateral force acting on the wheels. The platform is propelled forward direction by the rotational force on the wheels. Lateral forces cause two sets of wheels to pivot in opposite directions, and thereby directionally steer the platform.
The importer also claims copyright on the packaging, having a unique design on the box.
When other traders started selling similar scooters in Israel, Hsin Lung and their local distributor, both represented by Saar Plinner, sued the importers, distributors and customs.
The problem was that the design was never registered as a patent or an industrial design in Israel.
Unperturbed, Hsin Lung Accessories Co. Ltd. and the importer sued for passing off, unjust enrichment and copyright infringement; it being noted that in Israel, copyright does not require registration.
The defendants claimed that the generic scooter manufacturers in China that manufactured the goods suggested the brand name “Mover”, and gave various packaging options, including a picture of the goods within, in attractive colours. What is clear, however, is that apart from the name being different, printed in a different colour and appended to a different position, the two scooters are identical.
The complainants asserted that the issue is not parallel importing of similar goods, but rather importing of fake goods, and that they had developed a market by heavy investment in marketing. They alleged that the choice of identical colours was intentional, and that the suffix “er” on the names “Streeter” and “Mover” was designed to confuse.
The defendants claimed to be acting properly, in that the complainants had not registered their design or patent in Israel, the names were different and copyright on designs does not extend to goods that could have been registered.
Judge Rafi Carmel of the Tel Aviv District Court noted that copyright was not infringed and that the scooters were sold under a different name that appeared clearly, in different colours three times on the article in question. The free-riding charges, that the defendants were fulfilling a demand created by the advertising of the plaintiffs was also dismissed since free-riding is not a tort in Israel.
Ruling that the plaintiffs had not proved that unjust enrichment rights in the scooter accrued to the plaintiffs, he rejected the Unjust Enrichment charges. All charges were dismissed and the plaintiffs were required to pay legal fees of NIS 20,000.
In this case, although the design is a clear copy, albeit with a different name, there is no case of passing off and no trademark infringement. I would argue that by failing to register their patent in Israel, the plaintiffs were conscientiously opening the door to third parties marketing competing goods here. They had the opportunity to file for protection and failed to do so. Consequently, they have no case and the judge is correct.
However, since the Supreme Court ruling in the (in)famous 5768/94 A.Sh.I.R. case
in certain cases it is possible to obtain compensation under the doctrine of Unjust Enrichment, even where complainants have not registered designs and patents locally, where there is an additional element of bad faith.
I am not a great fan of A.Sh.I.R. since I like clear-cut law. Like most patent attorneys, I would encourage exporters to Israel to register their inventions as patents and to register their designs thereby creating clear in rem rights in Israel.
Nevertheless, A.Sh.I.R. remains good case-law and is supposed to create a binding precedent that the Tel Aviv District Court should follow where applicable.
In this case, the plaintiff has a US patent which indicates that they are the inventors, and the Taiwanese manufacturers are selling identical models as a generic article. In such a situation, I think that the A.Sh.I.R. ruling could be applied.
The A.Sh.I.R. decision was a triumph for Former Chief Justice Barak. It indicated that registering designs and patents was not necessary to prevent other manufacturers and distributors producing similar goods. If there was evidence of bad faith, wilful copying, etc., then one was entitled to injunctions and compensation despite failing to register ones goods. Barak was into doing ‘justice’ rather than formalistically applying the law. There is evidence that the current Supreme Court is more formalistic, and I see that as a good thing. However, unless this case is appealed we’ll not know if A.Sh.I.R. is still good case-law or not. Therefore, it would be useful if the complainants appeal this decision to the Supreme Court.
The case: T.A. 1126-07-10 Hsin Lung Accessories Co. Ltd and Shed On It LTD. vs. B.S. Toys and Brands and others.