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:
- 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?
- 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.
- 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.
- 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