Back in January, I reported on a decision by Judge Abraham Yaakov of the Tel Aviv District Court, that ruled that the Israel Customs Authority was wrong to charge the rights owner for storage and / or destruction of imports that infringed copyright or trademarks in cases where the costs can’t be recouped from the defendant. See: https://blog.ipfactor.co.il/2011/01/12/levis-successfully-sues-counterfeit-jean-importer-into-israel-judge-slams-israel-customs-for-billing-levis-for-storage-and-disposal-of-the-jeans/
The Israel Supreme Court has now heard an appeal by the Customs Authority concerning a shipment of fake Christian Dior Couture shoes that were imported by a West Bank Arab that abandoned the shipment and proved impossible to collect from.
In accordance with Section 200A of the Customs Ordinance, which was legislated in 1999 to conform Israeli law with TRIPS, the Customs Authorities detained the shipment and notified Christian Dior, who initiated proceedings and provided bank guarantees of NIS 5000.
Dior claimed that the bank guarantees could only be used to compensate defendants in the event that the Court dismissed the charges of copyright or trademark infringement. Customs claimed that the money could be used to cover costs of storage and destruction of the goods.
Judge Abraham Yaakov of the District Court (the same judge who ruled in the Levi’s case) ruled that the shipment was to be destroyed by the importer, which would bear the expenses. The District Court held that the Customs Authorities (i.e. the tax payers) should bear the costs of storing and destroying infringing goods should the importer default.
The Supreme Court reversed this judgement and ruled that the rights owners should bear the cost of storage and destruction of infringing goods where Customs cannot collect from the importer. The Court saw no justification to use public funds to cover the costs of protection of private property. It interpreted Section 200A of the Customs Ordinance, which complies with Section 53(1) of the TRIPS Agreement, as allowing the Customs Authorities to use the bank guarantee for that purpose. The decision was given by Judge Asher Gronis. Judge Elyakim Rubinstein concurred but also recommended that the government consider requesting further guarantees from importers to cover the IP rights owner’s expenses or used other means to facilitate collection such as withholding tax rebates.
The Case: 3960/10 Israel Customs Against Christian Dior Couture and Iyad Habas, before Judges Rubinstein, Arbel and Gronis. June 20, 2011.
Although I enjoyed reading Judge Yaakov’s ruling, I think that the Supreme Court is correct to reverse it.