Apollo and Polo vs. Krause Direct Marketing LTD.

Summer Holiday  Holiday on the buses

This is a double case concerning alleged infringement of trademarks and counter claims of copyright infringement. The subject matter are backpacks made in China and imported for distribution by Egged, a large Israel Cooperative Bus Company, to children of employees at summer camps ran on behalf of the company. Hence the pictures which relate to perhaps two of the worst British films of the Sixties and Seventies.

The first case concerns a complain by the related companies Apollo ADKS LTD, Promo Polo LTD and Polo Universal LTD which sued Krause Direct Marketing. Apollo et al. claim to own the intellectual property in a backpack manufactured and supplied in 2009 to Egged, a large Israel Cooperative Bus Company. The following year, Krause Direct Marketing provided similar bags complete with the Polo Star registered trademark owned by Apollo et al.

 In the second case Krause Direct Marketing sued Apollo ADKS LTD. Promo Polo LTD and Polo Universal LTD., claiming that in 2010 Apollo et al. used copyright images from Krause’ 2009 catalogue in their 2010 catalogue and website. Since the parties are common, the two cases were ruled on together, despite the issues being different, but the evidence and summaries were kept separate.

Background

Both Apollo and Direct Marketing are private companies that import and distribute a range of goods manufactured by foreign entities, typically in China. The goods are generic items supplied to interested wholesalers who source them, import and sell them on.

Apollo supplies the bags as Polo Star and Direct Marketing supplies the bags as Innopak, Free Style and Green Bag. Until 2010, the two companies had a shared marketing relationship, before the bag related complaint was filed.

Originally, Apollo sued Egged and shareholders of Krause Direct Marketing, but came to a settlement with Egged and dropped the charges against the shareholders.

The history of the bag

In 2009 Egged ordered 8000 bags from Apollo for distribution to children of employees at a private summer day-camp organized by the cooperative. The bags carried both the Polo Star logo and Egged’s logo and Egged ordered some minor changes to the dimensions of the bag, and selected a green colour for the bag. (Presumably the choice of colour reflects the fact that Egged buses are coloured green to indicate their environmental friendliness).

In February 2010, Apollo asked if Egged were interested in a repeat order, but Egged indicated that they were not interested in purchasing an Apollo design. However, in July 2010 it transpired that Egged were distributing bags to their summer campers that had the Polo Star logo, but import tags from Krause Direct Marketing. Apollo claimed that this was infringing their intellectual property.

Krause Direct Marketing accepted that the bags they distributed included the Polo Star logo, but claimed that this was an unintentional mistake that they only realized when Apollo sued them. What had happened was that Egged had requested that they supply them with bags with various changes and improvements such as a lighter coloured fabric with a different texture and wider straps. The bags should have been supplied under the trade-name Innopack, not Polo Star, however the Chinese supplier made a mistake and used the wrong name, and didn’t bring the error to the importer’s attention.

Krause Direct Marketing did a cursory check in Ashdod Port and found that the bags were not marked at all. Due to the tight schedule they simply ordered that large labels be attached. Egged claimed to have also done a cursory check. On receiving a Cease and Desist and a temporary injunction, both Egged and Krause Direct Marketing did a more thorough check of remaining stocks and discovered that some carried the Polo Star logo. In the settlement, Egged agreed to give the bags over to Apollo and to give Apollo the first right of refusal for contracts for up to half a million shekels for the next three years.

Apollo sued Krause Direct Marketing claiming trademark infringement, (unregistered) design infringement and on various other grounds.

Trademark Infringement

Krause Direct Marketing noted that the Polo Star mark had lapsed on 28 May 2010 due to failure to pay renewal fees and was reinstated on 14 July 2010, so was not in force at the time the bags were supplied. Krause Direct Marketing further noted an Israel Trademark Office decision of 24 August 2010 that some marks could not be registered due to the well known Ralph Loren marks for Polo, and so submitted the rather convoluted argument  that if there was a likelihood of confusion it was with Ralph Loren and not Polo Star. Finally, Krause Direct Marketing argued that they had specifically asked the Chinese supplier not to embroider Polo Star’s logo on the bags, and since they were competing with Polo Star and were independently branding a superior product, they had no interest in the Polo Star logo appearing on the bags, so there was no issue of bad faith in Krause Direct Marketing’s behaviour, despite the unfortunate mistake with the branding.

In response, Apollo argued that in civil trademark disputes there is no need to show that the infringer intentionally infringed, and that the act of infringement was enough to create a basis for claiming damages. Furthermore, Krause Direct Marketing had not proven that they did not want to benefit from Polo Star’s mark and certainly had not taken adequate precautions to avoid infringing. Apollo alleged that the storeman of Egged noted that of the remaining 3220 bags, 1270 carried the Polo Star mark, and so apparently around 40% of the order of 8000 bags, i.e. 3400 bags infringed Apollo’s mark.

Unjust Enrichment

Apollo claimed to have designed and developed a unique bag that Krause Direct Marketing were able to supply to Egged at a 15% discount since they did not have the development costs.

Krause Direct Marketing argued that Apollo’s original design was taken from Krause Direct Marketing’s catalogue. Egged ordered changes to that. Apollo thus did not design the original bag, and the bag that Krause Direct Marketing supplied was upgraded and used different fabrics, different colours and incorporated additional changes.

Krause Direct Marketing further argued that they had only lost money on the episode since they had to compensate Egged, had lost future marketing opportunities with Egged to Apollo and bags with Polo Star logo instead of the Innopack logo did damage to Innopack’s market presence.

Passing Off

Since the bags supplied by Krause Direct Marketing bore the Polo Star logo and was a Polo Star design, there was a clear case of passing off, and Apollo claimed statutory damages of NIS 100,000.

Krause Direct Marketing argued that since there was one customer (Egged) who had not wanted Polo Star bags, there was no passing off. The bags included an attached label stating the origin and were of a different design from the Polo Star bags of the previous year, which themselves had only had a limited distribution of 5000 or so, and so had no reputation anyway.

Other claims

For good measure, Apollo claimed that Krause Direct Marketing’s actions were robbery, interference in other’s business, commercial malpractice due to failure to take precautions, trademark dilution, deceiving the consumer, false marketing, and infringing statutory rights.

Krause Direct Marketing denied these, claiming that none of these additional charges were proven.

The ruling

In the ruling on the trademark infringement, Apollo’s claims were thrown out and Apollo was ordered to pay 25000 Shekels compensation to Krause Direct Marketing.

On the second case of copyright infringement, where Krause claimed that Apollo et al. had used images from their catalogue, the judge accepted that there was copyright in the catalogue images and that it was infringed. Apollo was ordered to pay 24,000 Shekels to Krause Direct Marketing and 10,000 Shekels legal fees.

COMMENT

I waded through 35 pages to write up this case. I suspect it should never have made it to court.

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