Israel Patent Office Rules Costs for ‘Unnecessary’ Design Cancellation Proceeding

costs-awardThere are very few Israel Patent Office rulings or Israel court rulings relating to designs. However, they do occur.

Israel Design No. 53151 to SHL Alubin ltd relates to a profile. It was submitted for registration on 6 September 2012, and issued on 19 December 2013. On 31 December 2015, it was canceled following a Court Order obtained by Silver Hong Kong Israel, who then requested real and actual costs to be awarded.

Silver Hong Kong Israel filed for cancellation on 10 August 2014. SHL Alubin ltd denied all charges. In parallel to the cancellation procedure, a complaint was filed with the Haifa District Court – Civil Matter 21470-03-14 SHL Alubin LTD vs. Exstel LTD.  Before the Israel Patent Office could hear the case, the District Court issued a ruling on 29 December 2015, canceling the mark.

To complete the picture, the design owner SHL Alubin LTD filed a request to hold the court’s ruling, but on 27 January 2015, that request was rejected and the design cancellation was published in the Israel Patent Office journal.

At that stage, a request for costs was filed, for the work done until that time, including filing statements of case, submitting evidence and counter-evidence. To support the request for costs, the Applicant submitted an affidavit from the CEO of Silver Hong Kong Israel ltd., with receipts for official fees and a breakdown of hours per month spent on the project. The breakdown was created for this request for costs, but was not detailed.

Silver Hong Kong Israel ltd. rather oddly claimed to have invoices that they were not submitting for secrecy reasons unless asked to.  On 10 May 2016, Applicant submitted invoices together with a statement from the CEO. The invoices were for consultation from the agent of record for each stage of the proceedings and totaled $35,567.5 (approx. 140,670 Shekels) for 42.5 hours of senior attorney time and 187.5 hours of junior attorney time, and a further 832 Shekels for official fees and 1500 Shekels for incidental expenses, not previously claimed.

Silver Hong Kong Israel ltd. considered the costs appropriate for the stage reached. They claimed that the court filing was forced on them as Alubin threatened to sue them for registered design infringement. However, since Alubin’s claims and designs were indefensible, their behaviour should be sanctioned, and this should be reflected in the costs ruled.

Silver Hong Kong Israel claimed that Alubin had hidden the functional nature of their design when filing the application, and this was what resulted in the design eventually being canceled. Silver Hong Kong Israel further alleged that Alubin hid the court proceedings from them and made it difficult for them to obtain details of the proceedings before the courts.

Alubin countered that the invoices were made out to a different company, VeMetal ltd., and there was no indication of a connection between that company and the plaintiff here.

There are very few Israel Patent Office rulings or Israel court rulings relating to designs. However, they do occur.

Israel Design No. 53151 to SHL Alubin ltd relates to a profile. It was submitted for registration on 6 September 2012, and issued on 19 December 2013. On 31 December 2015, it was canceled following a Court Order obtained by Silver Hong Kong Israel, who then requested real and actual costs to be awarded.

Silver Hong Kong Israel filed for cancellation on 10 August 2014. SHL Alubin ltd denied all charges. In parallel to the cancellation procedure, a complaint was filed with the Haifa District Court – Civil Matter 21470-03-14 SHL Alubin LTD vs. Exstel LTD.  Before the Israel Patent Office could hear the case, the District Court issued a ruling on 29 December 2015, canceling the mark.

To complete the picture, the design owner SHL Alubin LTD filed a request to hold the court’s ruling, but on 27 January 2015, that request was rejected and the design cancellation was published in the Israel Patent Office journal.

At that stage, a request for costs was filed, for the work done until that time, including filing statements of case, submitting evidence and counter-evidence. To support the request for costs, the Applicant submitted an affidavit from the CEO of Silver Hong Kong Israel ltd., with receipts for official fees and a breakdown of hours per month spent on the project. The breakdown was created for this request for costs, but was not detailed.

Silver Hong Kong Israel ltd. rather oddly claimed to have invoices that they were not submitting for secrecy reasons unless asked to.  On 10 May 2016, Applicant submitted invoices together with a statement from the CEO. The invoices were for consultation from the agent of record for each stage of the proceedings and totaled $35,567.5 (approx. 140,670 Shekels) for 42.5 hours of senior attorney time and 187.5 hours of junior attorney time, and a further 832 Shekels for official fees and 1500 Shekels for incidental expenses, not previously claimed.

Silver Hong Kong Israel ltd. considered the costs appropriate for the stage reached. They claimed that the court filing was forced on them as Alubin threatened to sue them for registered design infringement. However, since Alubin’s claims and designs were indefensible, their behaviour should be sanctioned, and this should be reflected in the costs ruled.

Silver Hong Kong Israel claimed that Alubin had hidden the functional nature of their design when filing the application, and this was what resulted in the design eventually being canceled.

Alubin countered that Silver Hong Kong Israel based their case on the District Court case that they were not a party to. Silver Hong Kong Israel were granted access by the judge and this enabled them to file and prosecute the cancellation proceedings with minimal additional work.  Since the case never went to a hearing, this should be reflected in the costs awarded.  The cost request was a random list of hours and persons without details of the work allegedly done on behalf of Silver Hong Kong Israel, and the total amount of hours claimed was grossly inflated.  The invoices were made out in the name of V Metal ltd., not Silver Hong Kong Israel, and there was no link between the invoices and the work done.

Silver Hong Kong Israel countered this by explaining that V Metal ltd. was a sister company with common owners.

Commissioner Asa Kling noted that Section 46 of the Patent & Design Ordinance 1926 provides that:

In any legal proceeding before the Commissioner under this Ordinance, the Commissioner may rule what he considers to be reasonable costs, can decide which party should pay the costs and how they should be paid.

 [MF – there is an Israel Design Law pending legislation, but until it enters into force, design law is covered by this rather archaic ordinance].

The case-law establishes that the losing party should pay real costs. However, the courts can decide if the actual costs were reasonable, proportional and necessarily incurred in fighting the case, in the specific circumstances. The costs must be proportional to the issue being considered, so that the successful litigant recovers his costs but doesn’t punish the loser. See Bagatz 891/05 Tnuva Cooperative for Marketing Israel Produce vs. the Body Authorized to Grant Import Licenses of the Ministry of Trade & industry, 30 June 2005 paragraph 19.  The various considerations have been weighed up in a long list of patent and trademark rulings by the Israel Patent Office, and are appropriate for design litigation as well.

 

To be awarded real and actual costs, the successful litigator must show that the proof, a breakdown of hours and an agreement for compensating counsel.  Once the successful party provides a detailed costs analysis, the onus is on the losing party to pick holes in the costs request. This is stated in Paragraph 225 of the Tnuva ruling:

Once the detailed request for costs is substantiated – the burden of proof switches and the onus is on the loser to show why the costs are exorbitant, based on their being unreasonable, unnecessary and / or disproportional. 

The claim that Silver Hong Kong Israel could have based their case on the District Court filings was a general allegation and was substantiated in any way. Examination of the submissions to the Israel Patent Office dies imply that a significant amount of real work was performed on behalf of Silver Hong Kong Israel.  The case before the Israel Patent Office has a different statement of case, and evidence to support that statement of case. The court proceeding is not a substitute that can be cut & pasted.  Alubin claims that the costs incurred were unnecessary but there are no concrete examples and the company does not back this claim with evidence.

Alubin considers the whole submission was unnecessary since the case was never heard by the Israel Patent Office. Commisioner Kling rejects this position as  something that Silver Hong Kong Israel could not have predicted and the fact that the case before the Israel Patent Office was never ruled on its merits does not render the filing of the case frivolous or unnecessary.

In light of the above analysis, Silver Hong Kong Israel are entitled to real costs. However, Silver Hong Kong Israel did not originally submit details of the actual costs incurred. There is a difference between the identity of the party to the cancellation proceeding and the entity to which invoices were issued and due to the invoices not being submitted in a timely manner, this was not fully explained. This and the fact that the original request for costs was not detailed, can fairly be taken into account in a costs ruling under Regulation 512b of the Civil Regulations 1984, which allows the courts to consider the parties’ behaviour.

 Taking the above into account, costs of 832 Shekels and legal fees of 80,000 Shekels are awarded to Silver Hong Kong Israel , to be paid within 30 days or the sum will be index linked and interest will be incurred.

Costs re cancellation proceeding for Israel Design No. 53151, Ruling by Asa Kling, 3 August 2016.

 

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