KANEX – Cancelling a Trademark and Posting a Bond to Cover Costs

KANEX is a trademark owned by Chen Writing Instruments Ltd. It covers “Staplers, paper-punches, staple-pins, lever arc mechanism and all other office requisites (other than furniture) all being articles of stationary included in class 16.

Kanin India (Pvt) Ltd. filed a cancellation proceedings under section 39 of the Trademark Ordinance 1972. Both sides have submitted their evidence but the hearing which is typically the next stage of cancellation proceedings has not yet occurred.

Now both sides have filed interim requests. Kanin India have requested permission to file supplementary evidence, and Chen Writing Instruments have requested that Kanin India post a bond to cover legal costs should Kanin lose the cancellation proceedings.

Filing Additional Evidence

The general course of cancellation proceedings is set out in the 1940 regulations. Kanin India’s request to submit additional evidence at this stage contravenes the general order of things.

The additional evidence includes two Israel court rulings:

  • 2430/98 Kangaroo Industries Regd. vs. Guard Writing Instruments (1995) LTD.  (30 July 2007)
  • 18116/02 Guard Writing Instruments (1995) LTD.  vs. Chen Writing Instruments LTD (11 Sep 2007).
  • Three affidavits from Ehud Berman, manager and owner of Guard Writing Instruments (1995) LTD. that are dated from 1998, 2004 and 2016.
  • Copies of letters from 1998 sent by Kanin India (Pvt) Ltd., which were attached to Mr Berman’s affidavit from 30 July 1998.
  • Copies of additional letters sent by Kanin India (Pvt) Ltd in 1999 that allegedly mention the trademark

The request to submit the additional evidence was supported by an affidavit signed by Adv. Rami Artman, Kanin India (Pvt) Ltd’s legal counsel, testifying that the evidence only reached him after he had made the original submission of evidence, and that he could not have obtained evidence that he was unaware about.

In the name of Kanin India (Pvt) Ltd., Adv Artman argued that the additional evidence is relevant to rights in the marks and due to their importance, their late submission should be allowed. As the hearing had not yet occurred, there was no reason not to allow their inclusion.

Chen Writing Instruments Ltd. argued that Adv Artman’s affidavit was insufficient and that the evidence was irrelevant to the cancellation proceeding. Furthermore, the evidence was known to the applicants of cancellation when the first round fo evidence was submitted, and since they did not present it at that stage, they were estoppled from submitting it at this later time. If this additional evidence is allowed, it will cause additional and significant expense to Chen Writing Instruments Ltd., and thus Chen Writing Instruments Ltd were entitled to compensation for this damage.

DISCUSSION

As a general rule, evidence is preferably submitted in one lot. (See 2813-07 Unipharm vs. Merck & Co Inc. Section 22 (30 January 2013); See also 579/90 Rozin vs. Bin-Nun p.d. 46(3) 738 (1992) section 8, and also Zusman Civil Evidence Procedures 1995 (509-510).

Nevertheless, the case-law provides considerations that justify later submissions of evidence, particularly the relevance of the submission and the importance of allowing substantive justice to occur. See 1297/011 Michaelovich vs. Clal Insurance ltd. p.d. 55 (4) 577 (2001) 579-580; the stage of the proceedings reached; could the party have brought the evidence at an earlier stage; why the evidence submitted earlier (see Rozin section 8), and whether the opposing party can explain away or contradict the further evidence (391/80 Leserson vs. Workers Residences Ltd. p.d. 38(2) 237 (1984) section 3).

In addition to these considerations, the Commissioner of trademarks has wide discretion to deviate from formal requirements and to accept additional evidence since Regulation 41 grants the Commissioner discretion to deviate from the procedures:

Neither side will add evidence in cases before the Commissioner, however the Commissioner may, at any time allow additional evidence to be submitted as he sits fit, and to adjust costs accordingly.

The commissioner may rely on any of the considerations that courts have allowed, but additionally, may rely on regulation 41 because of the public good inherent in the register. See, for example. competing marks 242735 and 24250 Razer (asia Pacific) PTE Ltd vs Razor USA LLC (14 October 2014), and cancellation proceeding 114996 Hosan Marketing (USA) Ltd vs. Nobel Fashion (1981) Ltd (24 April 2006).

It appears from Mr Berman’s affidavit from 1998, that the Application for cancellation is justified as there was inequitable behaviour in the filing of the Application. However, the way in which this evidence was submitted makes it problematic to allow its inclusion.

It appears from Mr Berman’s affidavit that only part of the evidence available was submitted by the Opposers, and no evidence was submitted as to why the rest of the evidence was not also mae available. The papers were filed in one submission without explanation or organization, and without an affidavit explaining the submission. True, the Agent for the Applicant submitted an affidavit explaining that he had only now learned about the evidence. However, the client did not submit an affidavit or statement explaining the significance of the evidence or why it was not submitted earlier. The commissioner is not convinced that he should accept evidence on the basis of the attorney’s submission. One has to allow the mark owner to cross-examine the challenger and the agent of record cannot represent his client if he himself is signed on an affidavit. this seems to contravene section 36 of the Rules of Ethics for Attorneys 1968 which allow the attorney to testify to technical procedural issues but not to substantive matters. See the request to cancel 187385 aned 187386 Gemological Institute of America and opposition to 200701 and 200702 Gemology Headquarters International (28 May 2012).

Although the commissioner has great flexibility and discretion to allow additional evidence to be submitted, he can also use this discretion to ignore evidence under Section 80 of the Regulations. In this instance, there is no apparent justification to allow late submission of evidence and the Applicant hasn’t even made a case to justify where such late submission should be allowed.

There is something in the trademark owner’s complaint that the additional evidence is being submitted late in the proceedings without due justification.

When weighing up the integrity fo the register against the additional work required to take into account mountains of evidence submitted without proper labeling in an appropriate manner and at an innappropriate stage, the Commissioner ruled that the District Court ruling and the Affidavits of Mr Berman may be submitted together with their appendices within 30 days. The additional material that was not submitted with an affidavit may not be submitted as the trademark owner cannot cross-examine on them.

The Request to Place a Bond for Costs

The mark holder has asked for the Applicant for cancellation to post a bond of not less than 100,000 Shekels to cover legal costs, expenses and damages should the cancellation action be rejected.  The Request is based on section 353a of the Company Law 1999 and section 519 of the Civil Law procedures 1984. Furthermore, the mark owner has requested that the proceedings be stayed until such a bond is posted.

The mark holder considers the request justified since the Applicant for cancellation is a foreign limited liability company (an Indian company) without assets in Israel. Furthermore, the Applicant has not filed any evidence of their financial state. The trademark owner contends that the Applicant is acting in bad faith, is making the proceeding unneccessary complicated by submitting late evidence with a low chance of prevailing, requiring them to post a bond is justified.

To support the request for a bond, an Affidavit from Mr Isaac Neiman, the CEO of the mark holder was submitted together with the request.

The Applicant for cancellation claims that the mark owner’s request to stay proceedings is simply  a ploy to allow them to continue using the mark whilst preventing the Applicant from importing products into Israel.

The Applicant considers the likelihood of the cancellation request being allowed as reasonable, and considers the size of the bond requested to be disproportionate and inappropriate for an Indian company.

Section 353a states:

If an Israeli or foreign limited company files a legal proceeding in an Israel Court, the court is allowed, at defendant’s request, to require the applicant to post a bond to cover legal expenses in the event of the action being dismissed, and can stay proceedings until such a bond is deposited, unless the court is convinced that the Applicant has the resources to pay its bills.

The parties do not disagree that the commissioner can request such a bond deposited. Such bonds have been placed from time to time, see Israel Trademark No. 242256 East and West Stores Ltd. vs. East and West Importers Ltd. (27 August 2012); The Mooi cases Densher vs. Mewah Brands  and Oui Gruppe GmbH & Co. vs. Mis El High Fashion (1992) Ltd. The guidelines for such cases are given in Appeal 10376/07 LN computerized engineering vs. Bank HaPoalim (2009) paragraph 13:

From that stated above, the court reviewing a request for bail to be posted by a plaintiff who is a company to ensure that costs are covered, should first of all consider the financial status of the applicant. This is the first clause in the law, but this does not stop here. If the court is not satisfied that the plaintiff can pay his fees should the defendant prevail, the court should consider whether placing bail is appropriate or not. This stage requires considering the legal rights of  the parties and the status of the parties. The general situation is that a bond is required, and a decision not to require one is an exception to the general state of affairs.

See Appeal 10905/07 Naot Oasis Hotels ltd/ et al. vs. Zisser (13 July 2007, 23 May 2011).

Furthermore, in LN Engineering it was ruled that one does not consider the likelihood of prevailing unless the case is very clear-cut.

In other words – if, for example, the chances of prevailing are high, it may be appropriate not to request a bond but there are two points: (a) the proof is on the plaintiff to show that their case is very good, and (b) it is generally inappropriate to enter a protracted analysis of the chances of prevailing and these should only be considered if they are very good or very poor.

Since the general position is that bonds should be required and the Applicant is a foreign limited company without Israeli assets, the Applicant has failed to to provide justification for NOT requiring them to post a bond. No evidence was submitted about the companies’ finances.

As to the specifics of the case, the onus is on the applicant to show that he should NOT place a bond, and in this instance, one notes that the Applicant made the strange move of late submission of evidence, and was also responsible for various delays and extensions at various stages. Nevertheless, at this stage, it does not seem appropriate to look into the merits of the case. In conclusion, the Applicant has not persuasively argued that they should not post bail.

In LN Engineering, it was ruled that bail should be proportionate to expected costs if the Applicant loses:

Once the second inquiry is concluded with a conclusion that the Applicant should indeed post bail, the third inquiry commences, to ascertain the appropriate bond that is proportionate and balances the various interests. Paragraph 13 here.

The mark holder has asked for a bond to be set at 100,000 Shekels, and notes that actual costs so far have been 50,000 Shekels, but one has to note the large additional submission of evidence that has now been made.

Consequently, the Applicant has to deposit a personal promissory note for the full amount requested within 30 days for the case to move forwards.

CONCLUSION

The District Court ruling and its appendices may be submitted. Mr Berman’s statement and its appendices may be submitted, but no further evidence will be allowed.

The Applicant will personally guarantee payment of costs of  100,000 Shekels should the cancellation proceedings prevail, and in consequence of this late submission, the applicant will pay 8000 Shekels legal fees within 30 days.

Interim Ruling by Asa Kling re cancellation of 130585 (KANEX), 28 September 2016.

COMMENT

This is a cancellation proceeding. There is nothing to stop the Applicant from filing a second cancellation proceeding immediately on this one being rejected.  No trademark is ever inviolate. It is therefore appropriate to review all the evidence available and to rule on substance not on formalities. It therefore seems clear that evidence should be allowed to be submitted at any stage. However, if the stage is not the correct one, costs should be awarded against the late submitter. Similarly, evidence submitted without a proper affidavit or in a format not acceptable, should be objected to, giving the submitter an opportunity to correct the defects, and awarding costs to the opposing party.

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