Freshly Squeezed

שחוטThis ruling concerns a cancellation request by the originator of a mark against a registered owner who bought the mark with other assets from a company that the originator had sold his business to that had subsequently gone bankrupt.

The grounds for cancellation request were alleged lack of use.

Israel Trademark No. 220623 is for a stylized logo including the phrase “סחוט טרי” transliterated as ‘Schut Tari’ which means freshly squeezed. The mark is owned by Schut Tari 2007 ltd and was registered for nonalcoholic drinks in Class 32.

 

Background

The manager of the Applicant for Cancellation, Mr Ohad Harsonsky set up a factory in the 1990s for producing fruit juices that were marketed under the Schut Tari brand.

orange jewsApproximately in the year 2000, Harsonsky set up the Shut Tari company that continued the activities of the factory. At the beginning of 2005, Harsonsky decided to sell the company and the factory to Pri-fer Natural Marketing and Distribution (2005) ltd. [MF – Pri is Hebrew for fruit. The name is a pun on prefer] which was established by MR Erez Rifkin to make the purchase. Mr Rifkin established Prifer Natural ltd, a company active in the fruit juice industry, in the early 21st Century.

phones-blackberry-orange-phone-fruit-demotivational-posters-1295112418Blackberry on Orange sketch.

After the purchase was concluded, Pri-fer changed their name to ‘Schut Tari Mitz’ Tivi ltd. (Natural Freshly Squeezed Juice ltd), and Schut Tari changed their name to Multi-Pri ltd. The Pri-fer Group started producing freshly squeezed juices and Multi-pri stopped all activities. The Pri-fer Group did not succeed in absorbing all of Schut Tari’s activities, and Pri-fer was late paying the sale price. A business disagreement developed and the Pri-fer Group and Multi-pri agreed to mediation in March 2006. A mediated agreement was given the status of a court ruling by the Ramallah Magistrate’s Court. The mediator was Haim Sodkovitz who represents Eco Alpha, the Applicant for Cancellation.

orange juice squeezerPri-fer and Mr Rifkin were unable to meet the negotiated payment terms that were agreed to in the mediation. Consequently, on 7 March 2007, Harsonsky and Multi-Pri used legal collection means. However, since Rifkin started bankruptcy proceedings and the Pri-fer Group is being disbanded, the bailiffs were unable to collect the debt.

On 30 April 2007, the Court accepted Mr Weizmann Shiri’s offer to buy up the Pri-fer assets. After completing the purchase, Shiri started selling the juices under the name “Schut Tari” (freshly squeezed). However, in 2008, Shiri stopped manufacturing and has not continued since then or performed any activities under the Schut Tari name.

Towards the end of 2007, Harsonsky decided to return to the juice trade and he set up the Eco Alpha Company which is the Applicant for Cancellation. Eco Alpha started marketing to restaurants in 5 liter jerry-cans and subsequently in half liter retail bottles.

On 15 March 2008 the District Court authorized the sale of the Pri-fer Group’s assets including the reputation and the trade name “Schut Tari” – 2939/09 Accountant Berdichev Chen vs. The Official Receiver. On 4 May 2009 the owner of the mark submitted a request to register it and it was registered on 6 December 2010. After it was registered, the registered owner sued the current Requester for Cancellation for unauthorized use of the reputation inherent in the Shut Tari mark.

The District Court Ruling

orange scale.pngIn its ruling of 15 June 2015, (25147-05-12 Schut Tari (20007) ltd vs. Eco Alpha ltd et al.) the District Court accepted the registered owner’s claim of ownership of the mark:

The conclusion that arises from the hearing is that the brand “schut tari” was transferred to the plaintiff who, even prior to registration, was entitled to the protection that is given for unregistered marks that are well-known. Furthermore, from the date of registration, the plaintiff was entitled to sue for infringement of a registered mark.

The District Court established that since the mark had not been in use for a six-year period from registration, the rights were no longer enforceable:

And note, the fact that the plaintiff has not done anything with the mark from when it was registered enables concluding now, six years later, that there is no reason to recognize the validity of the registration and it should be regarded as abandoned. From here, it may be concluded that the registration without reestablishing the brand as a viable ongoing enterprise does not have financial consequences for the plaintiff or even declaratory worth when ruling on this matter today.

The District Court concluded that the name ‘Schut Tari” was indeed transferred from to the registered owner with the ongoing business.

Let us conclude that the plaintiff has established the burden of proof that the “Schut Tari” brand that was sold be Mr Harsonsky as part of the original deal was transferred to him and he was the owner when the first defendant started using the mark. However, the plaintiff’s cessation from using the mark from 2008 did not result in the rights being lost. However, from 2008 onwards one has to look at the time that has passed and whether the reputation reflected by the brand is still there. The Trademark Ordinance provides a timeline and, at this stage, in Mid 2011, thus has not happened.

The District Court concluded that the usage was infringing of the trademark and also constituted “passing off”.

The first defendant used an identical label to that of the plaintiff, on identical goods, which were sold to the same consumer group. In these circumstances, the allegations of apparent infringement are proven, both of the trademark and of the passing off and of taking the property of another under the tort of “Unjust Enrichment”. No one denies that Mr Harsonsky created that Schut tari brand and built up its reputation. However when he sold the business, he sold the brand to Pri-fer, and then from Pri-fer when it was disbanded, to the plaintiff, and this creates a prima facie basis for forbidding Mr Harsonsky from continuing to sell under the Schut Tari brand. However, the fact that at a certain time the plaintiff ceased their activity and no longer manufactured juices does not, in and of itself, enable the first defendant and Mr Harsonsky to return to using the brand that they’ve sold.

The District Court did not determine whether the Applicant for cancellation continued using the mark after declaring that they would not do so in mid 2013.

The Parties Claims

The Requester for Cancellation submitted their evidence in the form of an affidavit from Mr Harsonsky. The mark owner submitted their evidence in the form of an affidavit from Mr Weizmann Shiri, an affidavit of Mr David Shiri and one of Mr Ronen Biton. Mr David Shiri did not attend the hearing on 1 March 2017 and his affidavit was withdrawn. The others were cross-examined at the hearing. Since the parties all concur that the registered owner ceased using the mark in 2008 the only issue to ascertain is whether there are extraordinary grounds that explain this lack of use and justify the mark remaining on the register despite the lack of use.

The Claims of the Requester for Cancellation

Noting that the District Court had established that usage ceased in 2008, and alleging no special circumstances, the Requester for Cancellation believes the mark should be cancelled under Section 41 of the Ordinance.

The Requester for Cancellation notes that they themselves ceased using the mark in 2013 as a sign of good faith to the mark owner.

The Claims of the Mark Owner

The Mark Owner admits to not having used the mark since 2008. However he claims that this lack of use was due to the infringer’s usage. The infringing usage required resources to fight, and afterwards, it required resources to rehabilitate the mark. The mark owner brings the registration and the District Court case as evidence of on-going interest in the mark.

The Ruling
Section 41 of the Trademark Ordinance states:

  1. [a] Without prejudice to the generality of the provision of sections 38 to 40, application for the cancellation of the Registration goods in respect of which a trade mark is registered (hereinafter – goods regarding which the cancellation is requested)may be made by any person interested on the ground that there was no bona fide intention to use the trade markin connection with the goods for which it is registered in connection with the goods regarding which there is a request to cancel the registration and that there has in fact been no bona fide use of the trade mark in connection with those goods in connection with the goods regarding which there is a request to cancel the registration, or that there had not been any such use during the three years preceding the application for cancellation.

[b] The provisions of subsection (a) shall not apply where it is proved that the non-use is due to special circumstances in the trade and not to any intention not to use, or to abandon, the mark in respect of the said goods.  

[c] For the purpose of this section, there shall be deemed not to have been bona fide use of the trade mark in the event of any of the following: (1) use of the trade mark in Israel in advertising only whether in the local press or in foreign newspapers reaching Israel unless there are special circumstances which in the opinion of the Court or the Register justify the non-use of the mark on goods manufactured or sold in Israel. (2) cancellation of an authorisation to use the mark given to a manufacturer in Israel under section 50 unless the authorisation is cancelled following an infringement of conditions or because the person who gave the authorisation intends himself to manufacture the goods for which the mark is to be used or to grant the authorisation to another manufacturer in Israel.

[d] Application for cancellation may be made in the prescribed manner either to the Supreme Court or, at the option of the applicant, may be made in the first instance to the Registrar.

[e] The Registrar may at any stage of the proceedings refer the application to the Supreme Court, or he may, after hearing the parties, determine the question between them subject to appeal to the Supreme Court.

[f] in this section, “use” of a trade mark shall include [1] use of a registered trade mark by its proprietor or by an authorized person under section 50 in a manner that differs from that noted on the register in such a way as not to change the distinct character of the mark as it is registered;

[2] use by an authorized person under section 50 on condition that such use is subject to the control of the proprietor of the mark.

Section 41 of the Ordinance establishes that any mark not in use for three years should be considered cancelled under there are special circumstances that explain the lack of use. The purpose of this is to prevent the register from becoming an obstruction to business, or, in the words of the Supreme Court in 7038/04 Ms El Haute Coutre Ladies’ Fashion 1992 ltd. vs. PAGOTTE BEKLEIDUNGSF ABRIK PAULA GOT TESDIENER – G 11 March 2007:

The purpose of the section is to allow ensuring that the register reflects the business market, and that the registered marks are in use. This is to prevent registration of marks merely because they are not currently owned, without intent or desire to use them or for historical marks that are no longer in use to remain on the register.

The burden of proof for cancelling a mark is on the Applicant for Cancellation. The fact that this is a negative that needs to be proven, i.e. a lack of usage, does not damage this general rule. The Applicant for cancellation has to assume, at least to provide some basic evidence to establish their case, and then the burden of proof passes to the mark owner – see paragraph 7 of the Ms El Haute Couture ruling, and 296/86 Phillip Morris Inc. Ms Moorgate Tobacco p.d. 41 (1) 485.

There are three questions that the Commissioner should address when considering a cancellation request under Section 41 (see Bagatz 302/74 Nicholas Overseas vs. Farminger p.d. 29(1) 676:

The first question is whether or not there was use of the mark during the relevant period. If not, whether there were special circumstances that prevented use of the mark. If there were no special circumstances, the third question is whether in the absence of special circumstances, there is justification for the Commissioner to use his discretion not to cancel the mark.

In this instance, the parties agree that there was no actual use by the registered owner of the mark from 2008. Consequently, to prevent the mark from being canceled, the owner has to prove that there were reasons preventing its use.

In the 13887 Миг (Mig) ruling Migdor ltd. vs. Boris Gail et al. 16 July 2007,  the then Commissioner Dr Meir Noam discussed such special circumstances:

In R.P.C. 125 [1997] Ivermont, cited in Kerly page 285, the standard for justified lack of use of a trademark was established as follows:

  1. One should consider that trademark registration is intended for marks to be used
  2. Typical reasons and problems are not sufficient
  3. We are considering special and abnormal reasons in trade or the market or serious complications, albeit temporary ones, affecting the mark owner’s business
  4. The problems of regulatory approval may be considered as exceptional, but not mere delay in implementation and marketing
  5. Reasons that are under the control of the registered owner are not considered justification.

In Appeal 2209/08 GIGIESSE CONFEZIONI S.p.A vs. Vampoom ltd, 23 March 2010, the Supreme Court ruled that the principal of unauthorized third-party usage of a mark that prevents the mark owner from using the mark may be considered as grounds that justify lack of use. However, the Court left this open in the case before it:

Indeed, the reason claimed by the mark owner, i.e. that John Doe had taken over the mark is a “special trade consideration” if it prevents usage of the mark. It is possible that an unregistered license that is being used widely or a non-licensed usage that empties the mark of its ability to serve as an indication of origin could be considered as being a “special trade consideration”. However, it is not necessary to determine this in the present instance, since in this case, the Commissioner has ruled that it was not proven that it was the defendant’s actions that prevented the Appellant from using the mark.

The Supreme Court went on to rule in Vampoom that the mark owner not suing for infringement could indicate that this was not the true reason.

Even if in light of the wide use of the ZIP mark made be the defendant, arguably the mark is identified with them and not with the Appellant, this recognition is due to the actions of the defendant, which are acts of willful infringement that undermine purpose of the trademark laws.  The result of such recognition by cancelling the mark would be a rubber stamp endorsing the infringement if the infringer could prove that the mark user is no longer using the mark. Rather, ruling that such infringement is indeed an exceptional circumstance that is considered as justification for lack of use will require such third parties to first take the available legal actions to clear the way for such use, which neither damages the property rights of the mark owner or the integrity of the register.

In Chronopost v DHL Express France [2015] R 2425/2013-4, The Fourth Board of Appeal of OHIM, (28.1.2015) a request to cancel a mark for lack of use  was considered, where the lack of use was allegedly due to usage made by the infringer. The lack of use (parallel use) lasted ten years. The European Court of Appeal ruled that one cannot allow the infringer to benefit from his infringement if as a result of it, the mark owner cannot use the mark without being misleading to the public:

“If, under such circumstances, the trade mark proprietor were obliged to use this trade mark itself, in an identical manner to the infringing use, a likelihood of confusion would inevitably arise because the public would no longer be capable of identifying the commercial origin of the goods or services in question and would not be in a position to know whether the services originate from DHL or from Chronopost. Accepting such behaviour on the basis of the argument that the differentiation in terms of commercial origin is supposedly guaranteed by a second trade mark (see the cancellation applicant’s argument that it is always used in conjunction with the trade mark ‘DHL’, which is, moreover, not true – see the Internet extracts mentioned in paragraph 24 above) would render yet more ineffective each protection of a trade mark. A trade mark which can only ‘operate’ with another trade mark is no longer a trade mark and is useless in relation to its function of indicating origin.”

And then…

“Moreover, in such a situation, the proprietor would be indirectly reinforcing the value of its direct competitor’s trade mark, would be creating additional demand for its competitor’s goods or services (especially if it decides to promote this trade mark) and would therefore be indirectly subsidising its own competitor.”

Similar to the Supreme Court ruling in Vampoom above, the European Court of Appeal ruled in re DHL that cancellation of a mark on the grounds of a prior infringement was effectively confiscating a mark from its owners.

Accepting that the Community trade mark should be removed from the Community trade mark register would mean accepting that a trade mark could be systematically infringed until the point of its revocation, and thus de facto expropriated. In reality, the proprietor would thus be forced to choose another trade mark. The fact that a revocation would not affect the damages accrued up to the present changes nothing.”

See also James Mellor, David Llewelyn, Thomas Moody-Stuart, David Keeling, Iona Berkeley in “Kerly’s Law of Trade Marks and Trade Names“,15th ed. (2011), p. 360-361 which distinguishes from grounds originating with the mark owner and external considerations that are beyond their control and which make the lack of use unreasonable. For example, if the mark owner had to deal with cancellation requests over a long period and this prevented him from licensing the mark, the court would recognize these as grounds for lack of use.

“Apart from one period of a month, non-use attacks had been extant against the trade mark for over five years. Throughout that period, negotiations for licensing of the trade mark had been continuing, but the uncertainty created by the existence of the non-use attacks had meant that no licensing agreement could be concluded. It was held these were proper reasons for the non-use.”

The District Court has ruled that infringer made long-lasting and unauthorized use of the “Schut Tari” mark, both prior and subsequent to it being registered, and despite the mark being sold to the registered owner with the breakup of Pri-fer. Despite this, Mr Harsonsky claims that he did not know that he should cease from using the mark:

“The witness, Mr Harsonsky: When? I tell you now before the judge, what I thought that the “enrichment” that you are claiming, that I did not know, I didn’t think and didn’t know that the mark was registered. Ramaz didn’t speak to me about it at all, no one told me I couldn’t use it. The proof is [that when the issue did come up] in 2013 I stopped using the mark.

These statements do not sit with the fact that Harsonsky knew the reputation of his business which was sold with the mark, albeit then unregistered.

As to the usage after 2013, Harsonsky claimed under cross-examination that in 2013, he ceased to use the mark. Harsonsky testified that he did not act to register the mark himself as he saw no value in it in the market in question. However, under cross-examination it transpired that the usage did not stop. The mark owner provided evidence that the mark was used on refrigerators, lorries and in employment adverts. Harsonsky’s answers were inadequate. Harsonsky first claimed that the use was by “Fresh Orange” which markets for the mark owner, however it transpired that “Fresh Orange” was actually owned by Harsonsky’s son and their offices are in the same industrial complex as Harsonsky. Mr Harsonsky also alleged that Fresh Orange mostly dealt with fruit juices but it transpired that they sell juices to restaurants and coffee shops.

Mr Harsonsky himself admitted that it was poor business practice to enter a market using a brand that others were using.

In these circumstances, where the Applicant for Cancellation is using the mark after selling it himself, one cannot accept the request for cancellation. It is not reasonable for the Applicant for Cancellation to benefit from the fruits of his infringement that cancel the rights of the owner. If the Applicant for Cancellation wants to continue using the mark he can purchase it for a mutually acceptable negotiated sum.

The mark owner cannot be required to use a mark that is being infringed whilst he is taking legal steps against the infringer since this would be taking on a business risk whilst the issue is being litigated, particularly where investment is required to develop a market. Consequently, the infringement by the Applicant for Cancellation is sufficient crounds to justify the lack of use.

The Deputy Commissioner Ms Bracha notes that she is aware of Judge Groskopf’s ruling that the mark owner’s rights ceased in about 2011. However the Judge’s ruling related to the unregistered rights from 2008. From registration in 2010, the three-year period of lack of use can only consider the period from 2010 onwards.

Conclusion

The Application for Cancellation is denied. The Applicant for Cancellation will pay 3000 Shekels costs + 30000 Shekels legal fees.

Ruling Re Schut Tari Ms Jaqueline Bracha, 14 March 2017

Comment

It seems to me that Freshly Squeezed is sufficiently laudatory and generic that even in the context of the stylized logo, it is less than satisfactory as an indication of origin and I don’t really see the justification for allowing such a mark to register.  The distinctive colour orange does not to my mind indicate a particular supplier, but rather indicates orange as in the fruit which coincidentally is that hue. The font is somewhat unusual, but is supposed to represent drops of juice and thus is really not all that distinctive as an indication of origin. I think that the various suppliers that have at one time or another sold juice under the label, all of whom purchase oranges from the same groves, should make it like the word Tirosh – a biblical term for Beaujolais that was monopolized for many years by Carmel Mizrachi for their grape-juice, and is now considered a generic term for grape-juice.

Considering when this mark issued, it is tempting to refer to Naboth’s Vineyard (Kings I 21 and Riggs v. Palmer, 22 N.E. 188, 191-93(1889). However, as it would be extremely bad taste, I shall refrain.

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