Nespresso Parody – Supreme Court Rules on Trademark Infringement

This is the second of a series of articles regarding advertisements by Espresso Club that parody advertisements by Nespresso that feature George Clooney as a presenter. The Appellant, Nespresso, claims that their trademark rights were infringed in a number of ways.

The Name on the Shop

Nespresso shopFirstly, the graphic trademark Espresso is confusingly similar to Nespresso. The normative basis for this claim is found in Section 1 of the Trademark Ordinance 1972 which defines “infringement” as usage by one not authorized to …with a registered mark, for publicizing goods of the type that the mark was registered for“. No one disputes that the Nespresso mark is registered in Israel and that the advertisements at the root of this dispute are for similar goods, such as coffee machines. The problem with the Appellant’s case is that infringement is defined as “use” The word [N]espresso does not appear clearly in the advertisements. The Appellant intended a couple of words that were pixilated and blurred in the advertisements.

blurred shopThe Appellant argues that the infringement does not require using the same word, but merely one that is confusingly similar. They add that the mere blurring of the word is insufficient to create a differentiation between the registered mark and the blurred sign, but that the blurring actually raises the likelihood of consumer confusion regarding the design. However, careful examination of the advertisement – both on first examination and on subsequent viewing, leads to a different conclusion. One of the two words that the Appellant considers held by the Clooney look alike is so totally blurred that no amount of effort enables it to be read, and no stylization is noticeable. One therefore cannot say that usage was made of the Nespresso trademark, or that a mark that was confusingly similar to that of the Appellants was used.

blurred signThe second word that appears in the advertisements is the name on the shop sign, and this is also very blurred, and it is very difficult to see the word Espresso, apart from the letter O and the number of letters in the word. However, even if the word was readable, it is Espresso and not Nespresso; the word Espresso itself does not infringe Nespresso, unless the stylization is considered. From a graphic perspective, One can see two graphical elements of the blurred out name: (1) it is written in white on a dark background and (2) the first letter is twice the height of the other letters. White on black is not sufficient to be considered infringing to the extent that the two marks are confusingly similar, so long as other elements such as font, similar letters and so on. It is interesting to note that the registered Nespresso logo is actually dark on light and not light on dark background. This further strengthens the conclusion that there is no infringement. As to the first letter being twice the height of the others, the stylization of the two marks is different. The registered Nespresso mark has all the letters the same size, except for the N slightly extending above and below the other letters, whereas in the advertisement, the first letter is much larger. Thus the argument that the marks are confusingly similar is rejected. It is noted that the appropriate test concerns the marks as a whole. The mark in the advert does not seem like the Nespresso mark. Someone knowing the Nespresso adverts well and being familiar with the parody might realize that the producer is intending the word Espresso, but this is not enough to conclude that the advert uses the registered trademark.

The Coffee Machine

Burger KingTo reach a ruling regarding the machine, it is noted, that were the Respondent to use the Nespresso stylized mark on their machine, it is not clear that that would be infringement either. We would have to analyze the usage based on the McDonald ruling. In that instance, Burger King, a competing fast food chain screened an advertisement in which the basketball player Ariel McDonald was forbidden from entering a Burger King outlet whilst wearing a tee-shirt with the his name McDonald on it, and had to change his shirt to one saying Burger King. This Court, in a ruling by Judges Rivlin and Guvran ruled that this did infringe McDonald’s mark. However, Judge Naor dissented and ruled that the trademark laws were not intended to prevent uses of this type.

The McDonald dispute revolved around the suspicion of misleading the consumer under trademark law. In an advertising battle of the nature of both that instance and the present case, the use of the other’s trademark does not involve a suspicion of anyone being misled. The advertisement simply intended to differentiate between the marks and to emphasize the differences. The advertiser considers that this difference acquires some advantage over the competitor. Judge Naor considered that the prohibition to use the trademark in advertising was designed to prevent consumers being misled, such as by a misleading indication that goods advertised are connected to the trademarked brand. Since there is no such suspicion of misleading, the mere appearance of the trademark in the advertisement is not a trademark infringement. However, the majority opinion was that using a trademark to insult its owners is a infringing use, even if there is no likelihood of confusion, so long as the ‘insult’ does not relate to factual statistics regarding the competing business (pages 335-336 there). The ruling shows the disagreement as differing understandings of trademark law – protecting the property rights of the mark holder, or protecting the consumer from being mislead. Appeal 5066/10 Shlomo Angel Ltd. vs. Y and A Berman Ltd. paragraphs 37—38, 30 May 2013. A different perspective is found in the literature which discusses the appropriate protection for a trademark’s reputation. The majority tool the position that protecting a brand’s reputation encourages branding. However, the minority view does not believe in supporting branding activities per se. (See Following Appeal 8432/02 Eloniel Ltd. vs.McDonald, Mishpatim 435, by Zachrov).

The McDonald ruling was given in 2004. Since then the Israel Supreme Court has heard a number of voices supporting the dissenting view of Judge Miriam Naor, or leaving in suspense – implicitly or explicitly, the intention of the law. See Appeal 3559/02 Toto Zahav Subscriber’s Club vs. The Authority for Regulating Sport Gambling, p.d. 59(1) 873, 2004 (Judge Beinish), re Angel paragraph 37 (Judge Amit), Appeal 7629/12 Swissa vs. TOMMY HILFIGER LICENSING LLC, paragraph 32, 16 November 2014 (Judge Barak Erez), Civil Complaint 1248/15 Fisher Price Inc vs. Dweran Import Export Ltd., 78080, 31 August 2017 (Judge Rubinstein). The McDonald ruling is also discussed in the literature, see Zuchrov and also Leah Tzon Greenwald “Trademarks and Free-speech”, IP Law, International Issues, ed. Miriam Markowitch Biton and Lior Zemer, 2015.

Judge Hendel allows himself to join the dissenters. In his opinion, the minority view supports the correct literal explanation of the term “publicity”, and is logical when considering the purpose of trademarks. In this instance, were the trademark of the Appellant to appear in the advertisement, it would be necessary to differentiate between McDonald and McEnroe, as with McDonald today. However since neither the trademark nor any similar mark was used, the current case is different from McDonald where the mark was used, this is sufficient for present purposes. This issue will be revisited below, in a section considering dilution.

The second claim regarding trademark infringement deals with the arrangement and styling of the Appellant’s stores. The trade-dress of the stores is not registered in the Israel Trademark Register, but the Appellant considers that this is a “well-known mark”. The Trademark Ordinance does provide protection for well-known marks, even when not registered, however the protection for non-registered marks is narrow. A well-known mark is defined in Section 1 of the Ordinance as follows:

“Well known trademark” – means a mark that is well known in Israel as a mark whose proprietor is a citizen of a Member State, a permanent resident thereof or who has an active industrial business enterprise, and even if the mark is not a trademark registered in Israel, or is not used in Israel; in relation to determination of a trademark as a well known trademark in Israel, there shall be taken into account inter alia the extent to which it is recognized as a result of the marketing endeavors;

The infringement of well-known but non-registered marks is also defined in Section 1 of the Ordinance as follows:

[Infringement of](3) of a well known trademark even if it is not a registered trademark, or a mark so resembling it that it could be misleading in relation to goods in respect of which the mark is recognized or in respect of goods of the same description;

Section 46a(a) of the Ordinance adds that the sole right to use a well-known but non-registered mark is:

(a) Subject to any condition or limitation entered in the register, the valid registration of a person as proprietor of a trademark shall give him the right to the exclusive use of such trademark upon, and in every matter relating to, the goods in respect of which it is registered.  

These sections support the normative basis for the Appellant who claims that the décor of their stores is a well-known, though unregistered trademark. The District Court rejected this claim on a factual basis, and ruled that the Appellant had not provided evidence that the store-layout was well-known and served as a trademark. No factual evidence was presented to the Supreme Court either. The Appellant supports their claim by a statement attributed to the defendant, however such a statement, regardless how backed up in evidence, is not sufficient to establish that a mark is indeed well-known. Even if we accept such a statement as indicative that there is some reputation in a mark, this is far from establishing that a mark is well-known as understood under the Law. This is sufficient to dismiss the Appellant’s claims. However, since the Appellant’s claims raise various issues that have not been formally ruled in Israel, two issues raised will be discussed.

The first point is the status of a well-known but unregistered mark appearing in an advertisement in such a way that there is no likelihood of the consumer being mislead as to the origin of goods. One can argue that the Law does not forbid such uses since the law differentiates between registered and non-registered marks. With regards to well-known marks that ARE registered, the Ordinance defines infringement without reference to misleading. However, with regards to such marks that are NOT registered, the usage apparently has to be misleading for it to be considered infringement. On the basis of this difference and using other indications of correct interpretation, the case-law establishes that well-known marks can be infringed even if there is no likelihood of confusion.

See Civil Action 9191/03 V&S Vin Spirit Aktieobolag vs. Absolut Shoes Ltd. p.d. 58 (6) (2004), and Appeal 563/11 Adidas Salomon A.G. vs. Yassin, 27 August 2012,  Re Tommy Helfinger paragraph 31, Iris Soroker “Studies in the Design of Modern Trademarks”, Shlomo Levin Book, 2013. In contradistinction, where the well-known mark is NOT registered, infringement is defined as usage of the mark, or of a confusingly similar mark. From this it transpires that the owner of a well-known trademark, that does not register it, pays a price for failing to do so.  The Law protects a registered trademark more than an unregistered one. The incentive to register trademarks helps to provide the legal certainty that is necessary in commerce. One of the differences between the different protections is the dependency of a likelihood of being mislead. Due to this distinction that is explicit in the Law, it appears that the legislator wished to grant wide protection does not depend on the likelihood of confusion only for well-known marks that are registered, and not for well known but not registered marks. It is noted that well known but non-registered marks are less protected than ordinary marks that are registered, as considered in the Mc.Donald ruling, this is also reflected in the legal sanctions available for the various marks. See Section 59 of the Ordinance.

The second point that the Appellant’s allegations raised related to the type of trademark under discussion – the trade dress of a shop. The definition of a trademark is “a mark that serves or is intended to serve the manufacturer or trader of a good.”Marks include letters numbers words, characters or other symbols and combinations thereof, in two or three dimensions” (Section 1 of the Ordinance). A shop décor is neither a letter, a number, or a word and is not an “character”. Can it be considered as “other symbols”? Alternatively, is the list non-exclusive? The general approach in trademark law is not ‘what?’, but rather ‘is?’ – Is the mark something having unique characteristics that can help the consumer differentiate between different suppliers (Soroker pages 528-9). So, for example, in the US and Europe the question of whether fragrances and tastes are registerable as trademarks has been considered.

mgm parodyOn one hand, the difficulties of such marks is recognized, where one of the central difficulties is the poor ability of consumers to differentiate products from different suppliers by taste or smell. See (In case C-273/00, Ralf Sieckmann v. Deutsches Patent-und Markenamt [2002] ECR I-11737; Soroker 541-540.). On the other hand, despite the difficulties, the possibility HAS been recognized, and smells have been registered after they have been demonstrated as being able to differentiate between suppliers. For example, a fruity smell has been registered for various fuels and the scent of mowed grass has been registered as a trademark for tennis balls. MGM successfully registered their famous lion’s roar (MGM (Metro Goldwyn Mayer) (In re N.V. Organon, 79 U.S.P.Q.2d 1639 (T.T.A.B. 2006)). In Europe, the décor of a shop has been registered with reference to Apple Stores. Apple (In Case C‑421/13, Apple Inc. v. Deutsches Patent- und Markenamt [2014] BusLR 962). This last example shows another example of the considerations. The word apple has no inherent distinguishing features, and is in the public domain and cannot be completely monopolized. The strength of the mark is the arbitrary connection between the word apple together with image of an apple with a bite taken out, and its association with technology over the years. This expresses the scope of prohibition of the mark, which is not in all uses and all situations, but only where it has acquired distinctiveness. (see re Adidas paragraph 9).

To understand the background of the comparatively wide recognition and interpretation of trademark law for different kinds of marks, we should return and consider their main purpose is to distinguish between different suppliers, and to enable a supplier to mark his goods in a way that distinguishes them from those of competitors. The protection of the law is required for all sensible characteristics since smell, taste sound or design, can, in the mind of the consumer, create a connection to a specific supplier. Without a prohibition to use the mark, one could use it even in a manner that could confuse consumers to obtain sales at the expense of the mark owner whose goods the consumer intended purchasing. However, there are other relevant considerations in allowing a particular sign to become a trademark requiring registration, beyond the danger of being mislead. Thus the European court refused to allow a cock-crow from being registered as a trademark, inter alia because of the technical difficulty in managing such registrations effectively, such that one wishing to check the register can reasonably ensure that he does not use a mark confusingly similar to those registered. (Shield Mark BV v. Joost Kist (Case C-283/01) [2003] E.T.M.R 3).

toffiffeeTo complete the picture, it may be said that even if until now we’ve only discussed the theoretical possibility to register the unique décor of a shop that has acquired a reputation and serves as a trademark. This question, which requires discussion and clarification, is about the boundaries of such a mark. The main problem in this regard is that it lies at the border between trademark law and other laws, such as copyright, patents and design law. A design can be aesthetic, functional or artistic. As such, it is likely to fall under other laws that may allow it to be copied because of the public good. A prominent example of this was concerned with whether a chocolate shape (Toffiffee) could be a trademark (Appeal 11487/03 August Storkc KG vs. Alfa Intuit Food Products ltd, p.d. 62 (4)1, 23 March 2008).  In that instance the possibility of a product shape that has acquired distinctiveness through years of use, can serve as a trademark, but only subject to the balances inherent in other laws. It can be registered as a trademark only if it does not serve a real functional or aesthetic purpose, but only serves to differentiate the product from other products (see paragraph 30 there). So the possibility of registering a design as a trademark is dependent on other restrictions. However, in this instance we are not required to discuss this.

The Clooney Double

clooney vs clooneyA third claim that was raised by the Appellants with regard to the trademark infringement is that the respondent took advantage of the reputation of Nespresso™ by using a double of George Clooney. The respondent does not dispute that the image of Clooney was an integral part of the Nespresso™ associative image and was part of the Appellant’s reputation. However trademark laws deal with trademarks and not with connections, associations or reputations that are not crystallized as trademarks. The definition of “infringement” in all its varieties is less than “usage of a trademark by someone unauthorized”. This claim by the Appellant is not in accordance with the purposes of the law and it damages both the purpose of the Law and other important interests such as freedom of expression and freedom of employment. However there is no need to discuss these issues at length here. It is sufficient to simply reject the Appellant’s claim and to discuss more fully under Unjust Enrichment by use of reputation, and that reputation is not a trademark.

In summary of this section, the Appellant has not proven that the Opposer has used their well-known or their registered trademark and the three counts of trademark infringement are rejected. The District Court ruling regarding trademarks is upheld.

Dilution of Trademark

dilution-coffeeA further cause for complaint raised by the Appellant was ‘damage to their reputation and dilution of reputation”. As we will see hereinbelow, the claim of dilution is not a free-standing claim. It is a further (fourth) ground of trademark infringement. That as may be, the Appellant claims that the Clooney double plays on their reputation since someone seeing the Clooney will now recall the defendant’s product. It is also claimed that the use of a double mocks the Appellant’s trademark, weakens it and damages its value. The District Court rejected this claim, basically since the claim was not substantiated. Judge Hendel agrees with this result, but does not consider it necessary to look into whether the Appellant’s value was potentially damaged and clarifies below.

starbucks.pngThe concept of dilution is established in Appeal 6181/96 Cardi vs. Bacardi & Company Ltd., p.d. 52(3) 276 (1998). In that instance, Bacardi, the international spirits company, opposed the registration of the trademark BAKARDI for clothing. The interesting thing about that case was that Bacardi was only registered for spirits, and also was not used as a trademark for anything else, so there was no grounds to prevent the mark being registered under Section 11(9) of the Ordinance which generally prevents confusingly similar marks being registered: “There marks are not registerable…a mark that is identical to that owned by another and is registered for the same goods or for goods of the same type”. Nevertheless, the Commissioner refused to allow the BAKARDI mark to be registered for other reasons as explained below. The Supreme Court upheld his Appeal. The Court accepted the modern trend for wide protection for marks having international reputations, which is referred to as dilution of the trademark, and was adopted by both the United States and the United Kingdom (see page 281 there). The ruling by Judge Engelhard was endorsed by Judges Levin and Strasbourg-Cohen and stated that dilution was intended to prevent use of a mark ‘without borders’, even where there is no likelihood of consumers being misled, such as for goods that are very different from those traded under the mark.

The justification for forbidding usage of a trademark even where there is no likelihood of confusion is based in three reasons (re Bacardi pages 282 to 284):

  1. Use of the trademark enables one to “harvest fruit that one has not toiled for”
  2. Use of the mark includes a possible damage to the legal owners of the mark, due to erosion and dilution of the mark.
  3. Use of the mark creates an unreasonable state of affairs wherein the original owners could be prevented from using their well-known mark due to a local manufacturer having acquired rights by registering a well-known mark.

The Bacardi ruling carved out a new channel from earlier rulings, since it innovatively concluded that it was correct to protect a famous mark from dilution, and this is not part of the Ordinance and this type of legislation is for the legislative (the Knesset) and not for the court.(see Civil Action 352/69 Manhattan vs. HaMagfer Ltd., p.d. 23(2) (1969). In re Bacardi, the court considered that the old law was worthy of reconsideration due to the developments in Israeli and foreign rulings over the previous 30 years. Together with this, it was decided that the doctrine of dilution could be anchored in Section 11(6) of the Ordinance which states that “Marks that create unfair competition” could not be registered.

A year and a half after the Bacardi ruling, the Trademark Ordinance was amended to include sections relating to well-known marks, as discussed above. The background of this amendment and its connection to well-known marks was recently discussed by Judge Kara in Appeal 9839/17 Habitat vs. Cagom, paragraphs 1315, from December 2018.

In the framework of the amendment, protection of well-known marks registered in Israel was added, which is somewhat similar to the doctrine of dilution. In particular, the two arrangements are intended to protect the owners of strong trademarks from usage without permission, even when the use of the mark is on goods that are not marked with the trademark and there is no issue of consumer confusion, to prevent economic damage to the mark owners (Michael Cohen “The Rise and Fall of the regeneration of the Proposed Codification for the Doctrine of Dilution for Israeli Brands” Mishpatim 47. (2018)). The similarity between the two arrangements raises the question if the legislative protection of well-known marks has replaced the doctrine of dilution found in previous case-law or whether these are two different arrangements that need to be separately considered. In recent years, after the amendment to the Ordinance the literature suggests viewing the amendment as adoption of the doctrine of dilution, Manhattan to the Dawn of a New Millennium!, 12 Fordham Intell. Prop. Media & Ent. L.J. 991, 1031 (2002), Ofer Tur-Sinai “Intellectual Property Law, marching into the New Millenium  (Currends and Novellae in the Israel Law, Kiryat HaMishpat 177, 278-282. Nevertheless, the case-law from this period considers dilution and infringement of well-known marks as separate grounds for infringement, see Re Absolut pages 878-888, Appeal Unilever PLC vs. Segev, 23 August 2005, Civil Case 10959/05 Delta Lingerie S.A. France vs. Tea Board India (“Darjeeling”) paragraphs 11-16, 19-20, 7 December 2012. This last case from 2005, specifically relates to the relationship between the two grounds but does not resolve the issue.

Nowadays, the trend of the case-law and the literature is to see the amendment concerning well known registered marks as being a codification of the doctrine of dilution, there is no grounds for separate consideration. “… now, since part of the doctrine of dilution has been written into the Israel Law, it is clear that the mark owner can sue on these grounds” (re Hilfiger paragraphs 52-53). See also re Adidas, paragraph 19; Soroker pages 557, 565-566; Cohen pages 459 -463. The conclusion arising from this is that the doctrine of dilution should be considered in light of the Ordinance, and there are not two separate doctrines that can result in different conclusions. It should be noted that even if in the past, when the two grounds were separately analyzed, the courts always found the same way for both doctrines, with both grounds accepted or both grounds rejected. Practically, therefore, there was never a difference between the two.

So how does the above introduction relate to the specific case before us? As stated, the grounds of dilution adopted by the legislation is limited to well-known marks that are registered as trademarks in Israel. Where a well-known mark is not registered, the protection afforded is limited to preventing it (or a confusingly similar mark) being used as a trademark by others for similar goods – goods in the same family, but necessarily classified in the same class. See Toto Zahav 894-895. Such cases are related to those where there is a danger of consumers being mislead, and is nothing to do with dilution. However, well-known marks that ARE registered in Israel do have wider protection:

“Infringment – use by someone not authorized…
(4) of a well-known mark, which is registered, or of a mark that is similar to it, for goods even of a different type, so long as the usage indicates a connection between the goods and the mark owners, whose rights may be prejudiced thereby”

The first characteristic of this arrangement is that infringement can be use of the mark on totally different goods from those for which the mark is registered, despite typically not being concerned with cases where the consumer is likely to be mislead. Thirdly, alongside the lack of requirement for confusing similarity, two requirements have been established for finding infringers responsible for use of the mark or marks similar thereto – the use has to indicate a connection to the mark-holder and the right user has to be likely harmed by the usage.

First baseCan the Appellant benefit from the wider grounds of complaint – not merely of classic infringement, but also on grounds of dilution of reputation? The claim raised was dilution of reputation, where the emphasis was on the Clooney character and the dilution claimed was the usage of a double. However, this claim does not pass first base. As shown above, the dilution grounds are limited to infringement of a well-known mark registered in Israel and are not applicable to the reputation of a company or personage per se. Furthermore, the image of Clooney is not a registered trademark as explained hereinabove. So even were we to assume that the character has a reputation that has been used in a way that damages it (and Judge Hendel is not ruling this to be the case) it still does not help the Appellant. Only usage of a registered mark can amount to infringement of a registered mark that is well-known and is registered in Israel. Notably, even in the doctrine of dilution as ruled in the case-law preceding the amendment, one could not find dilution of reputation per se. as infringing, but had to show use of the registered trademark or a similar mark (as in the Bacardi and Unilever cases). The Nespresso mark IS a well-known mark that is registered in Israel but neither it, nor a similar mark was used in the advertisements of the Respondent.

Loose ends.jpgWhilst tying up loose ends, it is noted that Appellant could have a further dilution claim if we were to assume that the picture of Clooney had, with his agreement, been registered as a trademark by the Appellant for coffee and related goods (under Section 11(8) of the Ordinance). Even in such an event one could claim that the publication of the Opposer’s coffee products using the Clooney double (with clarifying text that it was not Clooney), does not dilute the reputation behind the character and picture of Clooney. The reason for this is that the use of the two images (Clooney and the double) is for the coffee products sold by the two parties to this proceeding, and is the point of competition between them. In the case-law and literature there is disagreement regarding whether trademark dilution can occur where there is no likelihood of confusion and where the two items use their marks on their products of the same type. The trend in current case-law is not to see dilution in such cases (see re Adidas paragraph 19 and re Angel paragraph 44-45), although in earlier rulings a different conclusion was reached (re Unilever paragraph 26 – in that instance, there was a likelihood of confusion but the court saw fit to consider whether a well known registered mark for goods of the same type, was appropriate where there was no likelihood of confusion – See also Cohen pages 468-471). It is noted that in the United States and in Europe it is explicitly stated that a trademark may be diluted by usage or by similar marks on the same type of goods, even where there is no similarity that is sufficiently confusing to vice rise to infringement. A good example of this approach was given by the Court of Appeal of the OHIM (Office for Harmonization in the Internal Market (Trade Marks and Designs) which is the body responsible for trademark registration in Europe. In that instance, the well known beverage company Red Bull claimed that the competing mark Red Dog infringes their well-known mark. The court of first instance accepted this and Red Dog’s appeal was rejected, while ruling that a trademark may be diluted even by goods of the same class. RED DOG vs. RED BULL et al R-69/2009-1, par. 18, 24-26 (11 January 2010). For a US example, see Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 633 F.3d 1158 (9th Cir. 2011) in which the possibility of dilution of a mark where there was no likelihood of confusion was accepted in a case where the two marks both appeared on jeans. However, it will be appreciated that we are not required to consider this in the present case, since the Clooney character was not registered by the Appellant.

Until now, we have been dealing with one of the two branches of dilution, as considered in Europe and the US, the branch that is considered ‘blurring’, erosion or weakening (see re Adidas paragraph 19, the ruling by Judge Hayot, Zuchrov page 446). Nowadays this branch of the United States Federal trademark regulations is defined as follows:

“‘dilution by blurring’ is association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark” (15 U.S.C. § 1125(c)(2)(b) .

blurring1Dilution by blurring revolves around the association between the mark and the famous mark. As a result of the connection or the association, the unique distinguishing feature of the famous mark is damaged. For example, where a third party uses a famous mark for goods that are significantly different to those on which the mark is used. In view of the blurring, the trademark is not alone in the market. It loses its uniqueness and no longer indicates the goods protected in the way that it used to, but also indicates other goods. A similar definition of dilution by blurring appears in the European trademark regulations: “use of that sign […] is detrimental to, the distinctive character… of the trade mark ” (Regulation on the European Union trade mark, Art. 9(2)(c)). With respect to the blurring aspect of the dilution, use of the mark is forbidden even if the damage does not involve misleading consumers per se. The uniqueness of the mark is considered important under the assumption that part of the strength of the mark – that is protected by law, is its uniqueness, regardless of likelihood of misleading.

Dilution by blurring is the dilution discussed by this court under the title dilution. So, for example, one can see in re Bacardi” Use of the reputation includes the inherent possibility of damage to the legal owners of a mark, due to diminishment, dilution of reputation, and erosion of the unique nature of the mark: (re Bacardi page 282). In this instance, as in re Adidas, the definition of dilution used by Yaakov and Chana Kalderon was cited Trademark Copying in Israel 189 (1996). “The use of a strong mark without permission from its owners, without creating misleading, that results in erosion, and blurring of the unique reputation and quality that the mark succeeded in providing to consumers”. The other rulings of this court that dealt with the doctrine of dilution dealt with the claim of trademark dilution of a mark by blurring (see, for example, re Absolut, Unilever, Delta, Adidas and Tommy Hilfiger. The present discussion has also related to blurring until now, and we have shown that the Appellant does not have a case. But the Appellant claims grounds for compensation on the other branch of dilution as we will now discuss.

cocaineThe second branch of the dilution doctrine is referred to in the US and Europe as tarnishment, i.e. staining the reputation of the mark, by mocking it, identifying it with low quality or using it in an insulting manner. This is not nibbling at a leaf but direct assault on the trading name of the tree. This is how the staining type of dilution is referred to in the United States:

 ‘dilution by tarnishment’ is association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark” (15 U.S.C. § 1125(c)(2)(c)).

A similar definition appears in the European regulations:  “use of that sign […] is detrimental to… the repute of the trade mark” (Regulation on the European Union trade mark, Art. 9(2)(c)). The emphasis is on the damage to the reputation of the mark being used.

In contradistinction to the branch relating to blurring, the staining branch has not been adopted by the Israel case-law. However, the McDonald ruling created an Israel made situation akin to “dilution by staining”. To recall, in that instance, the majority ruling of the court was that using of the mark was an infringement since it was intended to insult the mark owner with no factual basis for so doing, and there instance was not one that was likely to result in classic misleading as to the origin of the goods. In fact, the McDonald ruling sets up an arrangement that is much wider than the tarnishing branch of the dilution doctrine as ruled in the US and Europe. The doctrine of dilution in Israel and abroad is limited to well-known or famous marks, whereas the McDonald ruling relates to all registered marks, even those not well-known. The law is based on option (2) for infringing in the definitions provided in Section 1 of the Ordinance, which relates to registered marks – any registered mark, being published. This is different from infringement by dilution which appears in Option (4) and only relates to well-known and registered marks. In addition, there is a high degree of uncertainty that in the case covered by the McDonald incident, there was what would be considered tarnishing in other jurisdictions where this is reserved for use of well known marks in connection to sex, drugs, and so on, or to identification with low quality goods (Zachrov 268-496). Since the court has not had to address dilution by tarnishing in Israel Law, this is likely to arise if the usage of the well-known mark does not infringe under McDonald. In such a case, there is still a question of the wide publication of the mark, usage that is dilution by tarnishing.

It is noted that the literature is critical of the McDonald ruling which prevents advertisements including non-complimentary reference to the company behind a trademark but using the mark (see Zuchrov, and Tzon Greenwald above). The problem arises from the significant damage to the freedom of expression in cases whereone is not allowed to criticize a famous mark owner by reference to their mark. It has even been claimed that the ruling damages competition and free trade (Zachrov 468-496). Judge Hendel considers that the key to understand dilution by tarnishing in Israel is to be found in the Trademark Ordinance which differentiates between registered marks and well-known registered marks. Using a regular registered mark is only forbidden in cases where there is an inherent risk of misleading the public by non-approved usage of the mark or a confusingly similar mark (see Appeal 5454/02 Taam Teva (1998) Tivoli Ltd. vs. Ambrosia Superb Ltd. p.d. 57(2) 438, 450 (2003) with respect to the same goods that are usually marked, or within the framework of an advertisement for such goods (option (1) and (2) of the definition of infringement. This is in contradistinction to uses of a well known mark which is also forbidden in situations that do not generally give rise to a suspicion, and can be for totally different goods (option (4) of the definitions of infringement, and also where the mark is similar to the registered mark in a manner that is not misleading. The focus of Option (4) is not misleading buy rather of pointing to a connection between the mark in question and a well-known mark, and the suspicion that the owner of the well-known mark will suffer some damage, and these two conditions are both required to have grounds for complaint.

Judge Hendel has already noted his reservations regarding the majority position in McDonald, which deviates from the normal and traditional purposes of trademarks. This criticism is explained above. However, one still has to consider the option (4) for infringement.  It will be noted that options (a) and (2) that also deal with trademarks that are NOT well-known, do not differentiate between allowed and forbidden used of the mark. As soon as one decides there is use of the mark (or of a confusingly similar one), that usage is forbidden. In contradistinction, option (4) has an important responsibility filter – there has to be a risk of damage to the mark owner. Not all uses are forbidden, but only those which are proven to be likely to damage the owner of the well-known mark. The language of option (4) states: “only when… the owner of the registered mark, is likely to suffer damage from the usage”.

This restriction of the prohibition to usage “that it is likely to damage” – is intended to help balance between conflicting values. Were all uses considered as tarnishing the well-known mark to be forbidden, it would transpire that the protected right is the “respect” due to a trademark or its good name. However, opposing this interest are other hefty considerations such as freedom of expression and competition, and sometimes the interest of criticism, to influence and maybe awaken the consumer. There is thus significant importance in balancing the legal protection of trademarks by defining “infringement”, by preventing registration of marks and by giving monopolistic use, – with the weighty consideration of economic damage to its owners. Judge Handel’s views on this will be clarified, both regards to the law and with regards to its application on a case-specific basis, by three points:

Firstly, as stated previously, when the Ordinance was amended it included a type of “Israeli dilution clause” that fits with the doctrine of dilution found in the earlier case-law, but adds certain conditions. These conditions are good, not only with respect to dilution by blurring, but also with respect to dilution by tarnishing. Since neither of the two types of dilution appear explicitly in the Ordinance, their cognizance depends on condition of option (4) for defining infringement, and the relevant Sections of the Ordinance. As will be shown, these considerations are appropriate also for the tarnishing type that is known from various jurisdictions. The first condition is that the mark is used. It is not enough to use the reputation. The Appellant refers to tarnishing as “damage to the reputation asset”, however this definition is incorrect. Not every damage to the reputation is dilution, of either type, but only damage to the reputation as expressed in the trademark can be considered as dilution. This is stated in the wording of the Ordinance (infringement is uses… of the well-known mark that is registered…). This is true across the world, where dilution is part of the trademark law and relates to trademarks and not to ‘reputation’. (see the references above and the legislation that deals with trademarks and their application which requires use of the mark. This was also the case in re McDonald which relates to the infringement of a trademark. Thus the Appellant’s claims that relate to usage of the double of Clooney (which is not a trademark but rather a presenter) should be rejected. To clarify this point, one cannot claim dilution of a trademark where the manufacturer tarnishes a ‘competitor’ as happens in this advert, but does not use the competitor’s trademarks., even if we were referring to a market with just two competitors and it is absolutely clear who is the competitor. It may be that is in such a case the competitor may have other grounds for action, such as libel, slander, vilification, but since this is not a trademark usage, one cannot refer to trademark infringement despite it possibly being a damage to reputation.

Secondly, even if we were to accept the claim that the persona of George Clooney is part of a well-known mark, the Appellant’s claim fails on account of the second condition for Option (4) which is the requirement that the mark be registered in Israel. This requirement is discussed above, and is relevant here, without needing repetition. It will be noted that legislators specifically chose not to grant the wide protection for well known marks to those not registered in Israel, and the logic of this is self-evident. Such marks are worthy of protection, but only for cases where there is likelihood of consumers mistakenly considering a product as related to someone not involved in its manufacture or sale, and not the wider protection against dilution.

Thirdly, the protection against dilution depends on addition considerations given in the Ordinance, that indicate a connection between the products and the owner of the registered mark, and the condition that the owner of the mark is”‘likely to be injured” from use of the mark (option (4) of the definitions of infringement in the Ordnance; section 46a(b) of the Ordnance. The requirement to point to a connection requires clarification and discussion in the various cases regarding dilution by blurring. In such cases, one should consider whether similarity between the marks points to a sufficiently strong link that it fulfills the requirements of the law. (see re Absolut page 885 and re Angel paragraph 46). When relating to dilution by tarnishment, it seems that generally it is easier to prove the required connection, since generally the purpose of the tarnishment is that the consumer will understand that the subject is the well-known mark, and will link between the use of the well-known mark and the owners. In this instance, the basic assumption of the advertisement is that the consumer will understand the connection between the products of the Appellant and their trademark. The main discussion in cases of tarnishment is focused on the second condition – the possibility of damage due to the usage. This condition is very important, for balancing between the conflicting interests and rights that occur with dilution by tarnishing.

In this regard, it will be remembered that we are relating to an economic injury. This is clear from the words of explanation that accompanied the draft of the amendment, that explains the amendment to the ordinance as “noting the need to give protection to the intellectual property rights”, which is “having great economic value” (see accompanying explanation to the draft law 2819, 524, and also to Tur-Sinai page 281).. Additionally, the central purpose of the doctrine of dilution is to protect the commercial value – that is part of the reputation – of the trademark from injury, by blurring or by tarnishing. This is historically and normatively tue. (see re Bacardi, pages 282, 284, and re Adidias paragraph 19). It is stressed that the Ordinance does not require proving “injury”, i.e. commercial damage. The wording of the section is “likely to damage” and not “damage”. On the other hand there is no assumption that the use of the mark automatically results in damage to its value, and one has to prove a real likelihood. Insult, ridicule and tarnishment are likely to hurt the feelings of the mark holder, but not necessarily will find expression in the consumer behavior. The burden of proof is on the complainant to show that they have grounds for complaint. One has to prove in various ways, that the use of the mark is likely to create financial damage to the mark owners. And more specifically there is a need for a causative connection between the use of the mark and the damage to the mark owners: “the mark owners are likely to be damaged in consequence of the said usage”. The prohibited damage is that resulting from use of the mark and not from other causes.

For example, use of the famous mark in the framework of comparative advertisement between the advertiser’s product and the product protected by the famous mark. In such a case, the injury from use of the mark is to the owner’s profits. But there is no causative connection between the use of the mark and the injury, which are connected by competition and not be the mark. So there is no “infringement”. A further example is criticism of the mark owner where use is made of the mark. In such a usage, it is likely that the use itself does not tarnish the market and does not injure the reputation of the mark owner, but the criticism may well result in injury to the mark owners because of the content of the criticism. Here again there is use of the mark and there is injury, but since there is no connection between the two, there is no infringement. Obviously, to the extent that the use of the trademark itself is injurious and can create economic damage, the fact that it is based on criticism or competition is not enough to provide protection against charges of dilution. The reason for these differences is due to the intention of the law, which is to protect the mark owners from damage that results from use of the mark, but not to prevent economic damage from other reasons. One must not forget that the branch of the law under discussion is trademark law which relates to use of the mark. So it is not inconceivable that the mark owner will be entitled to compensation on alternative legal grounds.

By way of comparison, the United States federal trademark law specifically protects marks from dilution by blurring or by tarnishment. But there are exclusions to dilution (bold added by Judge Hendel):

“The following shall not be actionable as dilution by blurring or dilution by tarnishment under this subsection:

(A) Any fair use, including a nominative or descriptive fair use, or facilitation of such fair use, of a famous mark by another person other than as a designation of source for the person’s own goods or services, including use in connection with

(i) advertising or promotion that permits consumers to compare goods or services; or

(ii) identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.

(B) All forms of news reporting and news commentary.

(C) Any noncommercial use of a mark” (15 U.S.C. § 1125(c)(3)).

The protection of this fair use with regards to competition and criticism – including parody – was not added to the Israel Law, but the need for a causal relationship between the usage of the mark and the damage to its owners gives rise to a similar arrangement, at least in certain aspects. It will be remembered that even the majority ruling in re McDonald did not forbid using the mark in the framework of comparative advertising, and even acknowledged the possibility of using the mark to insult the mark owners in certain instances:

One can conceive of use of the reputation to insult the owners within the framework of comparative advertising. Where the advertising includes factual comparisons regarding the competitor’s service, and the comparison that insults the competitor is accompanied by this comparison, in appropriate circumstances.. one could consider allowing such a comparison because of the social value of the comparative advertising.

This balance is not mentioned or even hinted to in the earlier law that the majority based the McDonald ruling on. This is different from the causal relationship that is explicit in the dilution Sections of the Israel Law that only allow preventing damage to the owners of the well-known marks that arise directly from use of the mark, and not from other causes such a competition or criticism. It is stressed that the case-law stood firm on the requirement to prove damage to “the real basis” (re Absolut, page 885, re Angel paragraph 45), and this finding relates to addressing the suspicion arising from use of the mark, and not from other uses. (For a discussion of an appropriate possibility see A Trademark Has Been Diluted: Theories or Facts? 41 Hous. L. Rev. 713, 742-745 (2004) that relates to the doctrine of dilution in US Law.

In this instance, there is no need to nail down the question of whether the likelihood of economic damage to the Appellants was proven, since they have not proven that their marks were used. It is sufficient to merely note that the suspicion has to be supported by a factual basis, particularly where the reputation is a strong one, and is not necessary damaged by references of one type or another. This factual basis could include for example, actual influence on the reputation of the mark and on how its usage is perceived by the consumers after the tarnishing advertisement. It is possible that even a strong advertisement will not result in the consumers seeing the famous mark in a negative light, and the burden of proof is on the plaintiff.

Categories: famous marks, Intellectual Property, Israel Court Ruling, Israel Trademark, trade dress, trademark, trademarks, החלטת בית משפט, סימן מסחר, סימני מסחר, סמני מסחר, קניין רוחני, קנין רוחני

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