February 15, 2015
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ISRAEL: The Supreme Court Sets Limits for Legitimate Use of Trademarks by Parallel Importers
Israel’s Supreme Court, in an appeal of a decision of the Tel Aviv District Court, addressed at length the extent to which parallel importers may legitimately use brand owners’ registered trademarks. (CA 7629/12 and 8846/12 Swissa v Tommy Hilfiger Licensing LLC (November 16, 2014, Nevo).
The court of first instance held a parallel importer of authentic Tommy Hilfiger goods liable for trademark infringement. The District Court considered the importer’s extensive use of Tommy Hilfiger’s trademarks and logo colors. According to the District Court judge, such use exceeded the scope of genuine truthful use, which is necessary for marketing the goods. The District Court thus prohibited use of the business name “Tommy Hilfiger—The Importer’s Warehouse,” and use of the trademarks TOMMY HILFIGER and TOMMY on signage, except for one outdoor sign with an explicit indication that it was a parallel import business. The District Court also imposed extensive restrictions on the use of Tommy Hilfiger’s trademarks on the importer’s website, and enjoined the importer from using the domain name tommy4less.co.il. Finally, the court awarded 457,000 NIS (116,289 USD) as damages at large for trademark infringement.
The Supreme Court adopted a more liberal and flexible approach. The basic principle and starting point of Israeli law is that parallel importing is legitimate and promotes freedom of trade and fair competition. Israeli trademark and antitrust laws support parallel imports of authentic goods. Hence, marketing and sale of authentic goods which are not misleading are allowed and even encouraged in the small Israeli market (in which the degree of competition is low).
The Court confirmed that parallel importing, as such, is permitted in Israel, based on the doctrine of “exhaustion of rights” and that sale of authentic articles per se does not constitute trademark infringement. However, a parallel importer’s use of a trademark in connection with marketing activities may indeed constitute trademark infringement if it does not fall within the bounds of the statutory “genuine use” defense. The three cumulative conditions for applying this defense are: (1) the identification test (whether it is impossible to identify easily the goods without using the trademark); (2) the necessity of use test (the scope of use of the mark does not exceed what is necessary for identifying the goods); and (3) the endorsement test (whether use of the trademark is likely to create an impression of patronage or sponsorship by the trademark owner). The Court held that, in the context of parallel importing, the first two conditions are usually met, and thus, the most relevant test is the third one.
The Court further held that parallel importing per se does not constitute either passing off or unjust enrichment in the absence of additional circumstances. It also held that the doctrine of dilution—which is acknowledged by Israeli law—is not applicable or suitable to address most cases of parallel imports.
Applying the above to the case at hand, the Court held that use of the importer’s business name “The Importer’s Warehouse—Tommy Hilfiger” constituted trademark infringement and passing off. However, the Supreme Court reversed the judgment of the lower instance and canceled the injunction against the use of the domain name www.tommy4less.co.il. The Court ruled that the use of this domain name did not create a false impression of endorsement. The Court held that adoption of the same colors for its store design as Tommy Hilfiger’s logo colors (red, blue and white) was not misleading.
The Court ordered the parallel importer to clarify explicitly at the shop entrance and regularly in its marketing material and website that it does not operate under Tommy Hilfiger’s sponsorship or endorsement. However, the Court added that such clarification does not necessarily require use of the words “parallel import.”
The Court substantially reduced the amount of damages to 100,000 NIS (25,446 USD) because the appellants did not succeed in proving their damage, not even to the extent sufficient for estimation. Therefore, the court awarded damages by estimate only on the basis of the maximum statutory damages allowed by law for the tort of passing-off.
Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.
© 2015 International Trademark Association