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Trademark Highlights

February 17, 2013


Tags: Trademark
  •  Adidas loses an appeal to the Supreme Court to enjoin the release of four-striped shoes on the grounds of infringement of Adidas’ famous three-stripe mark
  • A parallel importer’s excessive use of the Tommy Hilfiger marks falls outside permitted genuine description of his goods
  • District court rulings clarify the boundaries of the tort of prevention of physical and online access to a business
  • Use of a mark as a search keyword (Google AdWord) amounts to trademark infringement when the sponsored ad website’s use of the mark is confusing

A.   In some departure from earlier case law1, the Supreme Court by a majority opinion affirmed the Tel Aviv District Court’s judgment that rejected Adidas Salomon AG’s claim against an importer of four-striped shoes on the grounds of trademark infringement unjust enrichment2

Adidas Salomon AG sued an importer of sports shoes bearing four diagonal stripes and the word “Sydney”, seized by the Customs Authority, on the grounds of infringement of its well-known three-stripe registered mark, dilution, passing off and unjust enrichment.

Defendant’s Products Adidas Marks
1 3
Exhibit
2 4
Exhibit

The Tel Aviv District Court rejected Adidas’ claim on all grounds, holding, inter alia, that the defendant’s low-priced four-striped shoes intended for retail at lower-end points of sale were not likely to be confused with Adidas’ well-known three-stripe mark. The court further observed that stripes were inherently weak marks and their protection from dilution should not extend to similar marks, lest Adidas should obtain unwarranted monopoly over diagonal stripes on sport shoes in general.  

Although the Supreme Court disagreed with the district court’s pronouncements regarding the desirability that non-branded products be available at low prices while retaining some association with higher-end goods, it affirmed the district court’s conclusion that the defendant’s four-striped sports shoes, which bore the name “Sydney” and were intended for sale at low prices in open-air markets, raised no likelihood of confusion or association with Adidas’ well-known three-stripe mark. It was held that while Adidas’ three-stripe mark undoubtedly acquired a strong secondary meaning, its innate nature of weak inherent distinctiveness would still affect the scope of protection to be afforded to the mark vis-à-vis non-identical trademarks.

The Supreme Court noted, inter alia, that while it was held in the past that comparison of the marks ought to be made with reference to the registered mark as it appears on the register, rather than to the marks as they appear on the products, this authority is good mostly with respect to word marks, while device marks, especially marks that are composed of elements that may be perceived as aesthetic features such as stripes sewn on a shoe, are to be considered in conjunction with the products that they designate and it would be artificial to detach the marks from the product.

It was held that secondary meaning acquired by a mark does not supersede the inherent distinctiveness, and that inherent and acquired distinctiveness are assessed in parallel when determining confusing similarity.

As to dilution, it was noted that while dilution does not require a likelihood of confusion, it should not be adopted as a default position wherever likelihood of confusion was not established. The majority judge opined that a finding of dilution in the absence of any likelihood of confusion should be reserved for exceptional cases, e.g., where the finding of lack of confusion resulted from the goods being of a totally different description. The Supreme Court held that, since there was no risk that consumers would associate the defendant’s lower-quality shoes with Adidas, the cause of dilution may not be established.

While the majority also denied Adidas a remedy under the laws of unjust enrichment, the dissenting opinion was that notwithstanding the absence of likelihood of confusion or association among consumers that would have amounted to traditional trademark infringement, the defendant committed unjust enrichment as it free-rode the plaintiff’s goodwill in a situation where consumers were attracted by the goodwill and image built by the trademark owner without being confused as to origin, but rather, as it were, consciously enjoying the imitation product market.

An application was made for an additional hearing, and we shall report on any developments in the case. 

B.   The Tel Aviv District Court fnjoined a parallel importer of Tommy Hilfiger products from making excessive use of Tommy Hilfiger marks that fell outside statutorily permitted genuine description of goods3

The Tommy Hilfiger group, which sells its products in Israel through an exclusive distributor and holds registrations of the marks TOMMY, TOMMY HILFIGER and red-blue-white flag logo, sued a parallel importer of its goods on a variety of grounds including the infringement of its registered marks, passing off, false representation, consumer deception and prevention of access to another’s business.

The defendant importer marketed genuine Tommy Hilfiger products via a store called “The Importer’s Warehouse” and prominently used the Tommy Hilfiger marks and logo colours in its store design, signage and advertising and also on its website http://www.tommy4less.co.il/; mention of the fact of parallel importation was not prominent. After the plaintiff’s approach, the defendant ceased using the name “The Importer’s Warehouse Tommy Hilfiger” for its store and website.

Observing that Israeli law permits parallel importation of a trademark owner’s genuine products, the Tel Aviv District Court addressed the extent of permissible use of the trademark owner’s trademarks in connection with such goods. The court observed that the registered owner’s exclusive right to use a registered mark for the goods for which the mark is registered or goods of the same description, under the Trade Marks Ordinance [New Version], 5732 – 1972 (the “Ordinance“)4, is qualified by a third party’s right to use the mark to indicate “genuine description of the character or quality of his goods”.5

The court reiterated the criteria of permissible truthful use set forth by the Supreme Court in the Toto Gold matter,6 namely (1) that the goods are difficult to identify without using the mark, (2) that the mark is used to an extent not exceeding what is reasonably and fairly necessary for identifying the goods; and (3) that such use does not imply sponsorship by the trademark owner. Applying these criteria, the court held that the defendant’s use of the marks was necessary to identify the goods but its extensive use of the marks (in store name and design, domain name and content, and advertising) exceeded what was reasonably and fairly necessary for genuinely describing the goods. As to implied sponsorship, the court ruled that while the fact of parallel imports was indicated on the website and elsewhere, the extensive use of the marks without mention of parallel importation was likely to imply sponsorship by the Tommy Hilfiger Group and confuse consumers as to the source of goods.

The court thus found trademark infringement and unjust enrichment. The court also held that the name formerly used for the store and on the website was misleading as to the source and sponsorship of the defendant’s goods as emanating directly from the Tommy Hilfiger Group, and thus constituted the tort of false representations under section 2 of the Commercial Torts Law, 1999.

However, because the goods were genuine, no passing off was found.

While the use of the mark TOMMY in the domain name was held to be unfair and to fall outside permitted use, it was held not to prevent or encumber access to the plaintiff’s business online and thus not to constitute the tort of prevention of access to another’s business under the Commercial Torts Law (discussed below).  

To ensure that only permitted genuine use of the marks to describe the goods is made, the court granted an injunction limiting the importer’s use of the marks. Thus, the importer was enjoined from using the Tommy Hilfiger marks in the store name and domain name, and from using the flag logo colours in the design of its building and web pages. The permitted use was limited to a single outdoor sign, a single use per advertisement and a single use on the website homepage – all such uses to be accompanied with mention of parallel imports. Also permitted was use as necessary for identifying the goods in the catalogue (also with mention of parallel imports) and in the press coverage section of the website.

C.   The District Court attempted to clarify the boundaries of the tort of prevention of access to another’s business, physical and online, and the circumstances in which the use of Google AdWords amounts to trademark infringement

The recent district court decisions illustrate the evolving approach to the tort of prevention of access to another’s business, under section 3 of the Commercial Torts Law, 5759 -1999, which provides as follows: 

A business shall not unfairly prevent or burden the access of customers, employees or agents to the business, goods or services of another business.

As noted, the parallel importer’s use of the Tommy Hilfiger’s marks in the domain name was not held to fall within this tort, as it did not encumber access to Tommy Hilfiger’s business.

  1. The Tel Aviv District Court held that “ODAFIM LAMETAYEL” (OUTLET FOR THE TRAVELLER) for an online store and as an AdWord infringed the well-known “LAMETAYEL” (FOR THE TRAVELLER) mark7

Israel’s chain of camping gear stores LAMETAYEL (Hebrew “For the Traveller”) and outlets LAMETAYEL ODAFIM (“For the Traveller – Outlet”), which holds a registration of the LAMETAYEL mark in English and Hebrew and operates a travel-related website at http://www.lametayel.co.il/, sued a camping gear retailer that, in addition to its brick-and-mortar store “KKSH – Center for the Traveller and Soldier” and online store at http://www.kksh.co.il/, launched http://www.odafim-lametayel.co.il/(“Outlet for the Traveller”), with the Hebrew appearing on the website, and purchased corresponding Google AdWords.

Neither the court’s observation that a descriptive word remains forever a weak mark nor the disclaimer in the plaintiff’s registration availed the defendant, as the district court held that the defendant’s use of ODAFIM LAMETAYEL for its website was likely to confuse despite some differences between the marks and websites and was not bona fide, given the plaintiff’s long-time reputation for camping gear and given the defendant’s failure to distinguish itself. The court also found that the defendant knowingly made a false commercial description in choosing a similar name for operating in the same field and in omitting its own business name.

Online use as prevention of access to a business. The defendant was also found to commit the tort of prevention of access to Lametayel’s business. Citing an earlier district court case in the Magnetics8 matter, according to which Internet access fell within the scope of the tort, the court held that the defendant’s use of the plaintiff’s trademark in its domain name interfered with customer access. The court also reiterated its earlier ruling in the Congress Center case (reviewed below), according to which a private company engaged in free competition is nevertheless under a duty of fairness, and ruled that the defendant in Lametayel acted unfairly.

Google AdWords as trademark infringement. The case saw an interesting development in the approach to trademark use as relates to Google AdWords. In an earlier district court decision in theMatim Li9 matter, the Tel Aviv District Court held that the use of another’s trademark as a Google AdWord, that is, a search keyword, did not amount to infringement. The Lametayel court distinguished the circumstances before it from those in Matim Li, holding that an Internet user would not be able to distinguish between the two Lametayel websites, whereas in Matim Li the search for the plaintiff’s business (whose mark “matim li” (suits me) was also a dictionary word) resulted in search results of another retailer, “Crazy Line”, so the use of the mark was made “behind the scenes” and did not cause confusion between the trademark owner’s business and that of the unauthorized user of the mark.

b. The Tel Aviv District Court held that information booths and distribution of advertising booklets on a short access path to a job fair organized by the plaintiff constituted unfair interference with access to the plaintiff’s business and unjust enrichment at the plaintiff’s expense10 

The Israeli Trade Fairs and Convention Centre, which conducts, under a contract with the Ministry of Defence, job fairs for soldiers finishing their military service, sued a student association of one of Israel’s universities for setting up information booths to distribute advertising booklets along the 70-meter access path leading from the nearby train station to the fair premises. The plaintiff relied on several grounds including prevention of access to its business and unjust enrichment.  The defendant argued that it acted within the bounds of legitimate free competition, operating outside the plaintiff’s premises and using a distinct logo on its brochures and a distinct uniform of its representatives. 

Observing that freedom of occupation is a firmly entrenched principle in Israeli law and that Israeli law has no general tort of unfair competition, the court noted its duty to balance conflicting values and uphold a general duty of fairness in business conduct.  The court held that the defendant, by placing its booths just outside the plaintiff’s premises and distributing a brochure that did not sufficiently distinguish it from the plaintiff, had engaged in unconscionable conduct, and proceeded to examine whether such conduct was actionable under any tort.   

Prevention of access to a business. The court found that the defendant interfered with customers’ access to the plaintiff’s event in that it placed its booths and representatives along a short path leading to the plaintiff’s event (and refused to relocate) so that visitors were exposed to the defendant’s materials even before they entered the plaintiff’s event, and that such interference was unfair in that the defendant free-rode on the plaintiff’s investment in organizing the event.

Unjust enrichment. The court also held that the defendant enriched itself at the plaintiff’s expense, in the sense of the Unjust Enrichment Law, as the defendant intentionally centered its activity around the plaintiff’s event and that freedom of occupation did not give the defendant the right to locate its representatives at the entry to another’s business. 

 

David Gilat
Adv., Patent Attorney, Senior Partner
David Gilat
David Gilat , attorney at law and patent attorney, is a senior partner at Gilat, Bareket & Co.
Sonia Shnyder
Adv.
Sonia Shnyder

1 On two earlier occasions, the district court granted interim relief, affirmed on appeal by the Supreme Court, finding prime facie likelihood of confusion between the defendants’ four-striped shoes and Adidas’ three-stripe mark (in LCA 3217/07 Bril Footwear Industries Ltd v Adidas-Salomon AG[2007], and in LCA 3581/05 When the Shoe Fits Ltd v Adidas Salomon AG [2005]). In another case, CC (TA Distr.) 2326-07 Adidas Salomon AG v Ghantos Shoes Company Ltd [2011], the Tel Aviv District Court held that the defendant’s four-striped shoes infringed Adidas’ three-stripe mark and that the word “Orbit” on the defendant’s shoes did not eliminate the risk of confusion, as it could also designate the name of a shoe model.
CA 563/11 Adidas Salomon AG v Jalal Yassin et al [27.8.2012].     
3 CC (TA Distr.) 11296-09-10 Tommy Hilfiger Licensing LLC et al v. Swisa et al [31.7.2012] (damages were also awarded).
4 Section 46(a) of the Ordinance.   
5 Section 47 of the Ordinance.
6 CA 3559/02 Toto Gold Subscribers Club Ltd v Sports Lottery Council [2004]. 
7 CC (TA Distr.) 48058-07-11 Lametayel Travel Center Ltd et al v KKSH Ltd et al [3.9.2012]. 
8 CC (TA Distr.) 1627/01 M.S. Magnetics Ltd v Discopy (Israel) Ltd et al [2001]. 
OM (TA Distr.) 506/06 Matim Li Fashion for Plus Sizes Ltd et al v Crazy Line Ltd et al [2006]. 
10 CC 27080-06-11 (TA Distr.) The Israeli Trade Fairs and Convention Centre Ltd v Bashan Bar Ilan Management Services Ltd [22.5.2012]. 



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