District Court narrows the protection of well-known trademarks

(Following C.A (Tel-Aviv) 2177/05 Adidas v. Yasin at al.)

By: Jonathan Agmon and Matan Shok

The Tel Aviv District Court (Honorable Judge Michal Agmon Gonen) handed a judgment in Civil Case 2177/05 Adidas v. Yasin, on December 13, 2010.The District Court held that there is a need to balance the rights of a trademark owner to protect the positive reputation of their trademark against the rights of shoe importer for “self expression”.

This ruling has a broad implication on the trademark laws in Israel. The Court narrowed the scope of protection afforded by well known trademarks and created uncertainty regarding the scope of rights granted to well known trademark owners.

The Trademark laws were originally intended to protect the associative relation between a particular source of goods and the manufacturer that produced them. The development of the modern advertising market has led to the creation of an independent value for existing trademarks, regardless of the trademark’s physical features on the original product.

The maintained associative connection between the trademark itself and the public can establish the status of a well known trademark, which protection expands also to the trademark reputation. Damage to the reputation of the well known trademark is defined as trademark dilution.

Trademark dilution occurs when a trademark is being used in a way that weakens the goodwill and the positive reputation of the trademark in the eyes of consumers, even when no infringement takes place. Trademark dilution is traditionally divided into two main categories. The first category is “blurring”, which involves the use of a well known trademark to mark similar goods of low quality, or to mark goods of a different class from which the well known trademark is registered for. The second category is tarnishment, which involves the adverse usage of the well known trademark and demeaning it in the eyes of the public.

In cases of blurring, the damage is caused by weakening the connection between the well known trademark and the original product in the mind of the consumers. In cases of tarnishment, the damage is caused by the harm to the good reputation of the trademark in the eyes of the consumers.

Damage to the good reputation of a well known trademark can be caused easily. In the modern era, in which trademarks have become familiar indicators, it is sufficient to take a prominent element of the well known mark to create a connection among consumers to the well known trademark.

In Adidas v. Yassin, the famous Adidas Company learned that a Palestinian importer named Mr. Yassin imported to Israel from a factory in China sport shoes under the brand “SYDNEY” that bears four diagonal stripes on their sides. Adidas, claimed that the use of four diagonal stripes on the “SYDNEY” shoes infringe its well known registered trademark that contains three diagonal stripes, and demands the marketing of the “SYDNEY” will be ceased, and to destroy the remaining shoes.

Adidas Shoe Four Stripes Shoe
Adidas 3-stripe shoe

 

An example of 4 stripe shoe

Illustration photos

 

The Tel Aviv District court rejected Adidas’s claim and held that the “SYDNEY” Shoes are not similar to the Adidas shoes in light of the overall appearance of the shoes that Mr. Yassin imported, their poor condition and their low price. In addition the court held that since Mr. Yassin does not use the Adidas trademark, his actions do not constitute trademark dilution at all.

For example, the Court indicated that if Mr. Yassin was distributing ice cream with 3 diagonal strips, such use might dilute the Adidas trademark. According to the Court, using of 4 diagonal stripes on the same ice cream would not dilute the Adidas trade mark.

The Court’s decision indicates that dilution cannot exist in case of infringement – where an importer is using the well known trademark for the same goods. The Court seems to believe that when an infringement occurs there is no possibility also to dilute the trademark.

This is an inherent contradiction as bearing of well known registered trademark on goods of low quality inevitably diluted the well known trademark – i.e. damage to the positive reputation of the well known trademark.

The determination of the Court that without a slavish copy of the well known trademark other damages do not exist, encourages unfair competition because Mr. Yassin can more easily sell the “SYDNEY” Shoes because of their resemblance to the Adidas shoes.

The Court could have reached a different result. Especially in view of the fact that the Court was aware of the possibility that borrowing an element from Adidas stripes trademark will create a linkage and association to the famous brand and harm its positive reputation.

In contrast to this decision, in 2008 a US court in Portland  ordered Payless Shoesource Inc. to pay $304.6 million for wilfully infringing on Adidas America Inc.’s three-stripe trademark logo. The infringing shoes had four and two stripes shaped diagonally.