40 years later | A 5-ACT TALE OF RIGHTS AND USE
Both sides of our tale want to use and register the trademark HABITAT in Israel. Both sell furniture and household items. One is a renown local chain store and the other is an international trademark owner.
Who is to prevail? The Israeli Supreme Court’s ruling left this question unanswered…
Act I – The Facts
Back in the Seventies an Israeli businessman, Mr. Meirovits operated a furniture store under the name Habitat. In 1976, Mr. Meirovits filed a motion to cancel Habitat trademarks on the basis of no use. These were registered under Habitat Design Limited (Hereinafter: “Habitat International”). Habitat International informed the Israeli Trademark Registrar that it will not respond to the cancelation motion. The Israeli trademark Registrar ordered to cancel the trademarks. In 1979, Mr. Meirovits registered several Habitat trademarks under his name.
40 years later and in 2015 news spread that Habitat International plan to enter the Israeli market under the name HABITAT. Mr. Meirovits filed a lawsuit with the Tel Aviv District Court to prevent Habitat International from infringing his trademarks and from operating under HABITAT in Israel. Habitat international filed a counter lawsuit seeking to prevent Mr. Meirovits from the use of HABITAT.
Who’s rights will prevail?
Act II – The Tel Aviv District Court
In 2017 the Tel Aviv District Court handed their Judgement in both the claim and counter-claim focusing on the good faith doctrine and applying it to both parties.
The Court examined Mr. Meirovits good faith at the time he filed the trademark applications to determine if he was aware of Habitat international. The Court found that that Mr. Meirovits had acted in bad faith. He was aware of Habitat international and acted to ride on their goodwill. This factual finding was based on the following: Mr. Meirovits chose an English name, rather than a Hebrew one; Mr. Meirovits did not provide evidence to support his claim that the Habitat brand was conceived in cooperation with of an Israeli advertising agency; his testimony suffered from selective memory.
The Court examined Habitat International’s good faith and found that it acted in bad faith because it did not enforce its rights in Israel for 40 years while Mr. Meirovits operated to create goodwill for HABITAT in Israel.
Both parties acted in bad faith. Who may register or use the mark?
The Court ordered to cancel the Habitat trademarks that were registered under Mr. Meirovits.
The Court concluded that in case the parties will not reach a settlement within 90 days, Habitat International may use the trademark “Habitat International” both in English and Hebrew in its advertising and to use HABITAT on its products. At the same time, Mr. Meirovits may continue to use HABITAT.
Act III – The Supreme Court
A year later in 2018, the Israeli Supreme Court handed a Judgement in the appeal filed by Mr. Meirovits.
The Supreme court rejected the appeal and affirmed the judgement of the Tel Aviv District Court. Both parties acted in bad faith. Both parties may use the mark HABITAT in parallel: Habitat International may use “HABITAT INTERNATIONAL” for its marketing activities and HABITAT on its goods while Mr. Meirovits may continue using HABITAT (in English or Hebrew). No exclusive rights were granted to either one of the parties. The issue of registration was not further addressed nor decided.
Act IV – The Aftermath
It is the humble opinion of the authors that the Courts outcome is problematic. The main focus and emphasis in both judgments was the bad faith of the parties. Less emphasis was given to consumer confusion and to the notion that trademark ownership means the exclusive right to use and register the mark.
Two separate issues are involved – the use of HABITAT and the registration thereof. The Courts failed to distinguish between these issues; ruled in error regarding the use and did not decide on the registration.
The result is confusing: two competitors, with different brand values, may use HABITAT in Israel in the same field – furniture. The outcome balances between the rights of the parties but ignores the public. While the Courts were busy analyzing the bad faith of the parties, they neglected the public interest of preventing likelihood of confusion using the same trademark for the same goods.
In this regard, the goodwill which Mr. Meirovits acquired is significant. The Court should have considered that Mr. Meirovits spent more than 40 years selling high end furniture and became a commercial success story. Consequently, Habitat’s stores in Israel gained vast recognition and goodwill and consumers identify Habitat with Mr. Meirovits. It is likely that a competitive furniture store operating under the same name will confuse consumers.
The Court did not decide on this issue. The only outcome was the cancellation of Mr. Meirovits 70’s trademarks. In a search of the Israeli Trademark Registrar database we found that both parties filed recently separate applications to register Habitat related trademarks. The battle between the parties seems to continue on the registration front.
Act V – Closing comments
The Courts could have reached a better solution by which one of the parties would have been granted the exclusive right to use and register HABITAT. The Courts should have decided between the parties and determine which party prevails.
The courts could have compensated the party who lost the rights to the HABITAT trademark. One possibility is a Buy Me Buy You mechanism in which one of the parties could have bought the possibility to act in Israel as Habitat. Another option is that one party pay the other compensation or royalties for the sole use of HABITAT in Israel.