ESHEL not generic for type of yogurt, court rules

In Yotvata Dairies Ltd v Tnuva Cooperative Centre for Marketing of Agriculture Produced in Israel Ltd (Case CA 8778/04, April 30 2007), the Israel Supreme Court has allowed the application for the mark ESHEL filed by the respondent to proceed to registration.

Tnuva Cooperative Centre for Marketing of Agriculture Produced in Israel Ltd (Tnuva) started manufacturing a yogurt with a 4.5% fat content under the name Eshel in 1958. In 1962 Yotvata Dairies Ltd (Yotvata), a kibbutz located in the southern part of Israel, started manufacturing a similar product also named Eshel. For several decades Yotvata marketed its products exclusively in the southern part of Israel and this was done through Tnuva. In 1987 the parties signed a distribution agreement, but the cooperation ceased in 1998 following the acquisition of Yotvata by Strauss Dairies. On November 12 1997 Tnuva filed an application with the Trademarks Office to register ESHEL as a trademark in Class 29 of the Nice Classification. On April 15 1998 Yotvata filed an application for the registration of ESHEL YOTVATA in the same class. Due to the similarity between the two marks, the Trademarks Office initiated proceedings under Section 29 of the Trademarks Ordinance dealing with rival applications for identical marks.

Tnuva claimed that:

• the public consumers identified the mark ESHEL with Tnuva's well-known product;
  
  
• any use of the ESHEL mark that was made by Yotvata in the past 35 years was made by virtue of a licence issued by Tnuva; and
  
  
• following the termination of the cooperation between the parties, Yotvata lost its rights to use the trademark.

Yotvata contended that:

• it had acquired rights in the ESHEL mark through its prolonged use; and
  
  
• alternatively the ESHEL mark should be deemed a generic term that should remain in the public domain.

In the first instance the IP adjudicator accepted Tnuva's claims, and ordered that Tnuva's application proceed to registration and Yotvata's application be dismissed. Yotvata appealed to the Supreme Court.

Yotvata's arguments addressed two main questions, namely:

• whether 'Eshel' is a generic term describing a kind of yogurt with a high fat content; and
  
  
• whether the use by Yotvata of the mark for some 35 years entitled it to a right to use the mark on the basis of concurrent use in good faith.

The Supreme Court upheld the lower instance's decision. The court noted that Yotvata's concurrent claim of ownership and genericness with respect to the same mark was tainted with bad faith as such contentions contradicted each other. The court also noted that such contradictory claims may amount to judicial estoppel.

The Supreme Court remarked that a finding of genericness of a mark may be compared to expropriation of real estate and stressed that any conclusion of genericness must be made with caution, while carefully considering the relevant public interests.

The court noted that the original dictionary meaning of 'Eshel' refers to a specific tree (tamarisk) or a hotel and thus the mark ESHEL was inherently distinctive with respect to milk products. Nevertheless, in certain modern dictionaries and in a new edition of an established dictionary (Even Shoshan), the definition of 'Eshel' included the meaning of a type of yogurt, namely the parties' respective products. The court noted, however, that the definition in the Even Shoshan dictionary included an indication that Eshel, in the meaning of the dairy product, was a trade name. The court stressed that this supported Tnuva's claim that the mark ESHEL was not generic and that the inclusion of a word in a dictionary does not automatically render the word generic, as each case should be examined upon its specific circumstances.

The court noted that the fact that many people may use the term 'xerox' or 'frigidaire' when referring to photocopying or a refrigerator respectively does not allow a manufacturer of photocopier machines to call its product Xerox or a manufacturer of refrigerators to call its product Frigidaire. The most important factor in determining whether a mark has lost its distinctive character is the way the mark is perceived by consumers. An important factor here was the fact that there exists an alternative word ('Lebenia') to describe the same yogurt product. The word 'Lebenia' appears in dictionaries and also in various public documents, including in legislation.

Further, the court stressed that Yotvata failed to adduce survey evidence that the mark had become generic, although the court also noted that a survey is not the only acceptable way to prove genericness.

Turning to the issue of the rival applications, the court applied its three-prong test to determine which of the two applicants had a better right to the mark:

• The court noted that Tnuva was the first to file its application.
  
  
• The court found that Tnuva's use prior to the application had been much more extensive than that of Yotvata since Tnuva had an 80% market share while Yotvata had only 1%. The court also noted that Yotvata's claim of independent goodwill in the mark ESHEL accrued from use of the mark within the framework of a licence.
  
  
• The court considered Yotvata's use of the mark after the filing of its application to be in bad faith as it violated the agreement with Tnuva.

Accordingly, the court dismissed the appeal.

The court noted that appeals from the trademark registrar provide greater leeway in adducing additional evidence than appeals from other instances. This is because of the need to maintain the accuracy of the register.

David Gilat, Gilat Bareket & Co - Reinhold Cohn Group, Tel Aviv