Expansion of mark's use by defendant held to infringe plaintiff's rights

In East & West Import and Marketing Ltd v East & West Food Ltd (CC (TA Distr) 19922-10-10, January 7 2014), the Tel Aviv district court has held that the defendant's expansion of its use of the EAST & WEST mark (for which it had previously acquired rights from the plaintiff solely in connection with the retail of oriental foods) to wholesale trade infringed the rights of the plaintiff, which retained its wholesale business under the same mark. The court rejected the defendant's argument that it made good-faith use of its corporate name, which included the combination 'East & West'. The court further refused to impose personal liability on the defendant's officers.

The plaintiff, East & West Import and Marketing Ltd, engages in the importation and wholesale marketing of foodstuffs from the Far East. The company began as a family business: originally opening as a retail store in Tel Aviv in 1962, it expanded into wholesale in the 1980s. In 1994 it began using the mark EAST & WEST, in Hebrew and in English, for another retail store. The plaintiff registered the mark in 2004. In 1998 the store, along with the goodwill in the name East & West as it relates to retail sales, was sold to a former sales agent, who set up the defendant company, East & West Food Ltd, in order to operate the store and the attendant business. Under the sale agreement, the defendant was to refrain from engaging in the wholesale import of products from East Asian countries (other than the Philippines) for the term of the non-competition clause; for a number of years, it engaged in wholesale imports from the Philippines under the brand Taste of Asia. Thereafter, the defendant not only expanded its operations to wholesale trade from the Far East, but did so under the East & West name. The plaintiff sought a permanent injunction and an order for accounting, alleging trademark infringement and passing off.  

The parties differed in their interpretation of the sale agreement, the defendant arguing that it was free to use the EAST & WEST mark after the expiry of the contractual non-competition period, while the plaintiff asserted that it never intended to transfer its right to the EAST & WEST mark in the sphere of wholesale trade. 

Upon examining the sale agreement, the Tel Aviv District Court held that, in accordance with the agreement, the defendant had acquired only the retail business and the right to use the mark in retail, while the plaintiff had retained its rights in the mark with regard to wholesale trade.

The court subsequently examined whether the defendant nevertheless had a right to use the mark, either by way of good-faith use of its corporate name or otherwise. The court held that the defendant's use of EAST & WEST outside the sphere of retail did not constitute good-faith use of its corporate name; moreover, it was likely to confuse (and indeed confused) the public. Therefore, such use could not benefit from the exception of genuine use of one's corporate name. The court also refused to view the plaintiff's conduct as amounting to acquiescence in the defendant's use of the mark for a wholesale business.

With respect to trademark infringement, the court examined whether the combination 'East & West' was eligible for trademark protection (leaving aside the issue of whether the defendant was estopped from raising such claim). The court noted that, notwithstanding the office action requesting the plaintiff to disclaim the combination 'East & West' in its stylised mark, the mark was eventually registered without such disclaimer; rather, the words 'east' and 'west' were disclaimed separately. The court held that the EAST & WEST mark, when used for the importation of foodstuffs from East Asia, was not descriptive, but was located between descriptive and suggestive on the spectrum of distinctiveness. It was thus eligible for protection.    

With respect to passing off, it was held that the plaintiff had proved that the mark had acquired a secondary meaning and had come to be identified with its business.

Accordingly, the court found that there had been infringement of a registered mark, as well as passing off, and granted a permanent injunction and an order for accounting. It also awarded IS80,000 in costs.

The court also addressed (and rejected) the claim that the defendant company's corporate organs and officers were personally liable, holding that personal liability cannot be imposed unless the conduct of the organ or officer at issue is shown to amount to a specific cause of action. The court further noted that the imposition of a duty of care requires a special relationship that goes beyond the usual operation of a corporate organ or officer.   

David Gilat and Sonia Shnyder, Gilat Bareket & Co, Reinhold Cohn Group, Tel Aviv