Issues surrounding use by company group member remain unclear

In Miss El Ofna Elite LeNishim v Pagotte Bekleidungsf Abrik Paula Got Tesdiener-G, the Israel Supreme Court has affirmed a decision of the trademark adjudicator to refuse to cancel the registration of the mark MISS LAGOTTE on the grounds of non-use.

The appellant, Miss El Ofna Elite LeNishim, served as the exclusive importer and distributor in Israel of the German respondent's (Pagotte Bekleidungsf Abrik Paula Got Tesdiener-G) fashion products, including those sold under the mark MISS LAGOTTE. A dispute arose between the parties as a result of which the parties severed their direct commercial relationship in August 1998. Miss El Ofna filed a non-use cancellation action for the MISS LAGOTTE mark in 2001. By 1998, Pagotte had entered into an agreement with Oui, a related company, for the assignment of the MISS LAGOTTE mark, but the assignment was recorded on the Trademark Register only in November 2003, after Miss El Ofna had filed the non-use cancellation action.

Under Section 41 of the Israel Trademark Ordinance, an 'interested person' may file a non-use cancellation action if there has not been any use of the registered mark in Israel for a period of three years prior to the filing of the action. The main issue in dispute was whether the use of the mark during the relevant period had been made by Pagotte or merely by other members of the group (including the company Oui, the assignee of the mark in question) and, if the latter, would such use be sufficient to defeat the cancellation action.

The parties agreed to waive the evidentiary hearing before the adjudicator, such that each of them relied on a single affidavit in support of its position. Given the presumption in favour of the validity of a registration and the burden on the party seeking cancellation, the adjudicator rejected the action, noting that (i) it was reasonable to conclude that there had been use by related companies (even if not by the registrant/respondent), and (ii) Miss El Ofna had not satisfied its burden in proving non-use in such circumstances.

On appeal, the Supreme Court declined to interfere with the ruling of the adjudicator. The Supreme Court recognized that the question of the significance of use of the mark by members of a group is a fundamental one. However, the Supreme Court ruled that it did not need to reach a resolution of the question in the matter on appeal. The reason for so ruling was that the adjudicator had stated that the parties themselves treated the members of the group as being a single body, both in the contracts between them and the manner of the use of the mark itself. Because of this, there was no reason for the Supreme Court to deal with the underlying legal question about the legal significance of use by group members. Similarly, the Supreme Court, given the nature of the commercial relationship between the parties, declined to rule on the legal significance of the assignment to the company Oui.

The legal position with respect to use by a group of companies has never been conclusively resolved. The decision of the Supreme Court, with its emphasis on the factual background of the matter before it, only serves to leave open this question.

Neil Wilkof, Herzog Fox & Neeman, Tel Aviv