Recordal of licence as registered user agreement is mandatory

In Vampon Ltd v Gigiesse Confezioni SpA (January 21 2008), the commissioner of patents, designs and trademarks has ordered the cancellation of the mark ZIP (Registration 10166) on the grounds of non-use, even though the party that filed the petition for cancellation, Vampon Ltd, was the former importer and distributor of the trademark owner. The decision seems to establish a rule that recordal of a licence as a registered user agreement is mandatory with respect to the validity of the licensed trademark.

In 1998 Gigiesse Confezioni SpA registered the mark ZIP for goods in Class 25 of the Nice Classification (clothing, footwear and headgear, excluding t-shirts, sport shirts, sweatshirts, sweaters and belts with buckles). Between 1993 and 2001, Vampon was the exclusive importer and distributor of Gigiesse's products in Israel. Moreover, Vampon used a similar mark for its own clothing brand. In 2004, three years after the end of the commercial relationship between Gigiesse and Vampon, the Israeli Customs Authority notified Gigiesse of the seizure of goods bearing the mark ZIP which had been imported into Israel by Vampon. As a result, Gigiesse filed an action for infringement against Vampon in the Tel Aviv District Court. Vampon filed a petition for the cancellation of the mark ZIP on the grounds of non-use.

The commissioner addressed the following issues:

• whether the mark was in use within the meaning of Section 41 of the Trademark Ordinance; and
  
  
• whether there were any special circumstances that might allow the commissioner to exercise his discretion and maintain the registration, even though the trademark licensing agreement between the two parties had never been recorded with the Israel Trademark Office in accordance with Section 50 of the ordinance.

Gigiesse submitted evidence of use of the mark during the three years preceding the filing of the petition for cancellation. The evidence was based on an internet site operated by Gigiesse through which it sold its products. Moreover, Gigiesse relied on the inventory of its products which was held by Vampon in 2000; Gigiesse claimed that Vampon had continued to sell the products of the inventory until September 2001, less than three years before the filing of the petition for cancellation.

The commissioner ruled that Gigiesse's website was no more than a means of advertisement, which does not constitute use of a mark under Section 41 of the ordinance. With regard to the inventory held by Vampon, the commissioner ruled that since the amount of inventory was relatively small, it was difficult to conclude that Vampon had continued to offer the products for sale until September 2001, the date on which the petition for cancellation was filed.

With regard to the issue of whether the commissioner should exercise his discretion and allow the registration of the mark in the absence of actual use, the commissioner ruled that no special circumstances justified this outcome.

In addition, the commissioner held that the parties should have recorded the trademark licensing agreement as a registered user agreement with the Trademark Office. The commissioner found that there was no evidence of a signed trademark licensing agreement. At most, it was possible to discern from the behaviour of the parties that there was an unwritten form of licensing agreement that came to end in 1999.

The commissioner noted that in considering whether a mark should be cancelled, account must be taken of not only the commercial interests of the parties, but also the interest of the public at large. In the commissioner's opinion, in this case the public interest was greater than the commercial interests of either of the parties. The use of a registered mark by a third party - even with the permission of the owner of the mark - has the potential to mislead the public as to the origin of the products. This is the reason why the recordal of a trademark licensing agreement is not a mere technicality, but a matter that serves the public interest. The commissioner found that since 1999, the public had come to identify the mark ZIP with Vampon. Therefore, if the registration was not cancelled, there was a risk that consumers would be misled. Accordingly, the commissioner ordered the cancellation of the registration of the mark.

One may ask whether there was a genuine licensed use of the mark, as opposed to mere use by a distributor. If the latter, the recordal requirement would seem to be misplaced. Moreover, the decision to make recordal mandatory with regard to the continuing validity of the licensed trademark runs counter to precedents in most jurisdictions, which have used, or still maintain, a registered user arrangement. It remains to be seen whether the decision will establish a general rule or will be limited to the particular facts of the case.

Neil Wilkof and Gilad Shay, Herzog Fox & Neeman, Tel Aviv