Supreme Court refuses leave to appeal in parallel importation case

Israel

In American Eagle Outfitters Inc v Hamashbir Department Stores Ltd (LCA 8977/11, December 28 2011), the applicants have been denied leave to appeal from a Tel Aviv District Court decision in which the latter had refused to issue an injunction against the parallel importation of AMERICAN EAGLE-branded products.

The applicants - the owners of the AMERICAN EAGLE mark (collectively American Eagle) and their exclusive franchisee in Israel - sought an interim injunction against the respondent, which operated a nationwide chain of department stores. The applicants sought to enjoin the respondent from marketing clothes bearing the AMERICAN EAGLE marks, which were produced by a French company under a franchise awarded by the former owner of an Italian registration for the AMERICAN EAGLE mark. The scope of the franchise agreement between the Italian owner and the French franchisee was limited to France, Benelux and certain other countries. In March 2011 American Eagle acquired the Italian registration and was assigned the Italian registrant's rights vis-à-vis its manufacturers, including the French franchisee.

On October 30 2011 the court granted a temporary ex parte injunction enjoining the respondent from distributing the goods to its department stores. On December 1 2011 the court refused to issue an interlocutory injunction, holding that the factual basis of American Eagle's evidence was insufficient; the temporary injunction was extended until the Supreme Court issued its decision on leave to appeal.

The Supreme Court refused to grant leave to appeal, holding that the proceedings raised serious issues of law and fact as to whether the importation of the goods in question constituted "parallel importation" and whether such importation could be prevented under the trademark legislation.

The Supreme Court reiterated that a trademark owner cannot prevent the parallel importation of goods where the mark at issue relates to its own goods (which, on the face of it, supported the position of the respondent). However, the court noted that the law was not settled on the question of whether such determination would be affected by a territorial restriction in an agreement between the trademark owner and the manufacturer or distributor.

The Supreme Court held that such questions should be addressed in the main proceeding before the District Court, rather than in an interim proceeding. It further held that the balance of convenience did not tilt in favour of granting an interim injunction, and that the applicants could raise any of their claims within the context of their action for damages.

Accordingly, the temporary injunction was cancelled and the respondents were awarded IS30,000 in costs.

As a practical matter, the refusal of leave to appeal meant that the respondent was able to launch AMERICAN EAGLE-branded products in its stores before the opening of the American Eagle flagship store in Israel.

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

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