Test to decide on rival applications established by Supreme Court

In Malki v Sabon Shel Paam (2000) Ltd (Civil Appeal 898705, October 9 2007), the Supreme Court has affirmed a decision by the registrar of trademarks finding that the rights in the mark SABON SHEL PA'AM (roughly meaning 'the soap of the old days') belonged solely to Sabon Shel Paam (2000) Ltd under Section 29 of the Trademarks Ordinance.

Sabon is the owner of a chain of stores selling beauty products - in particular, soaps in the form of cubical blocks, which are sliced from a larger block and sold by weight. The first shop opened in 1997 and the business acquired reputation and recognition among the public. Sabon also invested heavily in advertising and sales promotion.

Sabon and an individual named Yehuda Malki both applied for the registration of the mark SABON SHEL PA'AM. The registrar of trademarks decided in favour of Sabon, despite the fact that Malki had used the mark before Sabon together with his main mark YARDEN. In light of the evidence, the registrar found that Malki had significantly increased his use of the trademark after Sabon had enhanced the reputation of the mark. The case was eventually heard by the Supreme Court.

The court held that in cases of concurrent applications, the decision should be based on the following factors:

• whether each application was filed in good faith;
  
  
• use of the trademark by each party until the date of filing of each application for registration (and, subsequently, until the date of the hearing);
  
  
• the date of filing of each application (which is the least important factor).

The court held that in light of the evidence, Malki had not made significant and continuous use of the mark before the filing date. Moreover, between the date of filing and the date of hearing, Malki increased his use of the mark only after Sabon had enhanced its reputation. Therefore, although Malki had filed the application in good faith, his use of the mark was tainted with bad faith.

The court also affirmed the registrar's decision to ignore the results of a polygraph test with regard to certain allegations made by Malki concerning a meeting held by the parties in 1997.

In addition, the court stated that although it did not normally admit further evidence on appeal, it was prepared to be more lenient in proceedings under the Trademarks Ordinance, since:

• such disputes may have implications for the general public; and
  
  
• the subject matter of trademarks has a dynamic character (the court referred to Yotvata Dairies Ltd v Tnuva Cooperative Centre for Marketing of Agriculture Produced in Israel Ltd; please see "ESHEL not generic for type of yogurt, court rules").

Interestingly, Judge Grunis stated that the outcome of the case was undesirable. Although Sabon had filed its application after Malki, Sabon expropriated Malki's rights in the mark with no compensation. According to Grunis, such outcome was due to the binary character of judicial decisions, whereby one party's gain or loss is exactly balanced by the losses or gains of the other party. Grunis thus advocated an intermediate solution whereby the loser would be compensated by the winner. Although such a solution is unavailable under the existing statutory provisions, modern law is arguably departing from such zero-sum situations.

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