Crocs Inc can rely on consumer protection laws in Customs dispute

The Tel Aviv District Court has held that a rights owner may rely on consumer protection laws and other laws, in addition to the specific provision of the Customs Ordinance that deals with seizure of goods infringing copyright and registered trademarks, to seek seizure of allegedly confusing goods by the Customs Authority in the absence of a registered trademark. (CC (TA) 2243-06 Crocs Inc v State of Israel – Customs Authority (June 19 2011)).

Crocs Inc sought to obligate the Customs Authority to refrain from releasing certain shipments of shoes it had seized, which allegedly infringed Crocs' registered models and bore a crocodile trademark, and to provide identifying information regarding such shipments. The crocodile trademark had already been filed but not yet registered at the time of the proceeding.

Upon having knowledge that the mark was not yet registered, the Customs Authority declared its intention to release the shoes, viewing its powers to detain the goods in accordance with the Customs Ordinance as being limited to the powers under section 200A of the Customs Ordinance. Section 200A of the Customs Ordinance provides for the Customs Commissioner's power to detain goods prima facie infringing copyright or a registered trademark.

Crocs obtained an interim order against the release of the infringing goods and in the main proceeding argued that the Customs Commissioner's power to detain is not limited to section 200A of the Customs Ordinance.

The court analysed the language of section 200A and inferred from its silence on the infringement of a well-known unregistered mark or a registered design that section 200A does not empower the Customs Commissioner to detain such goods.

However, the court held that such powers are vested in the Customs Commissioner under section 35 of the Consumer Protection Law, 5741–1981, which granted the Customs Commissioner the same power in respect of goods imported in contravention of section 2 of the Consumer Protection Law, which prohibits the sale, importation or holding for trade purposes of goods liable to deceive consumers, inter alia, regarding the identity of the manufacturer or the sponsorship or authorisation for the manufacture or sale of the goods, or of section 17 thereof, which prohibits mislabeling of goods, as if such goods violated customs laws and were subject to forfeiture.

Customs acknowledged such power but emphasised that its exercise was discretionary and that the case at hand justified not exercising such power.

The court held that the Customs as a matter of fact made the decision to cease detaining the goods solely on the basis of their not infringing a registered trademark and thus failed to have regard to relevant considerations under the Consumer Protection Law.

The court also accepted Crocs' argument that the Customs Authority had the power to detain the goods in reliance on a combination of other provisions of the Customs Ordinance (sections 188, 204 and 42), which provide that goods prohibited for importation and thus subject to seizure and forfeiture included goods, importation of which is prohibited under other laws. Thus, given an express prohibition in the Consumer Protection Law, the court held that goods liable to mislead consumers are prohibited for importation and may be seized by Customs; whereas absent a similar prohibition in the Designs Ordinance 1925, no similar power existed in respect of goods that only infringed a registered design. The court observed that a similar power exists in respect of goods bearing false or misleading marks under section 14 of the Merchandise Marks Ordinance, the applicability of which to the facts of the case was left open.

The court therefore allowed Crocs seven days to apply to the Customs Authority to exercise its discretion under the Consumer Protection Law, under section 188 of the Customs Ordinance or under the Merchandise Marks Ordinance.

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

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