IL TM Update: Parallel Imports Not Permitted in Cases of Split TM Ownership

In a recent precedential judgment (CA 7934/20 Jafora v. Ben Shlush), the Israel Supreme Court held that in cases of split ownership of the same trademark in Israel and another country, trademark rights are not exhausted and parallel imports are not permitted.

Jafora, Israel’s second largest manufacturer of soft drinks, is the registered owner of the SCHWEPPES trademark in Israel. ERL, a subsidiary of the Coca Cola Company, is the owner of the SCHWEPPES trademark in Ukraine and manufactures SCHWEPPES soft drinks in Ukraine. Both Jafora and ERL acquired the rights to the respective SCHWEPPES trademarks from Cadbury, which sold its worldwide rights in the mark in 2006.

In proceedings against a parallel importer which imported SCHWEPPES soft drinks from Ukraine, the Central District Court held that the rights in the trademark were exhausted notwithstanding the separate ownership. The Supreme Court, in a majority opinion, reversed on appeal. The Supreme Court held that when a trademark is owned in different countries by separate unrelated entities, the marketing of the product in a foreign country does not exhaust the trademark rights in Israel. The Supreme Court further held that parallel importation of the product originating from an unrelated source will create confusion as to the source of the product or its properties.

The minority judge held that the importation of SCHWEPPES soft drinks from Ukraine may be permitted under the ‘genuine use’ defense if an appropriate disclaimer, clarifying that the imported goods originate from a different source, is affixed to the imported products. The majority did not entirely exclude this option but noted that the burden to establish that a disclaimer can prevent confusion as to source is high and must be proved by compelling evidence. It therefore appears that the final word has not yet been said in parallel import cases involving trademarks of split ownership.

This update article is provided for general information only and is not in lieu of legal advice. Please contact us directly for any required advice on specific matters.