Registration is ZIPed shut as foreign trademark owner loses out

Facts and claims
Ruling

In Vampum Ltd v Trademark Owner Gigiesse Confezioni SpA the registrar of patents has granted the application of a local clothing retailer to cancel the trademark ZIP, registered in Israel by a foreign manufacturer, on the grounds of non-use. The applicant formerly imported the trademarked goods without a registered trademark licence agreement between the parties.

Facts and claims
ZIP, Trademark no 101663, was registered in 1998 in class 25 (various types of clothing) in the name of Italian clothing manufacturer Gigiesse Confezioni SpA. The cancellation application was filed in 2004 by Israeli clothing retailer Vampum Ltd, which formerly imported the registered owner's goods.

The applicant sought to cancel the trademark on the grounds of non-use for at least three years preceding the application, under Section 41 of the Israeli Trademarks Ordinance. Under Section 41 an “interested person” may apply for the cancellation of a trademark on the grounds there was no bona fide intention to use, and no bona fide actual use of, the mark in connection with the goods in respect of which the cancellation is requested, or that there had been no such use during the three years preceding the application for cancellation. Section 41 further provides that a trademark will not be cancelled if the non-use is due to special circumstances in the trade and not attributable to any intention not to use, or to abandon, the mark. Under the section, ‘use’ of a trademark does not include use made solely in advertising, but does include use by a registered licensee, as set out in Section 50 of the ordinance, provided that the use is under the supervision of the trademark owner.

The applicant retailer, which had imported the trademark owner's products for a certain period of time preceding the application, used the mark (in a different design) on its goods and as the name of its growing chain of stores. The applicant asserted that the trademark owner lost interest in the Israeli market, making no use of the trademark and proving no intention of further use. The applicant also claimed use of the trademark prior to any relationship with the trademark owner and asserted that there was no licence agreement for use of the trademark. The applicant further argued that the trademark owner failed to prove special circumstances preventing its use of the mark in Israel, given that the applicant’s own use of the mark was not such special circumstance.

The trademark owner asserted that the applicant stopped, allegedly temporarily, buying from it in 2001 under the pretext of financial and other difficulties. In 2004 the trademark owner learned, due to a seizure of trademarked goods by Israeli Customs, that the applicant had in fact continued making use of the trademark. The trademark owner further claimed that it never abandoned the intention to use the trademark in Israel, and that its subsequent attempts to find a distributor in Israel since 2004 did not succeed due to the applicant’s active use of the mark, which posed a strong disincentive to potential distributors.

The trademark owner further argued that the use by the applicant was use based on the owner’s licence and therefore counted as use by the trademark owner. Moreover, the trademark owner argued that the applicant was estopped from raising the claim of non-use due to its bad faith and that, even should the registrar hold that there was no use in the three years preceding the application, it had the power to leave the trademark on the register and should do so in light of the applicant’s bad faith in misappropriating the trademark.

Ruling
The registrar held that the mark had not been used in the three years preceding the application and that the trademark owner’s website was advertising in the sense of Section 41, which does not constitute use. The registrar held that the parties’ trade relations came to an end in 2001 at the latest and that the applicant continued to use the trademark. The registrar held that the use by the former importer was not deemed use permitted by the trademark owner, as the licence was not registered in accordance with a prescribed procedure under the ordinance.

Having determined that the mark was not in use, the registrar proceeded to rule that the applicant's extensive use of the trademark was not a special circumstance in trade that justified the failure to use in the three years preceding the application. The trademark owner did not present evidence of attempts to market its products in Israel and the registrar formed the impression that the owner lost interest in the Israeli market. Cooperation with Customs in detaining the applicant's trademarked goods did not constitute “use in trade” for the purposes of Section 41.

In determining whether to exercise its discretion to maintain the trademark registration despite non-use by the owner in the absence of special circumstances, the registrar noted the general undesirability of a situation where the importer of a manufacturer misappropriates its trademark. However, the case at hand presented an ambiguous situation. No licence agreement was shown to exist as to the right to use the trademark or the status of the applicant as an agent or franchisee, and in any event no licence was registered pursuant to the ordinance. The registrar was ready to assume that, at least for a period of time, the importer acted as the trademark owner's agent. However, a cancellation proceeding serves not only the interest of the parties, but also the interests of the public in general. Registration of a licence is required for the protection of the public. The public in the case at hand came to identify the mark with the applicant and therefore it would be the non-removal of the mark, rather than its cancellation, that would be misleading to the public. The registrar also awarded legal costs against the trademark owner.

This decision, insofar as it allows a former importer to usurp a trademark owner's mark, appears to contradict the spirit of Article 6septies of the Paris Convention for the Protection of Industrial Property, which sets out the trademark owner's right to oppose unauthorised registration of its mark in the representative's name. The registrar's decision serves to emphasise the crucial importance of continuing use in order to maintain a valid trademark and, further, of registering not only the trademark but the licence granted to a third party to use it.