Schweppes Case Ruling: When Is Parallel Importing Legitimate?

In the recent ruling handed down by the Israeli Supreme Court in Jafora Tabori Ltd. v. Ben Shlush Import and Export Ltd., the justices deliberated the tension between the legitimacy of the practice of parallel importing and protecting the rights of the owner of the Israeli “Schweppes” trademark.

Parallel importing is an accepted practice in Israel. Under it, an importer (who is not the official importer) purchases original products from a manufacturer abroad and markets them to consumers parallel to the official importer.

Exhaustion of Trademark Rights Doctrine

The justification for parallel importing originates in the “exhaustion of trademark rights doctrine.” According to this doctrine, a trademark owner exhausts its rights only after selling a product protected by a registered trademark for the first time in a territory, with the consent or permission of the registered owner of the trademark.

The Trademarks Ordinance in Israel prescribes rules regarding the registration and use of trademarks (letters, numerals, words, marks, symbols, etc.) used or intended for use by a person for the purposes of the products he manufactures or trades.

According to the Ordinance, a person registered as the owner of any trademark shall enjoy an exclusive and sole right to use it in the territory where he holds registration as the owner of the trademark.

The Supreme Court handed down its ruling following an appeal filed by Jafora Tabori Ltd. against the district court ruling. That ruling allowed the parallel importer of Schweppes products, manufactured in Ukraine by the trademark owner of the “Schweppes” trademark in Ukraine, to distribute them in Israel, despite Jafora Tabori owning the “Schweppes” trademark in Israel.

The Supreme Court overturned the district court’s ruling. It found the district court’s fundamental mistake was that it attributed internationality to the Israeli trademark “Schweppes” and associated it with a global “Schweppes” venture, which does not actually exist.

Supreme Court Ruling

According to the ruling, “A Ukrainian brand bearing the Schweppes trademark has no affiliation to the Israeli brand associated with Jafora through the Schweppes trademark that it owns. Therefore, Schweppes beverages that Ben Shlush wants to import from Ukraine to Israel are infringing products and their import to Israel is forbidden.”

According to Justice Alex Stein, in the absence of contractual relations between the Israeli trademark owner and the trademark owner abroad, there is no basis for the claim the sale of the products by the parallel importer in Israel fulfills the exhaustion of rights doctrine.

Therefore, parallel importing is a legitimate commercial practice in Israel as long as it does not infringe on the rights of a registered trademark owner.

***

Barnea Jaffa Lande Law Offices is at your service for further information. 

***