Recent Ruling Settles the Question of Copyright Protection for Unregistered Designs

By: Yehuda Neubauer and Hadar Avital (EHRLICH, NEUBAUER & MELZER, Attorneys at Law)

The Israeli Supreme Court has just released its long awaited ruling in CA 1248/15 Fisher Price Inc. v. Dvoron Import and Export Ltd., resolving the question of copyright protection in industrial designs. In the factual frameworks of the subject case, the world famous toy company Fisher Price (“the Appellant”), sued a local Israeli retailer (“the Appellee”) that allegedly copied one of its baby swinging chairs. Put in a nutshell, the Court held that the Copyright Law does not provide protection to unregistered industrial designs. Nevertheless, under certain circumstances, a part of a design that qualifies for copyright protection when separated from the subject design will not be denied such protection when copied as part of the whole design.

To briefly summarize the previous round, the District Court held that in view of the fact the design in subject was not registered, nor applied for patent protection, it was not entitled for protection under the Designs or Patents Laws. As for copyright, the District Court further held that both the design in subject and its ornamented upholstery were not entitled for protection under Copyright Law either. As mentioned above, the District Court’s decision was reversed in part by the Supreme Court, holding that parts of the design that are entitled to copyright protection shall not be denied of such protection only because they were copied together with other elements.

Judge Rubinstein reviewed three approaches for defining the scope of design and copyright protection: accumulating and parallel application – where an article is entitled to “double protection” by each legal field he qualifies for protection in; accumulating and alternative application – where the rights are accumulated but protection is alternative or limited; and alternative protection – where the article is entitled to either design or copyright protection, but not both.

In light of the wording of Article 7 of the Israeli Copyright Law, according to which unregistered industrial designs will not be entitled to copyright protection, the Court held this case falls within the scope of the Designs Law and the abovementioned rule shall apply. Judge Rubinstein openly expressed his discomfort with respect to the legal situation. Nevertheless, in his view, the words of the legislator should not be evaded. The damage incurred by unregistered design owners will be somewhat relieved by the limited protection offered to them under the new Designs Law recently approved by the Israeli Parliament.[1]

But the legal analysis of eligibility for copyright protection did not end here. The Court then turned to examine whether a part of a registerable design could be the subject of copyright. In the Judge’s view, it is unreasonable to reward a copier of what otherwise would have been entitled to copyright protection, for copying the subject of protection together with other subjects that may not be protected. The Court ruled that in order to decipher whether or not part of a design is indeed entitled to copyright protection, three questions need to be answered: First, one must examine if the subject article in whole is eligible to be registered as a design? In this particular case the undisputable answer was positive. Second, one must ask can the said part be separated from the article? The test applied here is the possibility of conceptual separation rather than a physical one – can the part still exist on its own after being separated from the article (e.g., as a drawing on paper or a three dimensional statue) without destroying the article’s basic form? In this case, it was decided that the lion figure, appearing on the upholstery, can exist separately and still be considered subject of copyright protection. Third, is the part itself legally entitled to copyright protection? Having applied the requirements of the Copyright Law to the case at hand, the Court decided that the lion figure, in itself, is entitled to copyright protection. The Court noted that the protection bestowed upon such part of a design should be limited to cases in which the copying was exact or very close. As for compensation for infringement, the Court noted it will be limited for infringing the copyright in the part subject of protection and not for copying of the article in whole.

The Court then moved on to discuss whether copying the lion figure as well as the product’s leaflet were considered to be direct or rather indirect infringement. In light of previous declarations made by the Appellee, according to which the manufacturer is in fact a corporation of a number of businesses including the Appellee, the Court found that the Appellee was the manufacturer of the infringing product, and therefore a direct infringer.[2]

Since the Appellant’s trademark appeared in the copied leaflet, another matter addressed by the Court was trademark infringement, and in particular – should the question of good faith be considered in cases of trademark infringement? With respect to registered trademarks, the Court held that examining the good faith of the alleged infringer is not required. In addition, it was held that in cases of use of an identical trademark, in order for the use to qualify as infringement, an intention to deceive is not required (as opposed to cases wherein a similar trademark was used). In this particular case, where the leaflet including the trademark was marketed by the Appellee, the Court found that the Appellee infringed the Appellant’s trademark. Nevertheless, as no factual structure was laid to prove the damage caused by the infringement, the Appellant was not entitled to damages in this respect.

As for the right to compensation of the design’s owner under the Law of Unjust Enrichment and the Commercial Tort of Passing Off, the question remains to be dealt with in future cases. The Court noted that the factual base required for proving Passing Off was not sufficiently presented.[3] In addition, the case did not qualify for compensation under the Law of Unjust Enrichment, mainly because of Appellee’s suggested negligence in not applying for a registered design, and the fact that the product was marketed under a different brand without attempting to mislead consumers.

The bottom line is that the copyrights in the lion figure and the leaflet, as well as the Appellant registered trademark were held infringed. The case was thus referred back to the District Court to set the suitable remedies the Appellant will be entitled to. The Appellee was also instructed to bear the Appellant’s legal costs in the sum of 30,000 NIS.

The question of entitlement for protection with regard to unregistered designs was waiting to be settled for a long time. This particular case – where the Court asked the Attorney General to submit the state’s opinion – was the subject of great anticipation. It so happened, that the Israeli Parliament has recently approved a new Design Law, that will be effective as of 2018, which will entitle unregistered design owners to limited protection under certain circumstances. However, it was made clear that the legal structure laid in the frameworks of this ruling will be applicable eve after the new law goes into effect. As for the question of balancing unjust enrichment with intellectual property rights, it seems that the issue remains entangled and is expected to cause further consternation to both legal professionals and commercial entities in the future.

[1] See our newsletter on the new Designs Law at:  http://www.ipatent.co.il/israels-design-protection-law-goes-modern/

[2] As opposed to the District Court, the Supreme Court held that the Appellee was not entitled to the innocent infringer protection, that according to the Court, should only apply in rare cases of direct infringement.

[3] We note that Judge Melzer begged to differ in this respect, holding that the Appellee committed the tort of Passing Off.