Parallel Chocolate Imports

Latfood Ltd. vs. Foodstock Ltd. (Tel Aviv District Court 27455-02-17, March 29, 2017)

The subject of this decision is whether a sole importer of goods can prevent parallel importing when the parallelly imported goods carry the details of the sole importer and not of the parallel importer.

Plaintiff is an importer of chocolate products manufactured in Latvia. Plaintiff filed a motion for a temporary injunction to stop the import and marketing of the chocolate products by the defendant.

The Tel Aviv District Court rejected plaintiff’s motion to grant a temporary injunction. The Court followed the Israeli case law, which views parallel importation as a tool to increase competition and lower costs for the Israeli consumers.

The Court held that the cause of passing off will succeed, if the plaintiff proves the following two: Firstly, that the products gained goodwill; Secondly, that consumers might be misled to believe that the products marketed by the defendant are marketed by plaintiff or somehow associated to them.

The Court concluded that consumers are not likely to be misled as to the identity of the manufacturer, since the products subject of this claim are original products.

The Court based the decision on the Israeli Supreme Court Judgment in the matter of Swissa vs. Tommy Hilfiger[1]. In that case, the Supreme Court restated the legitimacy of parallel importation based on the exhaustion of rights doctrine: once a product is sold, the owner of the product exhaust their rights, and a resell of the same product does not infringe upon these rights.

The Supreme Court emphasized that parallel importation is vital in Israel because of the unique nature of the Israeli market: limited competition due to the small size of the market; the dependence of many industries in the Israeli market on importation and the fact that Israel is isolated from its immediate geographic surroundings.

The plaintiff asserted that the chocolate products carry their details (name and address) and are not marked to show that the defendant is in fact the importer. This creates the impression that the subject chocolate products are imported to Israel by the plaintiff and that they are liable for them.

The Court rejected this argument since the plaintiff agreed that the chocolate products will bear their name during labeling at the factory. The details of the plaintiff, which appear on the chocolate products should be regarded as part of the product. The plaintiff may not excuse themselves from any liability for the chocolate products, where they should have foreseen that the products might find their way to the Israeli market.

Further, the Court concluded that the balance of convenience is against granting the requested temporary injunction. Dealing with consumers’ complaints regarding the quality of the chocolate products usually lies with the manufacturer and not with the importer. Therefore, it seems that if the marketing of the chocolate products will continue, it will not significantly harm the plaintiff. On the other hand, chocolate products are perishables and a delay in their importation will cause the defendant damages and prevent legitimate competition between importers.

[1] Swissa v Tommy Hilfiger Licensing LLC (Supreme Court cases 7629/12 and 8846/12, November 16, 2014)