During the last few decades, local manufacturing of fashion goods in Israel has decreased significantly, partly due to rising production costs. Simultaneously, Israeli consumers' preference for international fast-fashion brands is growing and the sales are increasingly shifting to e-commerce. At the same time, Israeli designers have been making a name for themselves internationally (for example a few years ago, a quarter of all wedding dress designers in NYC Bridal Fashion Week were Israelis).
1 . What are the main intellectual property legal tools available to protect fashion products?
Israeli intellectual property legislation provides various legal tools, which may be utilized to protect intellectual property rights (IPRs) created in the context of the fashion industry. These include, for example, the protections granted to designs, copyrights and trademarks. Some main points relating to the protection afforded to such rights under Israeli law are addressed in the following overview and table.
1.1. Trademarks and non-traditional trademarks
Trademarks are governed, mainly, by the Trademark Ordinance [New Version], 5732-1972 (TMO) and the Trademark Regulations, 1940. A "mark" is defined as letters, numerals, words, images or other signs or a combination of them, whether two-dimensional or three-dimensional. A trademark is defined as a mark used or intended to be used by a person in relation to goods which they manufacture or in which they trade. The basic requirement is that the mark will differentiate (inherently or by acquiring distinctiveness), that is, point to the source of the goods thereby distinguishing them from competitors' goods in the market.
A trademark registration is valid for ten years, and may be renewed for additional periods of ten years without limitation.
A valid registered trademark entitles the owner to an exclusive right to use same on the goods in respect thereof the trademark is registered, subject to the conditions and restrictions registered in the trademark registry (if any) and to prevent competitors, inter alia, from using identical or similar marks in connection with such goods or goods of the same description.
A well-known registered trademark entitles its owner to the right of exclusive use both in respect to goods of the same description and those that are not, where use of the mark by a person other than its owner is likely to indicate a connection between the said goods and the owner of the registered mark, and the owner of the registered mark is liable to be injured by the aforesaid use. A well-known trademark, even if it was not registered in Israel, entitles its owner to the exclusive use of the trademark for goods, in respect of which it is well-known in Israel or for goods of the same description.
The definition of the term "mark" in Section 1 of the TMO includes "other signs" and as such, paves the way for recognition of "non-traditional" trademarks.
Colour mark. In the Kodak Case (CC (Tel Aviv District Court) 225/96), the Israeli court recognized the use of a specific yellow colour as a trademark owned by the Kodak Company, in the photography industry, based on a decades-long connection between the colour and the company. However, this case is quite the outlier in this matter. In a recent decision rendered by the Registrar of Trademarks (Registrar), the Registrar expressed the position that colours should not be registered as trademarks other than in extreme cases, in which there can be no dispute that the colour has acquired a secondary meaning (decision dated 25.3.2019 regarding trademarks no. 271714, 271715).
Three-dimensional (3D) mark. Shapes of goods or their packaging may be protected by registering a trademark, however only in exceptional cases and provided that strict conditions are met. In the Toffifee Case (CA 11487/03), the Supreme Court ruled that the 3D shape of a product would be eligible for registration based on an acquired distinctiveness, insofar as it is proven that the shape is not esthetic or function-driven and that it, de facto, functions as a trademark. A later Registrar's Circular (003/2016) also applied the Toffifee Case criteria to packaging of a product.
Position mark. Protection for a method of placement or application of the sign on the product in the fashion industry requires showing that the decorative element is distinctive (having an inherent distinctiveness or secondary meaning). The Israeli Trademark Office (ITMO) adopted the three criteria used by the US Marks Trial and Appeal Board (TTAB), as follows:
- whether the decorative element is a ‘common’ basic shape or design;
- whether the decorative element is unique or unusual in a particular field;
- whether it is a mere refinement of a commonly adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods.
Based on the aforesaid test, the Registrar denied an application to register a trademark for an umbrella-shaped line of stiches ("the umbrella back vent") placed on the applicant's Baracuta G9 branded jackets (decision dated 1.11.2018 regarding trademark application no. 288945).
Advertising slogans. These are subject to the ordinary criteria for registerability, which include, first and foremost, distinctiveness. For example, applications to register the slogan "GUARANTEED TO KEEP YOU DRY" in classes 9, 24, 25 were denied as it was held that the slogan is descriptive for waterproof footwear, clothing and textile and will not be perceived by consumers as an indication of the origin of the goods (decision dated 10.12.2012 regarding trademarks applications no. 209978, 209979, 209980).
1.2. Design as an alternative or addition to TM registration
Designs are extremely important in the world of fashion and are regulated by the relatively new (approximately 5 years old) Designs Law, 5777-2017 (DL). The registration is valid for twenty-five years from the date of the application (subject to renewal every five years). A design is defined as "the appearance of a product or part of a product, composed of one or more visual characteristic of the product or of part of the product, as the case may be, including outline, color, shape, decoration, texture or the material from which they are made" and is protectable and eligible for registration if it is both novel and has an individual character. The 'novelty test' requires that on the Relevant Date (see below), there was no other publicly available design that is identical or that differs only in immaterial details. The 'individual character' requirement examines the impression that the design has on the "informed user" at whom the design is aimed, and who is "particularly observant". Possible constraints on the designer's freedom and a crowded market may lower the bar for examining the individual character (decision dated 6.1.2020 regarding design application no. 63572).
Israel is a party to the Hague Agreement Concerning the International Deposit of Industrial Designs. Accordingly, companies and designers from Israel are able to use “the Hague System” to protect their industrial designs in the member states of the agreement and the Israeli Patents Authority is accepting international applications for registration of industrial designs designating Israel.
An unregistered design meeting the above-mentioned requirements may be protected for a period of three years, if it was offered for sale or distributed throughout Israel commercially, within six months of the date in which it was made public (anywhere in the world) by the owner or someone on its behalf (the Relevant Date). Protection of an unregistered design is lessened, and does not include the ability to act against infringing goods at Customs, criminal sanctions against an infringer, and the ability to place personal criminal liability on a manager of an infringing entity. The owner of an unregistered design may file an application to register same during twelve months from the Relevant Date.
An owner of a design which is entitled (in the owner's view) to protection as an unregistered design, may mark the design as such, as prescribed in Section 62 of the DL and the regulations enacted thereunder.
According to Section 2 of the DL, protection for a design may only be awarded by virtue and in accordance with the DL (however, see our comment with respect to possible copyrights protection in the section below).The owner of an infringed design may be awarded, in addition to regular tortious reliefs, statutory damages (as of 2021) of up to NIS 100,000 (approximately USD $30,0000) without proof of actual damages.
1.3. Copyright as an alternative or addition to TM registration
Copyrights are regulated by the Copyright Law, 5768-2007 (CRL) and subsists in original works being literary works, artistic works, dramatic works or musical works, which are fixed in any form or are sound recordings. While the CRL has a requirement that the work will have a point of attachment to Israel (published in Israel or by an Israeli), since Israel is also a party to the Berne Convention for the Protection of Literary and Artistic Works, de facto, most internationally protected works enjoy protection in Israel and vice versa. Copyright protection cannot be granted to an idea, only to its application (for example, it cannot protect a stitching method). In the fashion world, copyrights can be relevant to works such as sketches, drawings and contents of internet sites.
Copyright protection is granted automatically (without registration) upon the satisfaction of the CRL's requirements and lasts for up to seventy years after the death of the author.
Under the CRL, copyright protection shall not be awarded to a product eligible for protection as a design. However, the Supreme Court ruled (CA 1248/15) that a two-dimensional pictorial or graphic work fixed to a product eligible for design protection may be entitled to copyright protection, provided that firstly, the work may be separated from the design without destroying its basic shape and secondly, each of the design and work are capable of existing independently (for example, ornaments and prints fixed to a shirt may be eligible to copyright protection).
Certain works may enjoy both copyright and trademark protection (for example, slogans or logos).
1.4. Any other pertinent IP rights?
1.5. Summary of additional IPRs
IPR in Israel
Time and modalities for grant
Pros and cons in the fashion sector
20 years, subject to renewals
(generally non-extendable, excluding special and specific circumstances).
Filing a patent application with the Patent Authority.
May vary from approximately 13 to 42 months (averages in 2020), depending on subject-matter and whether oppositions are filed.
Pros: a strong 20-year exclusivity on the market, can protect, for example, a special or novel method of production that improves efficiency.
Cons: lengthy and pricy process; eligibility requirements may be difficult to meet.
Unlimited, unless disclosed.
Automatic protection pursuant to the Commercial Torts Law, 5759-1999 (CTL) provided that the information:
Pro: potentially unlimited and “free” protection of the information.
Cons: the information is not protected from:
Unlimited (registration is valid for a period of 1-5 years and renewable without any limits to additional periods of 1-5 years).
Application to the Domain Name Registry.
Examination on a "first-to-apply, first-served" basis.
Grant based on availability of domain at the time of purchase.
Pro: essential for online visibility and brand awareness.
Cons: unavailability of the desired domain name once already registered by others ("cybersquatting" may be resolved through the arbitration panel at the ISOC-IL).
No registration requirement.
Pros: unlimited protection, no registration requirement.
Con: requirement of proving reputation.
(See Question 4 below for more information on passing off as well as unfair competition and particularly the "basket" tort of unjust enrichment.)
2 . Beyond intellectual property: what contractual arrangements are useful in manufacturing, distribution and advertising fashion products?
In addition to IPRs, the fashion industry is highly reliant on various contractual arrangements. In general, under Israeli contract law, a contract can take many forms, and becomes valid upon acceptance of a party's offer by another party. Special provisions and limitations in the context of contracts are the exception to the general rule of freedom of contracts.
2.1. Manufacturing fashion products
License agreements and Non-Disclosure Agreements (NDAs). As manufacturing agreements often involve access to and use of IPRs, it is highly advisable to identify such IPRs and contractually regulate their ownership. Addressing the consequences of license termination, including return of materials, non-use of confidential/sensitive information, etc. is similarly important.
It is common and advisable to introduce a robust confidentiality clause, or sign a non-disclosure agreement (NDA). Other than protecting IPRs, an NDA may also identify sensitive commercial matters that the parties wish to keep confidential.
A license to use a trademark should be recorded with the ITMO in order for the license to be valid vis-à-vis third parties. Otherwise, the use of the trademark by the licensee would not be attributed to the trademark owner (hence, exposing the mark to cancellation on grounds of non-use) and might be regarded as conflicting use. License recordal is particularly important when the trademark owner does not use the mark in Israel themself, but through a licensee (who, for example, manufactures the goods). Recordal should also be considered, for example, when the trademark is being used by affiliates of its owner.
Subcontract agreements / in-house manufacturing. In order to manufacture fashion products, a designer, fashion house, or other IPR owner, would usually contract with other parties. It is highly advisable that such agreements would be in writing. In negotiating and drafting these agreements, it is important to consider, inter alia, the following:
- the identity, record and reputation of the manufacturer/subcontractor, including employment practices which may create legal exposure, or cause issues of public opinions;
- what each party would require the other to provide, including information, samples, etc.;
- quality control, including possible pre-production tests, overseeing of production and ongoing sampling, etc.;
- indemnity, liability and insurance;
- ownership of IPRs which may be created during the project (including, for example, designs created by third parties) and employees' rights for additional remuneration which may arise as a result of the creation of such IPRs;
- term and termination;
- mechanisms of alternative dispute resolution; and
- applicable law and jurisdiction.
When applicable, it is advisable that possible engagement of subcontractors (and the manufacturer-subcontractors contractual relations) be negotiated with the manufacturer in advance and addressed in the manufacturing agreement, in order to protect the integrity and good name of the brand, as well as the IPRs involved.
2.2. Distributing fashion products
Agency agreement. Entities in the fashion industry often engage agents to continuously find new clients, or to conclude additional contracts with existing clients, for the purpose of purchasing goods that are marketed by the fashion entity. Such relationships may be subject to the provisions of, inter alia, the Agency Contract Law (Commercial Agent and Principal), 5772-2012 (ACL) and the Agency Law, 5725-1965.
The ACL provides for the fiduciary duty of the principal and agent towards one another and safeguards the commercial agent’s rights through its provisions regarding termination of a commercial agency contract and by providing for reasonable compensation for benefits gained by the principal as a result of the agent’s efforts.
Agency agreements can be made orally or in writing. Since the actions of the agent may (and are intended to) legally bind the principal, it is highly advisable that such agreements be made in writing and be clear and explicit. An agency agreement should include, inter alia, provisions regarding:
- conditions, authorizations and limitation of the agency;
- term and results of a termination;
- reporting duties and audit rights; and
- warranties regarding action in good faith.
Distribution agreement are similarly common in the fashion industry and the aforesaid aspects should also be addressed in the context of distributorship. Special attention should be given to consequences of termination, for example treatment of unsold stock, use of trademarks, cancellation of license registration with the ITMO, etc.
Selective distribution online in high-end fashion and trademark protection. Israeli competition law does not specifically address selective distribution of high-end products online. However, the concept of selective distribution of high-end products is, in principle, acknowledged by the Competition Authority and may be implemented, in appropriate cases, based on the general block exemptions, in the framework of individual decisions of the Competition Authority, or by means of self-assessment.
Co-branding and co-marketing. It is advisable that co-marketing and co-branding ventures are regulated by written contracts that clearly set forth the terms of the engagement, addressing, inter alia:
- market definition (i.e. marketing territory and possible future expansions);
- exclusivity (optional);
- IPRs ownership;
- financial matters (including how profits (and losses) are to be shared);
- term and termination;
- commitments to mutually protect each other's good-name; and
- the usual contractual clauses (damages, warranties, applicable law, jurisdiction, etc.).
2.3. Advertising fashion products
Advertising fashion continues its longstanding traditional use of models, billboard spaces and media broadcasts, alongside emerging uses of personally-targeted online advertisements and use of social media and "influencers".
Employing fashion models. Models' terms of engagement should be clearly specified, in order to allow the lawful use of the materials and ensure the protection of IPRs. It is important to address IPRs ownership and permitted use (including allowed editing and alterations, relevant media, period and territory of use). Engaging minors as models requires compliance with the provisions of the Youth Labour Law, 5713-1953 and the regulations enacted thereunder, including acquiring the relevant regulatory permits.
Social media, influencers and brand ambassadors/celebrities. The new advertising platforms on social media are significant and pose both opportunities and (legal) challenges.
In practice, smaller collaborations between companies and "influencers" or "brand ambassadors" (which involve small sums of money and/or take place on a one-time basis) usually forgo a written contract. However, contracts become very important when it comes to collaborations that involve large investment and/or are intended for a longer timeframe. Apart from standard contractual clauses, the contracts should also outline the scope of advertisement (for example, number of posts, labelling, location, etc.), and the monetary consideration payable to the "influencer". While this is still not a common practice in Israel, it is advisable to explicitly address, inter alia:
- IPRs ownership; and
- warranties and commitments to the brand being promoted and its values, or at the very least a mutual commitment to safekeeping of good name.
Advertising standards, relevant Authorities and advertising practice. A few different Israeli bodies are entrusted with consumer protection (public and non-governmental organizations), including in the context of advertising. Such bodies include, inter alia: The Consumer Protection and Fair Trade Authority, the Israel Consumers Council and The Second Authority for Television & Radio.
Israel was the first country to regulate the modelling industry through primary legislation, aimed at fighting eating disorders by reducing exposure to advertising featuring extremely skinny models (the Limitation on Weight in the Modelling Industry Law, 5772-2012). The law requires models to present a medical certificate showing that they are not medically underweight and prohibits the publication of an image that has been edited without an appropriate clarification (thereby giving the law the nickname: "The Photoshop Law"). Enforcement of the law is, however, limited.
3 . What regulations govern online marketing and how are the rules enforced?
3.1. Consumer protection regulations
Israel's general consumer protection law, including the Consumer Protection Law, 5741‑1981 (CPL) and regulations enacted thereunder, may apply, mutatis mutandis, to e-commerce.
The CPL also includes a number of provisions specifically relating to "long-distance sales transactions". These include:
- mandatory disclosure of details by the dealer;
- consumer's right to cancel a transaction; and
- additional protections to elderly consumers, disabled consumers, or new citizens in Israel.
Equal Rights for People with Disabilities (Service Accessibility Adjustments) Regulations, 5773-2013, mandate that a website offering a service to the public be adjusted in a manner that would allow people with disabilities effective use of the site.
"Influencers" and public figures advertising products on social media have been, naturally, a "hot topic" recently. In January 2021, the Israeli Attorney General (AG) submitted to the court his position on this issue, in the scope of motions to certify class actions submitted against Adika Style Ltd. et al (Class Actions (Jerusalem District Court) 29075-04-19; 15396-05-18). The AG argued that advertisements placed on social media must carry a clear indication that they are, indeed, an advertisement. Failure of the "influencer" (and the sponsor) to properly disclose the nature of the advertisement may mislead consumers, and particularly underage consumers, thereby breaching the provisions of the CPL, which prohibit advertisements that might mislead a reasonable consumer to believe that their content is not an advertisement. The use of a tag (@) or hashtag (#) is not sufficient and disclosure regarding the advertisement or sponsorship must be explicitly worded and clearly visible upon first view of the content. The AG limited the scope of the opinion to dealers (advertisers) whose place of business is Israel, explicitly leaving questions of extra-territorial applicability unanswered. The case is still outstanding before the court, and whether the court will accept the AG's position is yet to be seen.
3.2. Physical store and online store layout
A physical store's layout satisfying all the requirements under the relevant law, may be protected by IPRs. The architectural work on a physical store's layout may be protected by copyrights insofar as it satisfies the requirements under the CRL and so would a website's content, such as text and photos. In the Nestle Case (CA 3425/17), the Supreme Court raised in obiter dictum the question of whether a store design may be protected as a trademark, noting possible issues which may arise, including the inter-relation with other IPRs and that such protection should be limited to marks that have strong distinctiveness.
Imitation for a store's design may also be actionable based on the tort of "passing off" (see Question 4 below).
4 . What are the most relevant unfair competition rules for fashion businesses and how do the Courts interpret and enforce these rules?
Unfair competition has not been recognized in Israel as an independent cause of action. However, the first chapter of the CTL, titled "Unfair Competition", lists three torts, which apply in the context of competing businesses:
- Passing off. A business must not cause the goods it sells or the services it offers to be mistaken for the goods or services of another business or related to another business. A plaintiff relying on this tort must prove the elements of reputation and likelihood of confusion.
- False description. A business must not advertise something that it knows or ought to know is untrue with respect to itself or another business.
- Unfair interference. A business must not unfairly prevent or burden the access of customers, employees or agents to the business, goods or services of another business.
The second chapter of the CTL prohibits the misappropriation of trade secrets, which are defined as "commercial information of every kind, which is not public knowledge or which cannot readily and legally be discovered by the public, the secrecy of which grants its owner an advantage over his competitors, provided that its owner takes reasonable steps to protect its secrecy".
Remedies available under the CTL include, in addition to regular tortious relief include:
- statutory damages of up to NIS 100,000 (approximately USD $30,0000, as of 2021) without proof of actual damages;
- an order for accounts; and/or
- an Anton Piller Order and appointment of a reciever.
The Unjust Enrichment Law, 5739-1979 provides that when one obtains any property, service or other benefit from another (a beneficiary and benefactor, respectively) without legal cause, the beneficiary must restitute the benefactor. Several Supreme Court decisions held that where the law is silent on the lawfulness of the enrichment, lawfulness will be judged based on whether the enrichment is unjust and in the context of IPRs, it should also be proven that an "additional element" (relating to the beneficiary's behaviour or other circumstances rendering the enrichment unjust) exists. When the subject-matter right falls under the provisions of a specific law, the courts will tend not to recognize unjust enrichment as an alternative "by-pass" cause of action. However, when the law fails to protect the subject matter right, not due to a conscious legislative decision to deny such protection, the court will be more open to accept arguments based on unjust enrichment. Unjust enrichment was particularly relevant in the context of fashion until the enactment of the DL, since the former law (the Patents and Designs Ordinance) did not offer protection to unregistered designs. Nowadays, when the DL protects unregistered designs and excludes relief outside the DL, the unjust enrichment cause of action may prove less practical in the context of fashion items.
5 . Is there any regulation specifically addressing sustainability or ESG (Environmental, Social and Governance) in the fashion industry?
Currently, Israeli law does not address fashion industry-related environmental, social and corporate governance issues.
Israel does have a robust legal system relating to employment relations and employee protection. Consumer interests are protected, inter alia, under the CPL and regulations enacted thereunder and discrimination is explicitly prohibited under the Prohibition of Discrimination in Products, Services and Entry into Places of Entertainment and Public Places Law, 5761-2000 (as well as under the general constitutional right for equality).
Matters of "sustainability" are mostly left for the socially and environmentally conscious consumers and fashion entities. "Green-washing" (presenting partial or deceptive information regarding an entity's sustainability standards), may be actionable based on the cause of action of misleading advertising under the CPL. While not in the context of the fashion industry, in the past few years a number of class actions have been submitted on such grounds (consumer misleading) against entities involved in marketing as a "new technology" purportedly "eco-friendly" plastic bags.
It is also worth mentioning that the terms "green", "eco-friendly", "sustainable" or "ethical" are usually descriptive, and therefore, as a general rule, cannot be registered as a trademark (e.g. decision dated 13.4.2014 regarding trademark application 256552).
6 . Customs monitoring: do any special import and export rules apply to fashion products?
Under Section 200A of the Customs Ordinance [New Version], the Israeli Customs Administration (CA), may suspend release of goods that prima facie infringe upon copyright, trademark or registered design rights. Such suspension may be initiated following a notice submitted by a complainant, or (with the exception of an infringement of a design) independently by the CA. According to the CA, in 2020 (similarly to the last few years), the CA seized approximately 800 shipments with counterfeit goods (each containing, on average, 36 infringed trademarks) – 99% of which were initiated by the CA (not following a complaint).
7 . Frequently Asked Questions
What would be the significant legal challenges I would face in the fashion world?
Protecting a successful brand becomes a greater challenge over years. On one hand, technology and globalization facilitate cheap and easy copying and distribution of counterfeit or otherwise infringing goods. On the other hand, registering a trademark becomes a more complicated process as ITMO's approach towards descriptiveness and distinctiveness becomes more restricting and Israeli courts have been increasingly promoting free-market competition doctrines, favouring them over a more property-driven approach to IPRs. A representative example is the Adidas Case (CA 563/11), where the Supreme Court upheld a judgement determining that sports shoes bearing four diagonal stripes do not infringe Adidas' well-known three-stripe mark. Choosing a "good" trademark – which will be relatively easy to register and enforce (and preferably seeking, in advance, legal advice to this end) – is of great importance.
Is parallel importation allowed in Israel?
Parallel importation, as such, is allowed. Certain activities performed in the context of parallel importation (e.g. unauthorised use of copyrighted materials, misleading advertising, trademark use exceeding the scope of the allowed "genuine use" (as outlined in the Tommy Hilfiger Case, CA 7629/12, 8848/12)), may be actionable.
What would be a valuable legal tool protecting against copying of fashion goods?
First and foremost – a registered design. Where registration is impractical (for example, with seasonal fashion goods), the fallback position would be an unregistered design.