In other words, the same economic-commercial logic that, according to Mr. Ginley, was behind that late agreement, which was intended to bring about a reduction in the "unreasonable" rate of royalties paid in the first year of the license agreement, was not given any practical expression in the rate of royalties paid in the second to fifth year of the license agreement - a rate that was significantly higher than the rate paid in the first year.
- Third, the amount of FOB reported to the plaintiffs in real time was lower than its actual height, in a manner that led to a reduction in the amount of royalties to which the plaintiffs are entitled. If, as the defendants claim, it was agreed, with a late agreement, to change the payment mechanism to a fixed annual amount, then there was no logical reason for the defendants not to report to the plaintiffs in the quarterly reports the true FOB rate , since in any case it would not have affected the rate of royalties to which the plaintiffs would be entitled.
- In Mr. Jinli's cross-examination, when he was asked why it was necessary to report a low report regarding the actual rate of imports in the reports submitted to the plaintiffs, if there was indeed a late agreement to a fixed payment, his answer was that "no one had a problem with me paying $20,000 for years, not to Yoav, not to Mr. Hadad. In 2015, when the lawsuit began, I realized that I did not have the $20,000 anywhere in writing" (transcript of the hearing of November 13, 2025, pp. 371-372). However, this explanation is unsatisfactory because, as stated, in practice, ILS 20,000 was not paid at a fixed annual rate starting from the second year of the license agreement.
- Finally, the claim regarding a change in the payment mechanism set out in the license agreement was not expressed in the pleadings or in the minutes of the previous claim, and this version was first born, on the face of it, in the framework of this proceeding. In a hearing held on November 24, 2016 in the framework of the previous lawsuit, counsel for the defendants in the proceedings there replied (p. 33, paras. 25-26): "To the court's question as to whether there is a dispute that the plaintiffs are entitled to 10%, I answer that there is no dispute and that we believe that everything that should have been paid was paid."
- Ginley had no satisfactory explanation as to why this version of a late agreement to move to payment was not claimed within the scope of the statement of defense in the previous lawsuit, and testified before me: "There could be one reason for this, it may not have been written in the contract, and that I received advice from lawyers, at the moment I kept it to myself, at the moment I kept it to myself." In response to the question of whether the version presented by his counsel in the previous lawsuit was not true, he replied "I don't know" (transcript of the hearing of November 13, 2025, pp. 327, 15-16; p. 329, 9).
- Thus, we find that the defense's argument regarding the change in the payment mechanism in the license agreement lacks evidentiary support, and therefore the provisions of the license agreement in this regard stand. Even if, at one point or another, in the framework of the contractual relationship between the parties, there was a "dialogue" regarding the change in the payment mechanism, I am of the opinion that Don Gilley should have known, as a reasonable third party to the agreement with the plaintiffs, which is obligated to report truthful reports with respect to the FOB rate and to pay royalties as a result thereof, that the sender's conduct did not establish any representation of authorization in the circumstances of the case for a fundamental and substantial change in the terms of the license agreement. It is not for nothing that no real evidence was presented in this regard, and the existence of such a representation by the plaintiffs, the senders, was not established.
- On the basis of all of the above, I am of the opinion that the plaintiffs have been able to prove their claim that Don Gilley breached the obligation in the license agreement to report true reports in respect of the FOB rate and to pay the license fees accordingly. This means that for the period in which the contract was in force and no true reports were reported regarding the FOB rate and no license fees were paid pursuant to it, then Don Gilly should be charged the amount it would have incurred if the license agreement had been fulfilled in accordance with its provisions.
- The plaintiffs claim that after a notice of termination of the agreement was sent on April 5, 2015 (Exhibit 51 to the plaintiffs' exhibits, p. 568), which came into effect and expired the contract on June 15, 2015, the defendants continued to trade in branded products under the plaintiffs' brand, which they claim are counterfeit.
- It should be noted that from the evidence presented to the court, it appears that the defendants rejected the plaintiffs' claims in a letter dated June 10, 2015, and even rejected the notice of termination of the agreement (Exhibit 51 of the plaintiffs' exhibits, p. 586, para. 17), but on April 4, 2016, they announced through their counsel that they had stopped importing products bearing the brand to Israel (Exhibit 51 of the plaintiffs' exhibits, p. 589).
- At the same time, the defendants in their summaries did not claim, not even implicitly, that the agreement was unlawfully cancelled, and focused their arguments on the fact that there was no breach of contract on their part; that all their actions were done with the approval of Mr. Hasson; and that the plaintiffs "slept on" their rights for years and did not send warning letters and did not allege breaches in real time; and that only after the dispute between them and Mr. Hasson did they begin to claim breaches retroactively. In these circumstances, I can only accept the plaintiffs' claim that the agreement was lawfully cancelled by them, and that the cancellation came into effect on June 15, 2015.
- The plaintiffs argue in their summaries that while clause 12.5 of the license agreement permits the sale of existing inventory for six months after the termination of the agreement, this is only subject to the fulfillment of the obligations in the agreement, and that this right is granted to a bona fide license holder who has terminated an engagement in an orderly manner, and not to an infringer who used the brand to manufacture counterfeits and sell them in breach of the license agreement. The defendants, for their part, do not refer in their summaries directly to the right granted to them by virtue of clause 12.5 of the license agreement, but rather claim in general that their action to realize existing inventory ("sell-off" or "run-off") was lawfully done, since no temporary injunction was granted against them in the previous suit. The defendants also note that the court in the suit refrained from granting such an order, inter alia in light of the long delay in the plaintiffs' conduct, and therefore nothing can be argued against them in this matter.
- Since, as detailed above, I did not find that Don Geely's activity was carried out outside the framework of the license agreement or not in accordance with it in a manner that would infringe the trademark (and as will be detailed below, it was not even found that counterfeit products were sold), but I did find that the activity was carried out in violation of the obligation set out in the license agreement to report quarterly truthful reports and pay license fees accordingly - then Don Geely should be charged the royalty rate according to the license agreement, starting from the second year of the agreement and up to six months from the date of cancellation of the license agreement, i.e., from 2011 until and including 2015. A hearing in this regard will be held later in the judgment.
- For the sake of completeness of the picture, I will note, more than necessary, that I have not found that in the circumstances of the case, the existence of the tort of fraud, which is a particular tort set forth in section 56 of the Torts Ordinance [New Version] (hereinafter: the "Torts Ordinance"). The tort of fraud includes five main and cumulative elements: false representation of fact; disbelief in the truth of the fact; Intention to deceive; actual deception; and causing pecuniary damage in error [see, for example: Civil Appeal 3824/13 SF Wing Overseas Real Estate Investments Ltd. Yaniv, para. 25 of the judgment of the Honorable Justice Amit (as he was then called) (Nevo, March 1, 2016); Civil Appeal 1206/16 Samuel Diamond Company v. Rosenbaum (1992) in Tax Appeal v. State of Israel - Ministry of Industry, Trade and Labor, para. 27 of the judgment of the Honorable Justice Mintz (Nevo, October 9, 2018)].
- As is well known, the standard for proving the tort of fraud is high, and the burden is heavier and greater than the usual burden required in civil law, and it requires clear, strong, and convincing evidence of considerable weight, due to the fact that it is a tort with a particularly severe shade of guilt [see: Civil Appeal 7721/22 Walter v. Stavholtz, para. 48 (Nevo 24.12.2024); CA 4181/22 Anonymous v. Anonymous, paragraph 13 of the judgment of the Honorable Justice Grosskopf (Nevo, May 19, 2024)]. I do not believe that in the circumstances of the case, the plaintiffs were able to establish the element of intention to deceive, the burden of which is extremely heavy. The plaintiffs focus their arguments in this regard on the motive behind the defendants' actions, namely their desire to evade payment of full license fees (paragraph 17 of the plaintiffs' summaries). However, it has already been held that "the tort of fraud also requires the existence of a mental state of intent, in the sense that the presenter intended to cause the representative to believe in the truthfulness of the representation and to act in accordance with it [...] However, it does not matter whether the presenter's motive was malicious or not, but all that is required is such intention, in a very narrow sense" [see: Civil Appeal 1137/23 Deri v. Jewish National Fund, para. 135 (Nevo, May 5, 2025)].
- Whenever the contract between the plaintiffs and Don Gilly (which came in the shoes of the Ginelli company) was in force, then the non-compliance with the provisions of the license agreement should be regarded as a breach of contract, with all that it entails and implies. Although the defendants' actions cause some discomfort, we are dealing with a business dispute that at the end of the day concerns non-compliance with the provisions of a commercial agreement. It is clear that not every breach of a commercial agreement means a fraudulent stock as defined inthe Torts Ordinance. Care must be taken not to be captivated by allegations of fraud that attribute faults and impose serious blame on players operating in the business field, and it is appropriate that the use of the tort of fraud be done with due caution, and in the exceptional and unique cases that are appropriate for this. Therefore, despite the motive that ostensibly underpinned the defendants' actions, I do not believe that the plaintiffs have succeeded in establishing the basis of the intention to mislead in the tort of fraud, as interpreted and applied in case law, and the claim should be dismissed.
Fourth Claim of Breach of the License Agreement - Continued Sale and Trade in Products Bearing the Brand After the Cancellation of the Agreement
- The situation is different with regard to the termination of the license period under the license agreement as of January 1, 2016, and that during that period the defendants all continued to trade in products bearing the plaintiffs' brand, while generating profits and without the defendants having a license to use the plaintiffs' trademark. In the judgment in the Rami Levy lawsuit, which was given against the Rami Levy and Vipz chain, which sold the plaintiffs' products, the following was noted (at paragraphs 17-18):
"... The situation is different after the plaintiffs pointed out to the defendants about the problematic nature of their activities. This became especially clear after the warning letters from August 2015, in which the plaintiffs stated that they had cancelled their agreement with the license holder, and even took legal action against him.