Civil Case (Tel Aviv) 13315-08-20 LIFESTYLE EQUITIES C.V v. Don Gilley Ltd. - part 14

(1) In a registered trademark or a similar mark, in respect of goods in respect of which the mark or goods of the same definition is registered;

(2) in a registered trademark, for the purpose of advertising goods of the type of goods in respect of which the mark is registered or for the purpose of advertising goods of the same definition; [...]".

140. In our case, when, as of the beginning of 2016, the defendants did not have a valid license agreement for the use of the plaintiffs' trademark, and nevertheless made use of it, then this is an infringement of the trademark as defined in the Trademarks Ordinance, i.e., use of the trademark by a person who is not entitled to it. This means that the plaintiffs, as the owners of the registered trademark, were entitled to file the claim before me for infringement of their trademark against all the defendants, in relation to the period after the termination of the license agreement (section 57(a) of the Trademarks Ordinance).
141. Section 59(a) of the Trademarks Ordinance states that: "In a trial for infringement, the plaintiff will be entitled to relief by way of an injunction and damages in addition to any other relief that the court hearing the matter is authorized to grant, and will also be entitled to the remedies listed in section 59A." As is well known, "the owner of the right can sue for an injunction and compensation, but as an alternative remedy for damages, he can claim the restitution of profit on the basis of the laws of enrichment and not in law" [see: Daniel Friedman and Elran Shapira Bar-Or, The Law of Enrichment and Not in Law, 1, 495 (2015)].  In the circumstances of the case in which the plaintiffs' trademark was infringed, it appears that the remedy of restitution of profits is the appropriate remedy.
142. Thus, in the period beginning January 1, 2016 , in which all the defendants acted without a lawful license in violation of the plaintiffs' trademark, the plaintiffs are entitled to compensation for this in the form of the denial of the defendants' profits. A discussion regarding this entitlement and its scope will be held later in the judgment.

Fifth Claim of Violation - "The Indirect Import System"

143. The plaintiffs claimed in their summaries that the "indirect import system" constituted an additional concealment fraud intended to evade the payment of royalties. According to them, the defendants' customers, such as Yapiz (the Rami Levy chain) and the Shufersal chain, purchased products directly from manufacturers in China and Hong Kong under the direction of the defendants, and imported them to Israel.  This action created a "reporting bypass route" that amounted to imports in the amount of ILS 3,107,596 (p.  20 of the plaintiffs' expert opinion).  According to the plaintiffs, this action was carried out by the defendants in order to evade the payment of license fees.
144. The plaintiffs add that the defendants' profit mechanism from this track was sophisticated, so that Yapiz and the Shufersal chain purchased the infringing products at prices that are 75% higher than the defendants' direct import prices - a gap that constitutes the defendants' estimated profit, which stands at ILS 1,330,902 (in accordance with the plaintiffs' expert opinion). The plaintiffs claim that this activity, which was carried out by the defendants fraudulently and in complete contravention of the agreement, in a way that in effect took control of the plaintiffs' brand.
145. In their summaries, the defendants did not relate directly to the alleged indirect import system, nor even to the expert opinion on their behalf, and they focused most of their arguments, as stated, on the tripartite relationship that was created between the plaintiffs, the defendants, and Mr. Hasson.
146. In Mr. Ginley's affidavit, it was claimed that Don Gilly acted with full transparency vis-à-vis Global Brands regarding product approval. In his affidavit, he stated that some of the products were sold by the defendant as a "private label" in order to save on import and transportation costs, with the product label sometimes bearing the name of the end customers.  All transactions were made through Don Gilly and only after the brand was approved in accordance with the Style Guide.  It was claimed that the private label products were completely identical to the products manufactured with the defendant's label, designed by it and manufactured on the same production line in China after the plaintiffs' approval.
147. It was also stated in Mr. Ginley's affidavit that the only difference between the products was the name on the final label, and that the private import was not hidden from the plaintiffs. It was also declared that the license agreement does not prohibit the defendant from operating in the format of direct imports, which is a customary practice in the industry and has also been applied to dozens of other brands.
148. After reviewing the arguments of the parties, I am of the opinion that with regard to this breach, the claim should be partially accepted.

Indeed, there is no dispute that the method of operation attributed to that "indirect import system" was in fact carried out by Don Gilley.  Thus, Mr. Jinli admitted in his testimony: "There were deals that I would make with Yafiz and Shufersal and there were a few more directly, I would order the goods, it would just reduce the costs and I would all of them, in the same factories the same products, just send the same goods directly under their name directly from China in order to save the costs that it would come to me [...] They paid the factory in China" (transcript of the hearing of November 13, 2025, p.  383).

149. However, in light of my determinations below regarding the rejection of the plaintiffs' claims of counterfeiting products, the significance of the activity through the "indirect import system" is an attempt by Don Geely to save costs, including the payment of license fees to the plaintiffs under the license agreement , since these products are not reported as imported by Don Geely itself. The plaintiffs also mentioned this in their statement of claim as the first reason why, according to them, the same "indirect import system" was established (paragraph 62.1 of the statement of claim), and it was even raised in the plaintiffs' summaries (at para.  7).  This means that Don Geely must be charged the sum it would have been in charge if the license agreement had been fulfilled according to its provisions.  A hearing in this regard will be held later in the judgment.

Sixth Claim of Violation of the License Agreement - Manufacture of Counterfeit Models and Without Permission

150. The plaintiffs claim that any product manufactured during the period of the agreement without being reported and without paying a license fee necessarily amounts to a counterfeit product that entitles them to the negation of the defendants' profits. I am of the opinion that there is no substance to this argument and should be rejected for the following reasons:
151. First, as discussed at length above, the license agreement was valid between the parties until the end of 2015, and the defendants' activity during this period was carried out in accordance with the license agreement and its terms, including in accordance with the instructions of the plaintiffs' agent, Mr. Hasson. The fact that during this period of time this court found that the plaintiffs did not report truthfully about the FOB rate in a manner that reduced the rate of royalties owed by the defendants under the license agreement, does not amount to trademark infringement, but rather a breach of the license agreement, which is a contractual breach.
152. Second, on the merits of the matter, it was also proven before the court that all the approval of the models and everything involved in the production and distribution were approved by Ms. Boritz, on behalf of the plaintiffs. Thus, and as detailed at length above, Ms. Boritz confirmed in her testimony that she had no direct contact with any of the defendants and that she always acted with Mr. Hasson, and that Mr. Haddad and her managers at the plaintiffs also instructed her to act directly with Mr. Hasson.
153. In other words, the plaintiffs themselves determined the protocol of the approval process for the products marketed and sold by the defendants, and the defendants, through Global Brands and Mr. Hasson, who acted on behalf of the plaintiffs, acted according to his instructions. As noted at length above, although Mr. Hasson confirmed in his testimony that it was not his job to approve the models (minutes of the hearing of November 12, 2025, pp.  259, paras.  1-3; p.  292, paras.  8-9), but this does not detract from Mr. Hasson's status as the exclusive representative of the plaintiffs in their activity in Israel vis-à-vis the defendants in all matters relating to the granting of approval for the marketing and sale of products bearing the plaintiffs' brand.  In his own words: "I was an agent of [the plaintiffs]...  I am the emissary" (transcript of the hearing of November 12, 2025, p.  240, paras.  16-17).
154. Thus, Ginley, first and later Don Gilley, was the authorized and official franchisee of the plaintiffs' brand, and she acted to approve the products through the mechanism set by the plaintiffs, with the direct involvement of Mr. Hasson.
155. The defendants claimed that the approval process concerned the approval of a "prototype - master model", and that the approval received by Ms. Boritz through Mr. Hasson was approval for the use of the cut and logo in different sizes of the product and in different colors (paragraph 15 of the defendants' summaries).  This argument of the defendants was also supported by the affidavit of Mr. Hasson, the plaintiffs' board, which is also based on his experience, according to which "it was not required to bring to the attention of the brand owner a product that had already been brought to his attention when it was a different color and/or a different size (paragraph 45 of Mr. Hasson's affidavit).
156. The defendants claim that the plaintiffs' claim of "forgery" stems from the fact that the plaintiffs counted each catalogue number as a separate model or as a "separate infringement" (paragraph 16 of the defendants' summaries). The defendants further claimed that the plaintiffs based their claim regarding the existence of models that did not receive their approval on the SKU numbers (SKU ).  However, they claim that there is no connection between these numbers and models, and that the SKU number is not a model number, and that sometimes it is the same model that received Ms. Boretz's approval, as stated.  This claim was not contradicted by the plaintiffs.
157. I found that the plaintiffs did not bear the heavy burden placed on their shoulders to prove that the defendants counterfeited this or that there were products that did not receive Ms. Boretz's approval, through Mr. Hasson, who acted on behalf of the plaintiffs. Not only that, I found that the plaintiffs were unable to contradict the defendants' claim that each model that was approved was manufactured in a number of sizes and colors and received different part numbers, and that all the models received the plaintiffs' approval in accordance with the mechanism set by them, i.e., by Ms. Boritz through Mr. Hasson.

At this point, the plaintiffs chose not to submit evidence to support their claim of "forgery", including not an expert opinion on this matter, but rather made do with the testimony of Mr. Haddad and his son, Mr. Daniel Hadad, of the existence of various part numbers.  However, I am of the opinion that this does not lift the burden to substantiate the serious claim that these are counterfeits and the manufacture of various models that did not receive the approval of the plaintiffs, and the obvious conclusion in these circumstances is that this is a single model that received the approval of the plaintiffs and was manufactured in a number of sizes and colors, as claimed by the defendants.

158. Moreover, in his testimony, Mr. Hasson, who served as the plaintiffs' agent, supported the defendants' claim and testified that there was no forgery throughout the period of the license agreement. Hasson testified in his testimony that he closely supervised Don Gilley, visited their offices once a week, and supervised all the products produced, imported and sold by it (minutes of the hearing of November 12, 2025, pp.  244-248).  Since this was Mr. Hasson's obligation under the agency agreement, and since he served as the plaintiffs' long arm, I found his testimony acceptable in this matter, and I did not find it acceptable to accept the claim that any of the plaintiffs' products were counterfeited and marketed
159. It is not superfluous to note that this is a claim that was raised very late, and in any case not in real time, regarding the alleged infringing models. Thus, the defendants have operated in this method for years, and the plaintiffs, for their part, have refrained from taking any legal action against them, or at least in setting up an inspection and enforcement mechanism, including with regard to the action of the agent, Mr. Hasson, in order to enforce their interpretation of the agreement with regard to the mechanism for approving the products, and defining a product as counterfeit.  When the defendants acted with Hasson's approval in this manner for years, and the plaintiffs created a representation of authorization that was given to Mr. Hasson, then the defendants' reliance on this representation was found to be reasonable.

Additional Claims of the Plaintiffs

160. The plaintiffs claim the existence of the tort of passing off set forth in section 1(a) and the tort of false description set forth in section 2 of the Commercial Torts Law, 5759-1999 (hereinafter: the "Commercial Torts Law"). According to them, the existence of goodwill and a reasonable fear of deception have been proven, which are the foundations of the tort of passing off.  The plaintiffs claim that the tort of passing off exists because "the element of deception is formed by the very sale of counterfeit products that appear to be genuine", and because these are counterfeit products that were manufactured without the plaintiffs' permission or knowledge (paragraph 28 of the plaintiffs' summaries).
161. I am of the opinion that the argument should be rejected. As is well known, "despite the similarity between the tests according to which the existence of trademark infringement was determined and the tests regarding the tort of passing off, they do not require the same result in all cases" [See: Civil Case 1245/08 (Tel Aviv District) PUMA AKTIENGESELLSCHAFT RUDOLF DASSLER V.  CITY WASH IN A TAX APPEAL (NEVO, DECEMBER 2, 2013); Civil Appeal 3559/02 Toto Gold Subscribers Club in Tax Appeal v.  Sports Gambling Regulation Council, IsrSC 59(1) 873, 901 (2004)].  This is because "in contrast to the cause of action for infringement of the registered mark, which is anchored in the Trademarks Ordinance, the tort of passing off is not intended in essence to protect the consumer from the existence of the risk of deception in relation to the origin of the goods bearing the mark, but rather to protect the reputation and good name of the trademark owner." [See: Amir Friedman, Trademarks - Law, Rulings and Comparative Law, Vol.  1 1033 (2010)].
162. I am of the opinion that as stated at length above, it has not been proven that counterfeit products were manufactured or marketed by any of the defendants, and in any case it has not even been proven that the reputation of the plaintiffs' brand was damaged as a result of the defendants' activity, and all the more so that no reasonable fear of misleading has been proven. All of this is sufficient to bring about the rejection of the claim that the tort of passing off exists.  The claim of the existence of the tort of false representation was made in a weak and general manner, and thus it is not sufficient to accept it, and it is even liable to be rejected.
163. The plaintiffs claimed a breach of the territorial limitation set out in the license agreement, because it was proven that the defendants had carried out "circular sales transactions" through third parties outside of Israel, and that this was a fundamental violation outside the territory and that they directed the indirect import activity while circumventing the license agreement. I am of the opinion that this claim, which was also made in a weak and general manner, has not been proven by the evidence, and in any event, with regard to that "indirect import system", the conclusion that was determined above with regard to the breach of the duty to report the scope of imports under the license agreement is necessary.  However, this is not sufficient to establish a claim of violation of the territorial limitation, and even the plaintiffs do not refer to the same evidence on the basis of which this claim has been "proven", according to the claim.  Therefore, this argument should be rejected.

Lifting the Curtain

164. The plaintiffs petition in their summaries (at paragraph 38) to lift the veil by virtue of section 6(a) of the Companies Law, 5759-1999 (hereinafter: the "Companies Law"). According to them, it was proven that the use of Don Gilley's legal personality by Mr. Ginley and Mr. Rosen, as shareholders, was done in a manner that could defraud and deprive the plaintiffs, while emptying the company of its assets and taking an unreasonable risk as to its ability to repay its debts.  It was argued that Mr. Jinli was the living spirit, the issuer and the importer and the dominant factor in the connection with the plaintiffs, while Mr. Rosen was a full partner in the fraudulent acts, was familiar with the dispute through the warning letters and the lawsuit and refrained from taking action to stop the infringements, and therefore Mr. Rosen should be attributed awareness, at least by virtue of turning a blind eye under section 6(a)(2) of the Companies Law.

The plaintiffs also claim that lifting the veil is necessary in order to prevent a rewarded sinner.  According to them, in any case, this is a very small company that is managed as a partnership based on friendship and trust, and therefore the lifting of the corporate veil in a minority company should be examined in a "liberal" manner, and Don Gilly should be viewed as a type of partnership in which the partners are liable jointly and severally for damage caused to a third party.

165. The defendants claim that lifting the veil is an exceptional and extreme remedy that is given in exceptional cases in which fraudulent proof, smuggling of assets, misuse of the separate legal personality or particularly severe behavior that justifies the cancellation of the separation between the company and its shareholders or managers. According to them, it has not been proven that the separate legal liability was abused, and it has been proven that Mr. Ginley and Mr. Rosen acted in good faith in the framework of their duties without any intention of defrauding, without any personal involvement in material decisions, and without any action that would justify deviating from the basic rule of separate legal liability.
166. As for Mr. Ginley, it was claimed that he acted throughout the years of the engagement in accordance with the instructions he received from the plaintiffs' shipment - Mr. Hasson, who was the only entity with whom the defendants worked and who provided them with instructions, approvals, models, requirements and amendments. In any case, he himself did not make independent decisions in contravention of the license agreement, did not initiate the production of products that were not approved, did not conceal information, and did not act behind the backs of any of the parties.  All of his actions were transparent, documented, and based on the instructions he received from Mr. Hasson.  It was also argued that the plaintiffs' claim that Mr. Ginley acted without authority is inconsistent with the fact that the plaintiffs themselves acted through Mr. Hasson alone for years, receiving reports, royalties and approval of models by him.
167. As for Mr. Rosen, it was claimed that he was not a party to the agreement, did not participate in the negotiations, was not a shareholder and manager, did not make business decisions, and was not involved in the commercial or legal aspects of the engagement. It was claimed that his entire position was a warehouse worker, who engaged in logistics, packaging, receiving and shipping goods without any authority to make material decisions or to be involved in the design, production or connection with the plaintiffs.  The plaintiffs' attempt to attribute personal responsibility to him exceeds any standard of reasonableness and testifies to an attempt to exert unfair pressure on the defendants while widening the front against someone who has no legal or business connection to the dispute.
168. I am of the opinion that in the circumstances of our case there is no justification for lifting the corporate veil, and I do not accept the plaintiffs' argument that the actions of defendants 2 and 3 within the framework of the company were in an abuse of the principle of separate legal liability. And I will reason. 
169. Section 4 of the Companies Law states that a company is a legal entity capable of any right, duty and action that is consistent with its character and nature as a incorporated body. The company's independent legal personality is based on a barrier that separates it from its shareholders.  This buffer also derives from the corporation's limitation principle, which means that the company's shareholders are limited liability and are not liable for the company's debts.  This buffer is perceived as one of the important characteristics of the company [see: Civil Appeals Authority 66369-02-25 Investment and Trade Cells in Tax Appeal v.  Fishman, para.  13 (Nevo, July 2, 2025) (hereinafter: "Investment Cells Case") and the references therein].
170. Despite the existence of the aforementioned buffer, the law recognized the possibility of lifting the corporate veil in situations in which it can be said that the corporate veil has been misused. It has been held more than once that "the remedy of lifting the veil is an extreme and far-reaching remedy, which must be used with the utmost caution in exceptional cases and not as a matter of routine" [see: Civil Appeal 3807/12 Ashdod City Center K.A.  in Tax Appeal v.  Shimon, para.  56 of the judgment of the Honorable Justice Danziger (Nevo, January 22, 2015) (hereinafter: "the Ashdod City Center Case")].
171. Section 6(a) deals with the possibility of "full" lifting of the corporate veil, as follows:

")a) (1) A court may attribute a debt of a company to a shareholder thereof, if it finds that in the circumstances of the case it is just and correct to do so, in the exceptional cases where the use of the separate legal personality is made in one of the following: