Legal Updates

A distributor does not acquire rights in a trademark merely by investment in the brand or creation of brand reputation in the territory

February 11, 2021

A distributor of the Berkline furniture line in Israel has registered a trademark in its name pertaining to the products distributed. After the product manufacturer and brand owner overseas was acquired by a third party, the third party filed a motion to strike out the registered trademark.
The Trademark Registrar held that the mark was registered by the marketer in bad faith and therefore should be deleted. A trademark normally belongs to the brand owner and manufacturer of the products. Even when the local distributor invested significant time and resources in building and creating a local market for the product and establishing the brand’s reputation, it can not be viewed as having acquired the rights in the trademark or the reputation associated with it and there is a separation between the reputation of the distributor and the reputation of the brand. The distributor's investment gives it a reputation as a distributor only, and can be expressed in the fact that the consumer, when considering purchasing the product, will give weight to the fact that the product is sold by the distributor due to the price or quality of service attributed to the distributor. A distributor who submits an application for registration of a trademark owned by the manufacturer with whom it has a business relationship, acts in bad faith, even if the mark of the manufacturer has not yet acquired a reputation in the territory. Here, the distributor and the brand owner have never agreed on the transfer of rights in the brand or on the registration of a trademark under the distributor's name. Moreover, the distributor acted for many years without trademark registration, and acted to do so only when it became aware that the brand owner was about to be acquired by a third party and therefore the distributor acted in bad faith when it applied to register the trademark, and the trademark should to be deleted.