Legal Updates

One can not grant or limit rights in intellectual property which were not expressly granted or limited in the agreement.

July 5, 2021

A company was established under a founders agreement which granted it the right to use a certain brand by one of the founders. After the founder sold his holdings he began making parallel use of the brand.

The Court denied the motion and held that the founder was entitled to continue using the brand. When an intellectual property right is granted in an agreement, the rights beyond what is expressly stated in the agreement should not be granted or restricted, and a distinction must be made between granting a right of use and transferring ownership of the intellectual property in full. The granting of a right of use lacks features such as restrictions on competition, and insofar as it does not explicitly state this, does not include exclusivity or preclude parallel use. Moreover, as long as the brand is a successful one, with monetary value, it can be assumed that the transfer of ownership of the brand's intellectual property, as opposed to the grant of a right of use, will be made for a significant consideration. Here, the agreements between the parties did not include any explicit restrictions on parallel use and did not give the company exclusivity in the use of the brand. The founders agreement at most granted the company the right to use the brand and did not transfer all ownership of it to the company. As such, granting such a right of use does not prevent the founder, who is identified with the brand and operated it for many years before establishing the company, from making use of it. In addition, as the founder's holdings were purchased through a compromise between the parties for a sum of only ILS 50, such consideration cannot be viewed as sufficient and appropriate for the purpose of transferring full ownership of the brand as part of the compromise between the parties and any contrary assertion will lead to the brand, which stood at the basis of the engagement between the parties in the first place, being dispossessed of its value. Therefore, the founder may use the brand for as long as he does not use the company's unique characteristics such as the brand inscription in Hebrew letters, the company's customer list and the company's Internet business card.