A non-Israeli company, which holds the rights to an international brand, claimed that Israeli companies breached a license agreement and infringed upon its trademark by manufacturing and marketing products bearing the brand without its authorization. The Israeli companies argued that they had acted lawfully under explicit authorization received from the company's exclusive local representative in Israel.
The Court accepted the lawsuit on the grounds of trademark infringement, finding that the manufacturing and marketing activities were carried out without legally valid consent from the trademark owner. Under the Israeli Agency Law, "a person's agent is as himself." When an agent (such as a local representative) acts within the scope of either actual authority or apparent authority on behalf of the principal, their actions bind the principal for all intents and purposes. Apparent authority is created when the principal represents the agent to third parties as having the authorization to act on its behalf, or allows such a public representation through its own conduct. However, when an agent (the local representative) completely exceeds both its actual and apparent authority such as by granting manufacturing and usage rights for a trademark without the intellectual property owner's consent its actions do not bind the principal. The Israeli companies' reliance on the approvals of a representative who acted in extreme excess of their authority does not grant them immunity. As no lawful authorization was granted by the actual rights holder, the Israeli companies' actions amount to a direct infringement of the trademark under the Trademarks Ordinance.