Israel: The First Israeli Decision In The Contest Between Trademarks And Domain Names

In the first decision of its type, in MF 54749/99, OM 10909/99, Cellcom Israel Ltd v. T.M. Aquanet Computer Communications Ltd et al, the Tel Aviv District Court last week considered the relationship between trademarks and Internet domain names. The decision was awarded by His Honour Judge Yehuda Zafet on an application for a temporary injunction. Its result was the same as in the majority of cases in the USA - the registered trademark owner emerged with the upper hand.

Cellcom.net.il? Name Taken.

Cellcom is Israel's leading cellular company. Aquanet is an Internet service provider. In April this year it registered the "cellcom.net.il" domain name (and, incidentally, not content therewith, it also registered the names of the two other cellular companies operating in Israel, Pelephone and Partner-Orange, as domain names with the "net.il" suffix). Aquanet used the address for two sites - at one, www.cellcom.net.il there was a form to join Aquanet's service that makes it possible to read e-mail on the user's mobile phone screen. The other was Aquanet's usual home site (aquanet.net.il), to which the domain name cellcom.co.il, without the "www" prefix, pointed.

According to the registration rules of the Israeli Internet Society (isoc.org.il), which is responsible for the registration of domain names in Israel, the "net.il" suffix is allocated solely to the holders of a licence from the Ministry of Communications permitting them to provide internet services. Aquanet registered the domain name in dispute a few days after Cellcom's application to register it had been declined. In response, Cellcom applied to court against Aquanet, its director and shareholder for them to be restrained from using its trademark on the Internet and for ownership of the domain name to be transferred to it. The Israeli Internet Society was joined in the application as a formal respondent.

Cellcom based its claim on several causes, one of which was passing-off. Section 59 of the Civil Wrongs Ordinance provides that:

According to Cellcom, what Aquanet had done constituted the conversion of its name and by exploiting its immense goodwill, it was aimed at misleading the consumer public to believe that the sites operated by the Respondents on the Internet belonged to the Applicant or were are at least connected with it. In this way consumers seeking Cellcom's site on the Internet would instead find the infringing sites.

The Respondents did not dispute the goodwill accrued by Cellcom but pleaded that the goodwill had been accrued in the sphere of cellular phones rather than the Internet. In answer, the Court adopted the defence provided to trademarks whose power is so great as to go beyond the particular products with which the trademarks deal (G. Ginat, Passing-Off, p. 17; Y. & H. Kalderon, Israeli Trademarks, p.159). "The huge investment made by Cellcom in advertising its name has made the 'Cellcom' brand name something well known in Israel", held the Court. "The fact that Cellcom does not yet engage in the Internet sphere does not negate the existence of the goodwill element….As a result of Cellcom's great investment in advertising its name and the immense goodwill that it enjoys, it would be absurd to require it, if it wishes to expand its business into providing Internet services, as it states that it intends to do, to choose itself a new name instead of the one of which the consumer is aware and to invest again in advertising it, merely because another company that operates in the sphere came first and made use of the name, unlawfully enjoying the immense goodwill that it has accrued." Moreover, the Court held as a matter of fact that the services offered by Aquanet at the disputed sites were cellular phone services, and even the Respondents did not dispute that this was the sphere of business in which the Applicant had accrued goodwill.

As regards the concern of misleading the public, which is also a necessary element of the tort of passing-off, Aquanet asserted that the use of the "net" suffix is unique to Internet providers in Israel, compared with the "co.il" suffix that is used by commercial sites. According to it, the suffix distinguishes the Cellcom site from its own and precludes the possibility of misleading the public. The Court dismissed the argument. The "net" or "com" suffix, it held, indicates the type of service provided, rather than the nature of the company. Since a company can own two suffixes at the same time, they are not such as to constitute a sufficient distinguishing feature so as to avoid the concern of misleading the public. "It appears to me that any service offered to the public at a site that includes the Applicant's name, will be linked in the public's mind with Cellcom and the services provided by it", it held. It dismissed the argument that Israeli Internet users are aware of the difference between the suffixes and held that the "net" suffix, that is common to many domain names, gives rise to a serious concern of misleading the public in connection with the source of the service provided.

Although Cellcom does not deal in the Internet, because of its great investment in promoting its name, the Cellcom name has become one of the best known marks in Israel, the mark per se being meaningless and having been completely unknown to the public before the Applicant began using it. For that reason the public or some of it might believe that Cellcom has expanded its business into the Internet or alternatively is co-operating with Aquanet.

Aquanet contended that its circle of customers is different from Cellcom's. This argument was also dismissed in view of the fact that the Respondents themselves had agreed that the easiest way to reach the site of a particular company is to try to find its address by keying in its trade name or trademark, together with the appropriate suffix.

Aquanet argued that it had chosen the infringing domain name in good faith and with the intention of providing a service for cellular phones. As evidence, it adduced the fact that it had also acquired the domain names of Cellcom's competitors, Pelephone and Orange, with the "net" suffix. The Court found it difficult to understand why Aquanet could not provide the service stated by it (displaying e-mail on the cellular phone screen) by using its own trade name.

Goodwill is defined in Israeli legislation and case law as an asset that is the property of its owner. The owner of the goodwill may therefore require anyone with no right in it to refrain from infringing his property right. The use of Cellcom's name in Aquanet's domain name constituted an infringement of the Applicant's property rights and it was decided that Cellcom had also indicated prospects of winning its action on the cause of conversion of goodwill.

Having held that the balance of convenience also tended in favour of Cellcom, Judge Zafet allowed the application and ordered the Respondents forthwith to stop operating the Internet sites bearing the "cellcom.net.il" domain name. It ordered Aquanet, its director and shareholder to pay Cellcom's costs of NIS 20,000.

A few notes incidental to the decision - although similar actions have been brought in the Tel Aviv District Court before, until now there had been no judicial decision because they had either been settled (Yahoo, Inc. v Yahoo Israel, Internet Law, 9th August 1998) or judgement was awarded in default of defence (in the claim by the Japanese company Aiwa against those who had registered the domain name "aiwa.co.il").

As at 12th September 1999, the infringing site was still open, a form appearing at both addresses (cellcom.net.il and www.cellcom.net.il) to subscribe for Aquanet's services. The site titles specifically state that it is a new Aquanet service. It is doubtful whether it could be mistakenly believed that Cellcom is party to the service.

Nevertheless, a trademark vests an exclusive right in respect of the goods concerning which it is registered (section 46 of the Trademarks Ordinance). Prima facie this would have sufficed to preclude the use of the "cellcom.net.il" domain name by a site concerning cellular phones, without having to go into the tort of passing-off. Since the Cellcom mark does indeed have immense goodwill, it is doubtful whether it can be used even as the domain name of a site concerning something completely different, because of the protections afforded to trademarks that are exceptionally well known.

Although passing-off was at the centre of the decision herein, it was tied up with considerations from the area of trademark law. The immense goodwill of the Cellcom name, alongside the fact that the Respondents used the domain name for a service directly connected with cellular phones, tipped the scales in favour of the Applicant. It is doubtful whether this decision would also be proper in cases where little known trademarks are involved, when the infringing domain name is used for a site fundamentally different from the subject matter in respect of which the mark has been registered.

First published in September 1999