A judgment handed down by the Tel Aviv District Court earlier this month has held individual directors personally liable for trademark infringement.
In a ruling handed down on June 2 in Lifestyle Equities et al v Don Gili, the court handed the claimant, the owner of the ‘Beverley Hills Polo Club’ (BHPC) brand and trademark, NIS 3 million ($1 million).
The court’s decision is a departure from historical outcomes in Israeli trademark litigation, which have traditionally leaned toward more conservative awards or statutory caps, according to Yossi Sivan, founder of Yossi Sivan Law Firm, who led the case for Lifestyle Equities.
The case centred on registered trademarks for ‘Beverly Hills Polo Club’ - a lifestyle brand established in Los Angeles and owned by Lifestyle Equities and Lifestyle Licensing.
According to the judgment, in 2010, BHPC entered into a licensing agreement granting a local licensee, Don Gili Co, the right to manufacture and distribute apparel under the BHPC trademark, subject to restrictions.
Lifestyle Equities claimed that an accounting audit revealed that the licensee had underreported its direct import volumes to evade a 10% royalty fee.
Lifestyle Equities terminated the agreement. However, it claimed the licensee’s directors and shareholders continued importing, marketing, and distributing the trademarked items without a licence.
A court-appointed expert evaluation confirmed that the licensee had failed to report up to 13 million NIS ($4.3 million) in direct import volumes.
The court’s decision found that the defendant had systematically underpaid its contractually mandated royalties and that BHPC was entitled to the complete gross profits from the unauthorised use of its trademarks post-termination of the agreement.
The court also held the company’s individual directors and shareholders personally, jointly, and severally liable for the trademark infringement.
According to the court, because the directors had explicit knowledge of the contract termination, the decision to continue trading constituted trademark infringement and removed their corporate immunity.
The court ordered Don Gili Co to pay approximately NIS 1.6 million for unpaid past royalties and contractual breaches discovered during the pre-termination audit period, plus legal expenses.
Shalva Gineli and Ilan Rozen, directors at the company, were held liable to pay around NIS 1.4 million.
The judgment marks a departure from a UK case involving the same claimant.
In 2021, the UK Supreme Court tackled a similar question in a case in which Lifestyle Equities had sued a group of defendants.
In that decision, the court found that Kashif and Bushra Ahmed, the directors of the defendant companies, were not personally liable for trademark infringement because they did not personally receive profits from the torts nor had the requisite knowledge for accessory liability.
Managing IP sat down with Sivan to discuss the Israeli case, how he came to work with the client and what happens next.
How did you come to work with the client?
We have represented the client for many years, advising on trademark enforcement, customs seizures, and brand protection matters in Israel.
How did you prepare for the hearing?
Given the complexity of the case, the number of witnesses, and the extensive financial evidence, we devoted more than two weeks exclusively to preparing for the cross-examinations. This involved a meticulous review of accounting records, forensic reports, financial data, and the relevant case law across the numerous legal issues raised throughout the proceedings.
What was the strategy for deciding on the team that would work on this case, including who would lead the arguments in court?
In a case that spanned more than a decade, continuity was essential. We ensured that the attorney with the deepest knowledge of the facts, evidence, and procedural history led the advocacy before the court.
What is the significance of this case?
The judgment is one of the largest trademark awards ever granted in Israel, exceeding NIS 3 million. More importantly, the court imposed personal liability on company directors for trademark infringement, sending a strong message that corporate structures will not shield individuals who knowingly continue infringing activities.
What were the greatest challenges during this case? How did you overcome them?
The principal challenge was tracing and reconciling large volumes of evidence, including forensic data, financial records, quarterly reports, and import documentation. This required extensive collaboration with forensic accountants and financial experts over many years.
Did anything go wrong, or is there anything you would have done differently?
Given the scale and duration of the proceedings, there are always lessons to be learned. However, the outcome ultimately validated the strategic decisions made throughout the litigation.
How do wins like this help the firm gain new clients/prove its credentials in these types of disputes?
Results speak louder than rankings. Landmark judgments such as this demonstrate our ability to manage complex, high-value brand enforcement disputes, recover substantial damages, and develop innovative strategies that deliver meaningful commercial outcomes for clients.
What are the next steps (if any)?
The focus now shifts to the enforcement and collection of the judgment. If necessary, we will pursue the realisation of the asset seizures and attachments that were secured during the proceedings to ensure recovery of the award.
