Supreme Court orders rights holders to fund destruction of infringing goods if importer defaults

In accordance with Section 200A of the Customs Ordinance, which was passed in 1999 to bring Israeli law into line with the Agreement on Trade-Related Aspects of IP Rights (TRIPs), Israeli Customs detained a shipment of fake Christian Dior couture shoes and informed Dior, which initiated proceedings against the importer and provided bank guarantees of NIS5,000. Dior claimed that the bank guarantees could be used to compensate the defendant only if the court dismissed the copyright and trademark infringement charges. Customs claimed that the money could also be used to cover the costs of storing and destroying the goods should the importer disappear.

District Court Judge Abraham Yaakov (who also ruled in a similar case concerning Levi's jeans) held that the shipment was to be destroyed by the importer, which would bear the expenses. However, he went on to rule that Customs (ie, the taxpayers) should bear the costs of storing and destroying the infringing goods should the importer default.

The Supreme Court reversed this judgment and ruled that rights holders should bear the cost of storing and destroying infringing goods where Customs cannot collect from the importer. The court saw no justification to use public funds to cover the cost of protecting private property. It interpreted Section 200A of the Customs Ordinance, which complies with Section 53(1) of TRIPs, as allowing Customs to use the bank guarantee for such purpose. The decision was issued by Judge Asher Gronis. Judge Elyakim Rubinstein concurred, but also recommended that the government consider requesting further guarantees from importers to cover the rights holder's expenses or using other means to facilitate collection, such as withholding tax rebates (Israel Customs v Christian Dior Couture, 3960/10).