How a US Brand Recovered Its Israeli Trademark From Its Distributor

Result: Israeli registration assigned to the US owner and recorded at the Israel Patent Office, a USD 220,000 demand defeated, and NIS 6.4M of annual Israeli sales protected · Timeline: 11 months from cancellation filing to recorded assignment · Challenge: Distributor registered the principal's brand in its own name · Authority: Registrar of Trade Marks (Rasham HaSimanim HaMis'choriyim), Israel Patent Office · Financial Impact: USD 220,000 demand avoided and a NIS 410,000 container released

Background

Our client was a family-owned skincare manufacturer in Brooklyn with a US trademark registration dating from 2016 and distributors in nine countries. In 2018 it appointed an Israeli importer on the strength of a two-page purchase agreement drafted by nobody in particular, covering price, minimum order quantities and payment terms. There was no clause about the brand. Over six years the importer built the line into the pharmacy chains and a national cosmetics retailer, reaching about NIS 6.4M of Israeli sales a year. In late 2025 the American company decided to add a second distributor for the online channel. The importer's response arrived by email eleven days later: a scan of an Israeli trademark registration certificate in the importer's own name, filed in 2019 and registered in March 2020, and an offer to assign it for USD 220,000. In January 2026 a container of the client's goods was detained at Ashdod port. The client's US counsel, who had never had occasion to deal with the Israeli register, called us that week.

The Challenge

The Trade Marks Ordinance [New Version] 5732-1972 (Pkudat Simanei HaMis'char) is territorial in the ordinary way. A United States registration confers no rights in Israel, and the fact that the American company created the brand, owns the artwork and manufactures the goods does not by itself give it anything on the Israeli register. What the importer had done is common enough to have a name in practice, and the register does not screen for it: the Registrar examines whether a mark is distinctive and whether it conflicts with earlier Israeli rights, not whether the applicant is entitled to the brand as against a foreign principal who has never filed.

Timing was the first real problem. Section 39(a) of the Ordinance allows an interested party to apply to cancel a registration, but that route closes five years after registration. The mark was registered in March 2020, so by the time the client instructed us the five years had gone. The second problem was the container. Under Section 69A of the Ordinance, the proprietor of a registered mark may ask the Director of Customs to detain goods that appear to infringe, and Section 200A of the Customs Ordinance gives customs the power to hold them. The importer had lodged that notice. From the client's side of the Atlantic it looked like a company that had lost control of its own brand in a market it had spent six years building, and the USD 220,000 was starting to sound like a business decision rather than a ransom.

In Practice: Section 39(a) of the Trade Marks Ordinance 1972 shuts the ordinary cancellation route five years after registration, but Section 39(a1) allows an application to remove a mark on the ground that it was not filed in good faith to be brought at any time. The official fee to the Registrar of Trade Marks (Rasham HaSimanim HaMis'choriyim) at the Israel Patent Office is NIS 959 per class in 2026. A contested cancellation runs through a counter-statement, affidavit evidence, cross-examination and written summations, and takes 18 to 30 months to a decision, with an appeal to the District Court after that.

What We Did

The first day was spent on the register rather than on the client's grievance. We pulled the file wrapper for the importer's registration, confirmed the filing date, the class, the specification and the fact that no assignment or licence had ever been recorded against it, and confirmed that the client itself had nothing on the Israeli register at all, not even a pending application. That last point had a fix that did not depend on beating the importer, and we took it immediately: we filed the client's own applications in class 3 for the goods and class 35 for retail services, at NIS 1,904 for the first class and NIS 1,432 for the second, with our office as the Israeli address for service that a non-resident applicant is required to furnish.

Then we filed the cancellation. Section 39(a1) was the whole case, because it is the one ground with no limitation period, and because the facts fitted it. The evidence was almost entirely the client's own commercial file: the 2018 appointment correspondence, six years of purchase orders showing the importer buying branded finished goods from the client, the artwork and packaging files the client had emailed to the importer in 2018, and the US registration from 2016 predating the Israeli filing by three years. A distributor who applies for its principal's brand in its own name, while buying that brand from the principal, and without telling the principal, is not filing in good faith, and Israeli practice treats that as the paradigm bad faith case. We pleaded two alternatives so the file did not stand on one leg: Section 11(6), which protects a well known mark in Israel even where it is unregistered, and passing off under Section 1 of the Commercial Wrongs Law 1999.

The container moved faster than the register, because the customs mechanism has short fuses in both directions. Once customs detains goods under Section 200A, the proprietor who requested the detention has to deposit a guarantee fixed by customs within three days of the notice and file an infringement action within ten days. The importer did neither. It had assumed, we think, that the notice alone would be enough leverage. The container was released after nine days, having accrued about NIS 1,900 a day in storage and demurrage at Ashdod on goods with a landed value of roughly NIS 410,000.

In Practice: Under Section 69A of the Trade Marks Ordinance 1972 the proprietor of a registered Israeli mark can ask the Director of Customs to detain suspected infringing goods, and Section 200A of the Customs Ordinance empowers customs to hold them. The proprietor must then deposit a guarantee fixed by customs within three days of the notice and file suit within ten days, or the goods are released. Our client's container, carrying about NIS 410,000 of stock and accruing roughly NIS 1,900 a day at Ashdod, was released on the ninth day when the importer posted nothing. Border detention in Israel is a weapon with a very short handle, and a distributor who reaches for it without instructing an Israeli lawyer usually drops it.

The Outcome

The importer filed a counter-statement, and its evidence made our case rather than its own. It exhibited the same purchase orders we had exhibited, on the theory that they proved it had built the brand in Israel, and in doing so it put beyond argument that every unit it had ever sold came from our client. Settlement discussions opened after the evidence rounds closed. At month eleven the importer assigned the Israeli registration to our client, the assignment was recorded at the Israel Patent Office, and the cancellation proceeding was withdrawn by consent. No money passed for the mark. The commercial trade was a nine-month period in which the importer could sell down its remaining stock at agreed prices, which it wanted anyway, and a mutual release. The client's own two applications proceeded and now sit alongside the assigned registration.

Total official fees came to NIS 4,295 and our fees to NIS 78,000, against a demand of USD 220,000, roughly NIS 800,000, and against Israeli revenue of NIS 6.4M a year that had been hostage to a certificate the client had never seen. The client also had the answer to the question its board asked at the first call, which was how this happens to a company with a competent US trademark portfolio. It happens because a US registration stops at the water's edge and because a distribution agreement without a brand clause is an invitation. Our guide to protecting intellectual property in Israel as a foreign business sets out the clauses that would have made this a non-event.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. File in Israel before you appoint a distributor, not after the relationship sours. A direct national application costs NIS 1,904 for the first class, and Israel can also be designated through the Madrid Protocol from a US base mark, which is cheaper still across a portfolio.
2. Put a brand clause in the distribution agreement. It should state that the principal owns the marks, prohibit the distributor from applying for them anywhere, and require assignment on demand of anything registered in breach. Two sentences would have removed six years of exposure here.
3. The five-year cancellation window in Section 39(a) is not the end of the road. Section 39(a1) lets a bad faith registration be attacked at any time, and a distributor who registers its principal's brand while buying that brand from the principal is the classic fact pattern.
4. If your goods are detained at an Israeli port, check whether the party that requested the detention has posted the customs guarantee within three days and filed suit within ten. A great many detention notices are bluffs that expire on their own.
5. A non-resident can own an Israeli trademark outright, but must furnish an Israeli address for service. Appointing a local agent for that purpose is a formality, and it is also the mechanism by which you find out early that somebody else has filed your brand.

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