Does a parodic television commercial referencing a competitor's television commercial infringe the competitor's rights?

That was the core question deliberated by the Israeli Supreme Court in a recent judgement[1] rendered in an appeal dealing with a commercial of Espresso Club, which bore a strong resemblance to television commercials of Nespresso, starring actor George Clooney.

Unfolding of events: Nespresso is a world renowned provider of coffee/espresso brewing machines and matching coffee capsules. The face of Nespresso's advertisements is the celebrity American actor George Clooney, who appeared in many television commercials for the Nespresso brand. In the majority of the Nespresso brand commercials, Clooney is seen in luxurious settings, surrounded by people wearing expensive clothes, driving luxury cars and drinking Nespresso Coffee. While Clooney seems to think that everyone around him admires his fame and reputation, it turns out that the attention of those around him is, in fact, directed towards Nespresso's fine coffee ("the Nespresso commercials").

Espresso Club is an Israeli company selling coffee/espresso brewing machines and matching coffee capsules under its own brand.                

The Nespresso commercials provided the setting for Espresso Club's series of television commercials, featuring a Clooney look-alike and advertising a new deal, which includes payment only for the capsules, while the brewing machine itself is acquired supposedly free of charge. The main Espresso Club commercial ("the EC Commercial")[2] opens with the words (in Hebrew): "In the following commercial the performer is NOT George Clooney". In addition, whenever the said performer is seen, the words "The performer is not George Clooney" (in Hebrew) appear on the screen. The actor in the EC Commercial mimics Clooney's look, outfit and personality as seen in the Nespresso Commercials. The character featured in the EC Commercial is ridiculed for his look and behavior. For example, in the EC commercial, his car is towed away, apparently because he spends all of his time staring at women and talking to himself. Eventually, the EC Commercial ends with a new deal offered by Espresso Club.

In response to the EC Commercial, Nespresso filed a claim at the District Court, claiming, inter alia, the following:

  1. While Nespresso did not register the image of George Clooney as a trademark, his image is inseparable from the Nespresso brand and its associated goodwill.
  2. The EC Commercial dilutes the Nespresso trademark, harms the brand's identity and erodes Nespresso's image in the eyes of the public which distinguishes and differentiates the brand.
  3. As George Clooney is widely identified with Nespresso and its reputation, the use of George Clooney's double is an attempt to introduce such product or service as related to the Nespresso product or service, and therefore, qualifies as passing off.
  4. Espresso Club infringes the copyrights of Clooney's character, and other elements, as portrayed in the Nespresso Commercials.

Nespresso's claim was denied by the District Court and Nespresso appealed to the Supreme Court. The Supreme Court, much like the District Court, denied the appeal.

In a long and tailored decision rendered by Justice Hendel, with the concurrence of Justice Solberg and Justice Karra, the Supreme Court provided an in-depth overview of Israeli case law, foreign case law and the principles of Jewish law, and addressed new issues in the intellectual property field.

Trademark Infringement

As for Nespresso's trademark infringement claims, the Supreme Court determined that the use of an image which resembles the blurred Nespresso mark does not constitute "use" of said mark, since it was almost impossible to identify it in the EC Commercial. In obiter dictum, the court held that even had Espresso Club used said trademark, it should be considered whether a derogatory non-misleading use of a trademark constitutes a trademark infringement (suggesting that a former Supreme Court landmark decision, prohibiting such use, should be re-thought). As for the claim that the Nespresso stores' setting constitutes a non-registered well-known trademark, the court held that such claim was not factually established. Furthermore, even if the stores' setting was a well-known non-registered trademark (and the question of whether such setting may constitute a non-traditional mark was left open), the protection awarded to such trademark is only vis-à-vis a misleading use (while the protection awarded to a registered well-known trademark is also vis-à-vis a non-misleading use). As for the claim that Espresso Club infringed Nespresso's trademark by riding the goodwill associated with said mark, through the use of the Clooney look-alike, whose character is associated with the brand, it was held that an unauthorized use of goodwill (without trademark use) does not constitute trademark infringement.

In addition, both Nespresso's claims for dilution of its goodwill were rejected. The first argument, whereby the use of Clooney's look-alike eroded Nespresso's reputation and linked Clooney's character to the competing brand ("dilution by blurring"), was rejected on the grounds that the dilution doctrine was subsumed into the Israeli Trademarks Ordinance [New Version], 1972 ("the Ordinance") through the legislative protection of a registered well-known trademark. Hence, dilution of a trademark should be examined from the point of view of the Ordinance's provisions and there is no separate protection through the dilution doctrine. Dilution of a trademark (namely, infringement of a registered well-known trademark) involves the use of a mark or a similar mark and not the use of goodwill, per se. In the present case, there is no use of a registered well-known trademark. The court left undecided the question of whether dilution may exist where there is no likelihood of confusion and both marks are used for goods of the same description. The second argument, whereby the use of Nespresso's mark tarnished Nespresso's trademark and diminished its value ("dilution by tarnishment"), the court expressed the opinion that such dilution may be actionable only in the case of use of a well-known registered trademark (i.e. use of reputation alone shall not suffice), which indicates a connection between the said mark and the goods subject of the infringing use and is likely to financially damage the trademark owner (which damage must be established by solid evidence). It was clarified that a causal connection must exist between the use of the trademark and the damage to its owner; thus – where the damage is a result of a cause other than the use of the trademark itself, such as competition or criticism, the trademark use does not amount to trademark infringement (though the trademark owner may find redress through different causes of action).         

Copyright Infringement and Fair Use

The Supreme Court was willing to accept Nespresso's claim, whereby the Nespresso Commercials as a whole and the character played by Clooney in particular constitute protected works. The court then examined Nespresso's claims regarding copyright infringement in such works. It ruled that the EC Commercial should be classified as a "derivative work" – an original work which is fundamentally based on the Nespresso Commercials (and which requires the viewer's familiarity with them to be properly understood).

Under Israeli law, a derivative work may infringe the creator's exclusive right to his work. Nevertheless, Section 19 of the Copyright Law, 2007 ("the Law") permits the use of a protected work under the "fair use" exception, for various "justified purposes" as outlined in the Law, such as self-study, research, criticism, teaching, and more.                                                                                         

Addressing the issue of use of a work for parody, Justice Hendel noted that although a work may be criticized without using it, criticism through parody promotes the public interests in allowing criticism and freedom of speech and occupation, hence it should, in the appropriate cases, be acknowledged as fair use. It should, however, be verified that the use is indeed made for criticism rather than a free-riding use disguised as criticism. Where there is more than one purpose for the use – the dominant purpose should be criticism. In the present case it was determined that the purpose is indeed criticism, ultimately aiming to create a new reputation, distinguished from Nespresso's reputation.  

The court clarified that once it is determined that the use is made for a justified purpose, it should be considered whether the use is fair, taking into account the considerations listed in Section 19 and possibly additional relevant considerations:

  • the purpose and nature of the use - whether it is a transformative and novel use – parody being the prominent example of a transformative use; whether it is a commercial or non-commercial use – though a commercial use may constitute fair use, a non-commercial use is more likely to amount to fair use;
  • the nature of the work being used - this will be a significant consideration only in unique circumstances, e.g. – a work which has not yet been published or having a major cultural value, a famous work, etc.;  
  • the quantitative and qualitative extent of the use - this is a proportionality test. In certain circumstances, use of the entire work may constitute fair use while in other circumstances, use of a portion of the work will be considered an excessive use;
  • the influence of the use against the value of the work (rather than the value of the product that the work promotes) and the potential market for the work. This criterion may be difficult to implement in the case of a derivative work, since evaluating the size of the potential market for derivative works may be extremely speculative. However, in the case of parody, the derivative work does not conflict with the creator's reasonable expectation, the value of his/her work or its potential market;
  • additional relevant considerations – for example, a distasteful use (which will be found only in extreme cases; however, infringement of the creator's moral rights may exist, even if the use is not distasteful and also in the case of fair use).        

The Supreme Court determined that all of the above considerations support a conclusion that the use of Nespresso's work made in the EC Commercial constitutes fair use.

Consumer Deception, False Description, Publicity Right and Unjust Enrichment

Nespresso's allegations regarding publishing of false information and consumer deception were also rejected, as the Supreme Court held that they were factually baseless. As for the potential allegation regarding infringement of the publicity right, the court held that such infringement cannot exist in the case of a fictional character. In addition, recognizing the right for publicity in the context of parody will in all likelihood terminate the genre of parodying politicians and other celebrities.         

Finally, the Supreme Court discussed the unjust enrichment claims raised by Nespresso, according to which Espresso Club was enriched by damaging and taking advantage of Nespresso's reputation. The Supreme Court held that a degrading commercial should be evaluated from the point of view of defamation law. The unjust enrichment law cannot be utilized to circumvent the specific arrangements set forth in defamation law, save for in extremely exceptional cases. As for the claim for unjust enrichment by referring to a competitor's reputation in a comparative commercial, the court left open the question of whether, in the absence of a statutory unfair competition arrangement, the court should create such an arrangement through case law. It was determined that in the present case, it is impossible to identify in Espresso Club's actions an additional (negative) element, such element being a condition for the existence of unjust enrichment, bearing in mind that the lack of a statutory prohibition for an unauthorized non-misleading use of reputation was intentional.    

In the ultimate section of his judgement, Justice Hendel notes that the parties' contradicting positions illustrate the different approaches regarding comparative advertisement. One approach seeks to eradicate the mutual accusations from the field of advertisement, and to prevent it from becoming a battlefield. According to the other approach, the existing legal protections under the law express proper balances, and any advertisement which does not contravene them enrichens and develops competition in the market. It is for the legislator, who holds the tools for evaluating the influence of the different arrangements on the market and competition to strike the correct balance. Justice Hendel further noted that this case highlights the importance of a parody, being an independent work which may, within the proper boundaries, expose the weakness of another advertisement, through irony.                                             

The Supreme Court judgement in this case follows the trend of encouraging competition and protecting commercial freedom of speech, on occasion at the cost of limiting the monopoly afforded to the trademark owner.