Section 3 of the Commercial Wrongs Law, 5759-1999 provides: "No person who carries on business shall unfairly prevent or impede access by customers, employees or agents to the business, property or service of another person who carries on business". A recent judgment of the District Court of Tel Aviv (per His Honour Judge Yehuda Zafet) has applied the section to the Internet world for the first time. The judgment held that the registration of a domain name that is the same as another person's trade mark, thereby preventing the competitor from using his trade mark for the purpose of on-line activity, commits the commercial wrong of unfair interference, contrary to the said section.
The judgment was awarded in CF 1627/01, MS Magnetics Ltd v. Discopy (Israel) Ltd et al. The plaintiff, MS Magnetics, provides magnetic and optical media duplication and sales services. When it wished to set up an Internet site under the Magnetics domain name, it discovered that the name (and also the name Magnetic) had already been taken and registered as domain names by its competitor, the defendant, Discopy, which operates in the same sphere. The defendant, for its part, has active Internet sites at other addresses and it gave as the reason for registering its competitor's names the fact that it had been negotiating to obtain the Israeli representation of a foreign company by that name. There was no dispute that the negotiations did not yield an agreement and in any event the foreign company was operating its own Internet site from a different domain.
The plaintiff's attorney, Adv. Matti Barzam, left no stone unturned in seeking the transfer to the plaintiff of the infringing domain names that the defendant had registered. Firstly, he pleaded unfair interference as provided in section 3 of the Commercial Wrongs Law (which was the cause that ultimately stood at the centre of the Court's decision). In addition, he also pleaded unjust enrichment, passing-off (which is also contrary to the Commercial Wrongs Law), trade mark infringement contrary to the Trade Marks Ordinance (New Version), 5732-1972, exercise of a legal right otherwise than in good faith contrary to section 61(b) of the Contracts (General Part) Law, 5733-1963 and negligence pursuant to section 35 of the Civil Wrongs Ordinance (New Version).
In his judgment Judge Zafet concentrated on the argument that denying Magnetics the domain name prevented customer access to its business. This tort is one of the innovations of the Commercial Wrongs Law and its basic elements are: the existence of two businesses, the plaintiff and the defendant; the defendant prevents or impedes access by customers, employees or agents to the plaintiff's business, property or service; and the defendant's action is done unfairly.
Judge Zafet held that the first element means that the section applies only to a business in its relationship with another business. Someone who is not doing business, like a dissatisfied client who wishes to cause a nuisance to a business as revenge or to "persuade" it to agree to his claims for compensation, will not fall within the scope of the tort. In the case herein no problem arose in relation to this element. Nevertheless, it should be noted that the attempt to apply the wrong to the registration of domain names is not limited to relationships between competing businesses. The argument can arise in other contexts - for example, when the person registering the domain name does not clearly carry on business but is a private individual who has registered several names, in which case plaintiffs might be able to treat that fact, per se, as evidence of carrying on business. This argument has not yet been tried by the courts.
As regards the second element (impeding access to the business), the Court held that "the element concerns the prevention or impeding of access, regardless of the way in which the prevention or impeding of access is caused... For this element to be fulfilled, it matters not whether an act or omission is involved, whether the act is one-off or continuing, whether the prevention is by physical or electronic means or otherwise... In our era - the era of the Internet and computers and other electronic communications - contact between a business and its customers and agents and even its employees is frequently accomplished by electronic means. The customer sits at home and from there he can order products and services from businesses around the world, whether by means of Internet trade sites, e-mail, facsimile or telephone. This creates a variety of different methods of accessing the business. Realising the objective of the legislation requires all the electronic means of contact to be recognised... as 'access' to the business in the sense of section 3" of the Commercial Wrongs Law.
The Court found that setting up an Internet site for business and trading purposes is a widespread and accepted method for a business to make contact with its customers. So that it will not be difficult for customers to find the site, the domain name under which it operates is generally derived from the trade mark that the public identifies with the business. The registration of a domain name that is the same as the trade mark means that the business will have to choose another domain and it denies it the ability to establish a site bearing the trade mark by which the public knows the business. It was held that such action impedes customers' access to the trade mark owner's business.
The third element concerns the lack of fairness. The Court held that "this element is difficult to define but when we encounter it it is not generally difficult to identify it". It is an unfair act or omission that is unnecessary to protect the defendant's legitimate interest or need. The defendant competes with the plaintiff; it was aware of the plaintiff's trade mark; not the slightest evidence of negotiations with the foreign company, which in any event operates from a site under a different name, was produced; the defendant operates Internet sites for its own business under different domain names and does not use the Magnetics and Magnetic domains that it had registered except as links to its own sites. In view of these facts the Court deduced that the names had been registered with the object of preventing the plaintiff from establishing an Internet site bearing the trade mark by which the public knows it.
In the circumstances the Court ordered the defendant to transfer the domain names to the plaintiff and to pay it costs of NIS 20,000, plus VAT.
Translated by Word Power