America-Israel Patent Law

Do I Smell A Lemon (Coke)? A Twist on Parallel Importation

Coca-Cola has been sold in Israel for a long time; while its main competitor was still complying with the Arab boycott, Coke was not only marketing its product here, but even set up a bottling plant (via a local bottler) in Bnei Brak, today home to many meticulously religiously observant Jews.  Needless to say that Coke products sold in Israel are under rabbinical supervision to ensure that they are kosher.  And that Coke has many trademarks registered in Israel.

Fast forward to 2013.  Coke, like any successful business enterprise, wants to expand its markets.  So it should come as no surprise that Coke has a bottling operation in Bitounia in the PA (via an authorized partner*).  It should also not come as a surprise that some of the PA-produced Coke product makes its way into Israel. 

I don’t know how long Coke has been produced in the PA, and I don’t know how long some of that Coke has been finding its way onto the shelves of Israeli stores.  What is clear is that the PA-produced product costs less to consumers than the brown gold made in Israel, the price of which is tightly controlled by the bottler.  This makes the PA stuff attractive to Israelis who can get their hands on it – and at least an annoyance to the local bottler, although probably not a threat.  

The bad news for the Israeli bottler is that it doesn’t really have legal recourse against the PA-produced Coke.  That’s because it’s been long established in Israel that trademark law provides no relief against parallel importation of genuine goods.  In the particular case that set that precedent, the local authorized importer of Parker pens, who had an exclusive contract with Parker, sued a third party who purchased Parker pens elsewhere, imported them into Israel and sold them.  The court held that since the pens in question were genuine Parker pens, there was no infringement of Parker’s mark.  In the present situation, the PA drink is genuine Coke, authorized by HQ in Atlanta and legitimately bearing the Coca-Cola mark.

So what do you do when you want to protect monopoly rents but IP law isn’t on your side?  You could try to tell the public that the imported Coke is inferior, like the Israeli importer of Huggies did two years ago when someone started importing Huggies from Turkey and selling them for less.  But people can easily decide for themselves about the quality of the PA Coke, and you’d probably annoy the Mother Ship if you started bad-mouthing one of her other colonization teams.  

Personally, I suspect that if I were the bottler, my reaction would be to go to the Coca-Cola Company and ask it to tell the PA bottler to put a cap on his production, or to tell him that he’s not authorized to sell outside the PA, since I’m assuming that the larger mark-up on Coke in Israel means greater profits for the Coca-Cola Company. But since I'm not privy to the details, and there may be other variables at play in CCC’s calculus, I don’t know if that approach would work.

What other options are open?  Here’s where things take an Israeli twist.  The PA Coke is not under rabbinical supervision.   So recently the Chief Rabbinate (a state institution) issued a statement warning people against buying the PA-produced Coke because it lacked such supervision (see English-language article here).  It refrained from explicitly saying that the Coke wasn’t kosher – after all, the same concentrate is used in Coke around the world, sugar is sugar is water is water, so chances are the PA Coke is kosher – but noted the importance of educating kashrut-observing people to only buy rabbincally-supervised products.

I’ve no idea if the Chief Rabbinate discovered this “problem” on its own or if it was informed of the matter by someone else, like the Israeli bottler or one of the outfits that certifies the kashrut of the Coke from Bnei Brak.  But since Bitounia is close to Jerusalem, it seems to me that some enterprising kashrut agency could come to the rescue and explain to the PA bottler the benefits of kosher certification.  And then maybe the Israeli bottler would have to drop its prices.  Or not.  It's hard to believe that the PA bottler has access to a distribution system in Israel as good as the Israeli bottler's; one suspects the competition would be limited to the Jerusalem area. 

*From http://www.coca-colacompany.com/contact-us/coca-cola-rumors-facts (statement undated): “For example, in the Palestinian Authority, The National Beverage Company, our Company's authorized local bottling partner, is an independent, privately held company, managed by local Palestinian businesspeople, who operate a Coca-Cola bottling facility located in Ramallah and distribution centers in Gaza, Hebron and Nablus. The National Beverage Company employs 200 local people and generates employment for hundreds of others in related industries.”  Also look here.

Gotta Love Those Multilateral Treaties

So a news item last week in the patent world was that Saudi Arabia has now joined the Patent Cooperation Treaty (or in the formal language of the PCT, it has now become a PCT contracting state).  Amazingly, the ILPTO saw fit to send out its own email announcement about this and to post an item about this on its website.  I say “amazingly” because we all know that there will probably be a Jewish Pope before the Saudis allow national phase entry of an Israeli applicant’s PCT application, so it’s hard to fathom why the ILPTO is excited about the Saudi PCT accession.  Don’t believe me?  Check out this news story about the kingdom’s blocking access to The Jerusalem Post’s website.  Bottom line: Israeli entities that need to file in Saudi Arabia or other countries that are hostile to Israel (but are willing to adopt Israeli technology) will continue to need to play the part of Clark Kent for their patent application filings.