Israel: Unjust Enrichment (Restitution)—the Elements Necessary to Establish a Claim for Unjust Enrichment

Last Updated: 21 January 2005
Article by Avi Ordo

I. Summary

In a decision of the Israeli Supreme Court dated May 16, 2004, in the matter of L.C.A. 502/04 Buffalo Boots GMBH et al. v. Gali—Chain of Shoe Stores (TK-Supreme 2004(2), 1627), it was held, inter alia, that in order to establish that the enrichment of the defendant is unjust, it should be proven that an "additional element" exists (as previously held by the Court in L.C.A. 5768/94, 5614/95, 993/96 A.SH.I.R Import Manufacture & Distribution et al. v. Forum Consumer Product Ltd. et al. ("the ASHIR case")). Moreover, the plaintiffs’ alleged investment in the development and/or promotion of its products would not suffice to establish said "additional element".

II. The Factual Background

The applicants (a German shoe manufacturing company and its exclusive Israeli distributor) filed a claim with the Tel-Aviv District Court, together with an application for an interlocutory injunction, asserting that the marketing of shoes by the respondents, whose shoe products are similar to those manufactured by applicant no. 1, constitutes, inter alia, unjust enrichment, the tort of passing-off and trademark infringement. It should be noted that no application was filed by applicant no. 1 to register its shoes as a design in Israel. The Tel-Aviv District Court rejected the plaintiffs' application for an interlocutory injunction, even though it held that the shoes marketed by the respondents indeed constitute prominent imitation of the shoe products manufactured by applicant no. 1. According to the District Court's decision: (i) the trademarks used by the respondents to market their shoes were completely different from the applicants’ trademarks; (ii) the tort of passing-off did not exist in this case, inter alia, as the evidence presented by the applicants failed to establish the existence of goodwill in applicant no. 1’s shoes.

The applicants filed leave to appeal the aforesaid decision focusing, inter alia, on the cause of action of unjust enrichment (which, according to the applicants, the District Court sought to ignore when considering and/or rendering its decision).

III. The Supreme Court's Decision

According to the Israeli Unjust Enrichment Law, 1979, the plaintiff in a claim for unjust enrichment is required to prove three cumulative elements: (i) enrichment on the part of the defendant; (ii) that the enrichment of the defendant emanates from the plaintiff; and (iii) that the enrichment of the defendant is unlawful. In addition, in several Supreme Court's decisions it was held that where the enrichment is neither expressly prescribed nor expressly denied by the law, the question as to whether the enrichment is lawful is dependent upon the answer to the question as to whether the enrichment is unjust.

In the present case, the Supreme Court referred to the ASHIR case wherein it held that it was necessary to prove the existence of an "additional element" in order to establish that the enrichment is unjust. Such "additional element" exists where the copying (or imitation) of the plaintiff’s product by the defendant amounts to an action which does not accord with the requirements of fair dealing, i.e., unfair competition. In general, copying and imitation, per se, do not constitute acts amounting to unfair competition. However, the Court reiterated the following considerations, as discussed in the ASHIR case, which may indicate the existence of "unfair competition": (i) for so long as the work copied is important, novel and unique, the greater the tendency will be to regard such acts of copying or imitation as unfair competition; (ii) the efforts invested by both creator and copier; (iii) the mental state of the copier; (iv) the existence of reasonable alternatives for manufacturing a product, similar in function but different in appearance; (v) the results of the copying, i.e., circumstances giving rise to the potential deterrence on the part of manufacturers from investing in new products and technologies in order to further competition.

In the case at hand, the Court was willing to assume that the first two elements necessary to establish a claim for unjust enrichment (as referred to above) indeed exist. Nonetheless, the Court was not convinced of the existence of an "additional element", even though the respondents' shoes constitute prominent imitation of those manufactured by applicant no. 1. The Court held that the alleged investment of the applicants in the development and promotion of the shoes is insufficient to establish, at this stage of the application for an interlocutory injunction, the existence of an "additional element", since neither evidence with respect to the novelty of such shoes nor concrete data demonstrating the extent of the applicants’ investment, were presented. In addition, and despite the allegation by the applicants that many alternatives were available to the respondents for designing their shoes, the applicants failed to demonstrate to the Court any such possible alternatives. The Supreme Court accordingly upheld the District Court's decision which refused the application for an interlocutory injunction.

The Supreme Court’s decision is final and may not be appealed.


Avi Ordo, Adv.
S. Horowitz & Co.
Tel-Aviv, Israel

For further information on this topic or other related topics, please contact Avi Ordo at S. Horowitz & Co.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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