The Challenges Facing The Music & Film Industry in Israel

Technological advances, especially file-sharing sites and use of the cloud, continue to challenge the music and film industry and the economic models on which they operate.

Like software, musical and cinematic works are copyrighted. Most violations take place online, and therefore the majority of enforcement efforts are directed not only at the immediate infringer (the creator of the infringing copy), but also towards whomever submits the infringing copy to the public, i.e. Internet providers and content aggregation sites.

Two fundamental cases in the Tel Aviv District Court in 2015 culminated in seemingly conflicting decisions regarding this matter. The haze surrounding these rulings hinders the ability to take action against an Internet provider or website broker that provides access to infringing material. Until the Legislator acts to remedy this situation, we can expect more of the same.

Motion for Blocking Orders Against Internet Providers

An important decision of senior Judge (ret.) Gideon Ginat ¹ granted relief against third parties, Internet providers in Israel, whom he ordered to block access to the Unidown site, a platform for converting music content from You Tube to MP3 files for downloading.

The court ruled that a decision to grant relief against third parties is in keeping with similar decisions in England and that there is no impediment to issuing an order against the Internet providers, even if such action is not regulated under the law. The Association for the Protection of Internet Copyright and various production and broadcasting companies attempted to leverage this precedent to block the Popcorn Time site which hosts a popular service for watching copyright-protected movies and television programs.

An interim proceeding in the Tel Aviv District Court (Judge Altuvia Magen) dismissed the motion of copyright proprietors against Internet service providers.²  The court applied an earlier decision of the Supreme Court as a precedent instead—a decision ruling that orders should not be issued against third parties where the injured party has no direct case against said third party.³ The proprietors' motion to appeal was dismissed.⁴  

As long as copyright law lacks a sharp edge, infringers will continue eschew the consequences. It is an intolerable situation in which copyright proprietors are left adrift without any tools capable of realizing their intellectual property rights. 

In our opinion, correct handling of this matter necessitates the adoption of law similar to those applicable in Europe and the U.S. where the possibility of charging Internet providers who fail to remove infringing content in response to a cease-and-desist letter is an accepted practice.

On the other hand, methods that prevent abuse of the right by regulating exceptions such as the private use exception should be permitted. The private use exception set out in an EU directive ⁵ allows the user of a legal copy of protected content to copy or convert lawfully purchased content to other formats without such copying or converting constituting a violation, provided it is for private use. For example, this concept might apply to the conversion of a song from a lawfully purchased CD to an MP3 file or other music format in order to listen on a portable device. The private use exception achieves an appropriate balance between the need to protect the owner of the right against mass commercial violation of protected content, and the public's right to access lawfully acquired content.

The private use exception achieves an appropriate balance between the need to protect the owner of the right against mass commercial violation of protected content, and the public's right to access the content.

Protection of Commercial Brands

Today more than ever, the Internet enables easy, rapid and inexpensive access which sometimes connects a rights-violating producer with a potential importer seeking to penetrate the local market with products that resemble or imitate successful brands which are copyrighted or have trademark protection. Brand counterfeiting in Israel is gaining speed and eliciting concern from the business sector. Although the Customs Administration within the Tax Authority attempts to mitigate flow of counterfeit goods into Israel, it is powerless to deal with the full extent of the problem.

Distribution of counterfeit products and the attempts to import infringing goods to Israel harm both the owners of the proprietary rights and Israel's economy, which misses out on business profit and the resulting tax revenue. Moreover, the injured parties are mainly the consumers, who use their hard-earned money to buy counterfeit products which could be harmful to them and their health.

Which Products Are Susceptible to Counterfeit?

The list is long and includes fashion, perfumes, pharmaceutical products, stickers, footwear, alcoholic drinks, toys, and more.

Punishing Infringers

Under sections 200A of the new version of the Customs Ordinance and section 65 of the Copyright Law, 2007, the Customs units at ports and border crossings are authorized to detain goods suspected of infringing trademarks or copyright for three days.

According to Customs procedures, the seizure units of the Customs Authority can use their discretion to initiate the "short procedure" or "the long procedure".

In the short procedure, which is applied in most cases when the quantity of seized goods is small or when the cost of destroying the goods is negligible, the seizure unit contacts the owner of the right (or his legal representative) and requests that he submit an opinion based on photographs or small samples of the goods, regarding whether or not the seized goods indeed appear to constitute an infringement within three days from receipt of the notification (this window can be extended by an additional three days, if necessary). The Customs Authority will destroy the goods at no additional cost if the owner of the right submits a letter of indemnification to serve as a defendant if the importer sues the Customs Authority and a judge finds that the goods, in fact, did not infringe lawful rights.

If the Customs Authority decides to opt for the long procedure, the owner of the right is required to submit a bank guarantee of a value determined by the Authority within three business days. Within ten days, the legal importer must file a claim against the infringing importer in court. After receiving a deposit of the guarantee based on the quantity of goods, the Customs Authority will furnish the rightful importer with the details of the infringing importer. The Customs Department at the Ministry of Finance are required to sign off on any agreement reached between two parties.

The Challenges of Bringing Infringing Importers to Justice

Notwithstanding the efforts of the seizure units at the ports and border crossings to prevent the import of infringing goods from entering the country, proprietors often find themselves unable to take action against the infringer owing to enforcement and collection difficulties. In this absurd situation, the infringer often ends up in possession of his original counter band and can market it without restriction or punishment.

We owe this strange reality, in which the offender gets off scot free, to the confluence of numerous circumstances. Among these is the fact that infringing goods are often brought in by residents of the West Bank, who are largely undeterred by proceedings against them in Israel.

It is worth noting that when a large quantity of counterfeit goods are seized, the proprietor of the right is required to deposit a bank guarantee, which could be for tens of thousands of shekels, merely to obtain the details of the infringing importer. Only after receipt of that information and when he is already enmeshed in the proceeding, can he assess the viability of a settlement versus legal action.

This situation is frequently exploited by infringing importers who often estimate the cost of storing and destroying a certain product at an amount far and above the legal expenses and the financial compensation that the owner of the right can expect to be awarded if he decides to file a claim. In this upside-down dynamic, the importer will refrain from negotiating with the owner of the right in order to force him into a settlement and leave him with the bill for the storage and destruction of the goods. The outcome is that the owner of the right, who invested in the development of the brand, reputation, and registration of trademarks in Israel, is now compelled to pay merely to protect the right he has already established under the law.

We recommend several changes for improving enforcement and correcting the imbalances apparent in the current situation:

1. To amend the law so that infringing importers are required to deposit a bank guarantee with the Customs Authority as a condition for importing goods in the future. The guarantee will be forfeited if the importer does not comply with the law.
2.  To bolster civil and criminal enforcement against importers of counterfeit goods- before and after they enter Israel. To this end, Israeli Police and the Ministry of Economics must allocate additional manpower qualified to identify counterfeit material.
3. Both compensation for legitimate importers and punishment for infringing importers should be raised to create the proper deterrent effect.

The law should be amended so that infringing importers are required to deposit a bank guarantee with Customs Authority as a condition for importing goods in the future. The guarantee will be forfeited if the importer does not comply with the law.

1. [N.M.C. United Entertainment Inc. v. Bloomberg Inc., and others, Civil Case 33227-11-13]↩

2. [ZIRA (Copyright in the Internet) Inc. v. Anonymous, and others, Civil Case 37039-05-15]↩

3. [Rami Mori v. Barak A. T. C. [1995] Bezeq International Inc., Civil Case 4447/07 ]↩

4. [ZIRA (Copyright in the Internet) Inc. v. Anonymous, and others, Civil Case 5535/15]↩

5. [Article 5(b) Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society]↩