I OVERVIEW

Patent litigation in Israel is governed by the Patents Law 5727-1967 (as amended) (the Patents Law), regulations enacted thereunder, as well as by case law and decisions rendered by the courts and the Israeli Patents Registrar (the Registrar).

According to the Patents Law, patent litigation in Israel consists of three main proceedings:

    1. opposition, following acceptance of a patent application (pre-grant opposition);
    2. revocation of a patent; and
    3. patent infringement lawsuits.

The patentability, and hence validity of the invention may be challenged in the framework of each such proceeding.

In view of the pre-grant opposition regime, patent litigation in Israel is mostly conducted before the Registrar. According to the Israel Patent Office's (ILPO) Annual Report 2016, approximately 50 oppositions and a few revocation applications are filed annually with the Registrar.2

Research carried out by the ILPO, relating to opposition proceedings conducted between 2012 and 2015, reveals that more than 80 per cent of the proceedings that culminated in a final decision resulted in acceptance of the opposition.3

II TYPES OF PATENT

Patents in Israel are national, granted for a period of 20 years from the date of filing. Patents of addition remain in force throughout the duration of the main patent. The Israeli legal system does not provide protection for utility models, nor are short-term patents available in Israel.

Generally, patents are granted based on a full substantive examination. It is also possible to request abbreviated examination based on a corresponding foreign patent granted in certain jurisdictions (e.g., the European Patent Office or the US Patent Office). In addition, the ILPO signed several bilateral Patent Prosecution Highway (PPH) and Patent Cooperation Treaty (PCT)–PPH agreements with different national offices, which permit usage, under certain circumstances, of search and examination results of such offices.

The Registrar is empowered to extend the term of certain patents for an additional term, and subject to certain conditions the term is capped. A patent extension order may be granted only with respect to 'basic patents'. In general, a basic patent protects either a pharmaceutical product, a substance (being an active ingredient in a pharmaceutical product), a process for the manufacture or use of such substance or product, or a medical device for which marketing authorisation is required in Israel.

III PROCEDURE IN PATENT ENFORCEMENT AND INVALIDITY ACTIONS

In principle, two judicial authorities cover first-instance patent enforcement and invalidity actions:

    1. the Registrar, who hears mostly oppositions, revocation and amendment proceedings; and
    2. the district courts that try patent infringement cases.

Defendants in a pending infringement suit may argue, inter alia, that the patent at issue is invalid (indirect attack) or submit an application for revocation of the patent with the Registrar (direct attack).

The question of whether the invention is patentable is the focus of most opposition proceedings conducted before the Registrar.

One should bear in mind that the burden to prove the validity of the patent during opposition proceedings rests upon the patent applicant, while in revocation and infringement proceedings, such burden lies with the revocation applicant and defendant, respectively. Hence, there is an advantage in challenging validity by opposing the patent application, rather than submitting an application for revocation of a patent.

Another important consideration that may encourage interested parties to challenge the validity of a patent as early as its acceptance is the fact that the patent cannot be enforced until it is finally granted (after appeal has been exhausted).

The Registrar usually possesses a better understanding of technological and scientific issues when compared to judges. Where necessary, the Registrar is assisted by an examiner in the relevant field.

The Patents Law provides that the court may appoint a scientific adviser. Courts usually appoint advisers in more technologically complicated cases. The scientific adviser may advise the court and assist it in collecting evidence, but should not be involved in the rendering of judgment. The scientific adviser cannot be cross-examined by the litigants.

i Patent infringement procedures

Procedure and means to obtain evidence

Infringement proceedings may be initiated by the patentee or an exclusive licensee, and are conducted before the relevant district court.

Patent infringement proceedings are similar to those employed in other civil actions. Following the pleadings phase and preliminary discovery proceedings, a pretrial hearing will usually be conducted either by the court registrar or the presiding judge to identify the disputed issues and make the trial process more efficient. During the pretrial hearing, the judge is authorised to issue any procedural order aimed to simplify the procedure and, in particular, consider the parties' pleas and any motions to strike out, join or remove parties, entertain discovery and interrogation requests, and rule that further and better particulars be furnished, grant interim relief and order that evidence in chief be submitted by way of affidavits.

Evidence is generally submitted by way of affidavits presenting factual evidence (including experiments) and written expert opinions, which are all subject to cross-examination during oral hearings. The standard of proof required is that of the balance of probability.

Each party to the proceedings may apply for the discovery of documents relevant to the case that are or were in the possession of the other party or a third party, provided that the discovery request was first addressed to the other party. The court may also order a party to discover specific documents or reply to questions forwarded to it by way of interrogatories. All answers must be provided in the form of an affidavit. Another possibility for obtaining and preserving evidence is by means of an Anton Piller order, which allows entry to the premises of the defendant, and search and seize all relevant documents and evidence, although those measures are rarely applied in patent litigation. Upon application of the plaintiff, the court may also appoint a temporary receiver over any property or order an inspection of any property or article in relation to which a question has arisen in the action.

Limitation

In general, like other civil claims, intellectual property matters are subject to a seven-year limitation period that begins to run on the date of establishment of the cause of action. However, as each act of infringement constitutes a new cause of action with its own period of limitation, an injunction may be filed even where the infringement commenced more than seven years beforehand. Damages, on the other hand, cannot be sought for a period exceeding seven years.

As part of the new Designs Law that entered into force on 7 August 2018, the legislator deleted a section from the Patents Law that provides that defences to a patent infringement claim (e.g., the invalidity defence) are not time-barred. Nevertheless, it was made clear that this deletion was not meant and is not expected to change the existing law that defence claims are not time-barred.

Interim injunctions

Often, simultaneously with the submission of a statement of claim, the plaintiff will seek an interlocutory injunction (preliminary injunction) as a form of temporary relief, in order to preserve the status quo until the court renders a decision in the main action. Only in extreme and urgent circumstances will the court be willing to grant an interlocutory injunction prior to the filing of the statement of claim.

The discretion of the court in preliminary injunction proceedings is governed by several principles and considerations. The primary consideration is whether an immediate intervention of the court is essential in order to prevent irreparable harm. In addition, the applicant must demonstrate:

    1. a prima facie case on the merits and that there is a reasonable chance of succeeding in the case (patent validity is usually not discussed by the court in interim proceedings);
    2. that the balance of convenience lies in his or her favour; namely, that the hardship to the applicant if a preliminary injunction is not granted will be greater than the hardship to the defendant if an injunction is granted and eventually found to be unjustified; and
    3. 'clean hands' in approaching the court and that the relief was sought without laches or undue delay.

Preliminary injunctions are the most common form of interim relief in patent infringement proceedings. Additional preliminary remedies that are available under Israeli law include an attachment order and a Mareva order (aimed to restrict use of an asset), an Anton Piller order and a receivership order. This list is not exhaustive and the court may grant other interim reliefs as it deems appropriate in the circumstances.

As a rule, interim relief proceedings are heard inter partes. Ex parte relief may be granted if the applicant is able to establish, through prima facie evidence, that any delay resulting from an inter partes hearing is likely to cause irreparable or severe damage, or if the court is convinced that notice to the counterparty will defeat the purpose of the order. Applications for an attachment order, a Mareva order and an Anton Piller order are usually heard ex parte. When granting the ex parte relief (other than for an attachment order), the court will schedule the inter partes hearing within 14 days from the date of grant of the ex parte injunction. During preliminary injunction proceedings, the court may determine that, instead of hearing an application for a preliminary injunction, the main action will be expedited. Such determination enables plaintiffs to expedite the enforcement process.

In order for interim relief to become effective, the applicant must deposit with the court, in an amount determined by it, a personal undertaking and a third-party guarantee (usually, a bank guarantee), as security in case the defendant is damaged by the action that is ultimately denied.

The practice of protective letters is not available in Israel. A third party may apply to the court seeking a declaration of non-infringement as a protective measure in proceedings that assume the patent to be valid.

In general, a bona fide attempt to enforce a patent would not impose liability on the patentee (save for costs that the court is authorised to order should the claim be dismissed). However, in a precedential decision rendered by the Central District Court at the end of 2015, it was held that misleading the Registrar, intentionally or as a result of gross negligence, in an attempt to extend the patent monopoly, constitutes abuse of a dominant position or unjust enrichment, thereby entitling the plaintiff to claim all or part of the patentee's profits under the Unjust Enrichment Law 5739-1979. The decision, if not overturned by the Supreme Court, may also infer that a patentee may be found liable under Israeli antitrust law for threatening or commencing litigation to enforce a patent that the patentee knows is invalid or against a defendant whom the patentee knows is not infringing the patent.4 Interestingly, a decision taking a different approach was rendered in June 2018 by the Tel Aviv District Court in a case involving the same generic company as the plaintiff. In that case, Unipharm argued that the brand company abused its monopoly in the market of antidepressants and initiated futile proceedings (a claim based on the Unjust Enrichment Law and a preliminary injunction against the marketing of the generic version) solely for the purpose of delaying competition in the relevant market. Unipharm sought compensation and accounts.5 The court dismissed the suit, in limine, but also commented on the merits. In so doing, the court held that the Israeli Antitrust Law, which prohibits abuse of monopoly power, applies to actions relating to commerce or business as opposed to actions conducted before the authorities, such as the Registrar.

The Supreme Court will probably consider and opine on the lower court's contradicting views when rendering its anticipated decision in the Unipharm appeal.

Amendment of specification

Once examined and accepted, the court (or the Registrar in a case before him or her) may permit an amendment of the claims only for one of the following purposes: clarifying, removing an error in the specification or restricting the claims. The amendment may be allowed only if it does not broaden the scope of the claims or add anything to the specification that was not already included therein from the beginning.

Duration and costs

The duration of a patent infringement case varies significantly. The average duration is two to three years.

Costs are also difficult to estimate and may vary significantly, depending on the complexity of the case, the parties involved and the legal representation. Legal fees may range between US$400,000 and US$800,000 for the main claim and US$150,000 to US$300,000 for interim injunction proceedings.

ii Oppositions

Anyone can oppose a patent application within three months of publication of its acceptance.

Opposition proceedings consist of the following stages: submission of statements of arguments by both the opponent and the applicant, submission of evidence (usually in the form of affidavits and expert opinions), holding a cross-examination hearing and submission of summations.

The Registrar has an inherent authority to order discovery. However, the Registrar is usually more reluctant to exercise his or her authority in comparison to civil courts.

For details on amendment of specification, see Section III.i.

The duration of opposition proceedings may vary significantly from case to case. The average duration is two years, and six years if the proceedings ensue until a final decision is rendered. Costs are likewise difficult to estimate. In general, legal fees in opposition proceedings range between US$300,000 and US$700,000 (excluding expert fees and costs).

iii Patent revocation

The patentability of an invention may also be challenged in the framework of revocation proceedings, which may be initiated by any person, at any time while the patent is in force.

Revocation proceedings are essentially similar to opposition proceedings, except that in the former case, the parties are required to submit their arguments together with supporting evidence (usually by way of affidavits and expert opinions).

If a defendant in a pending infringement lawsuit files a revocation application, the Registrar will entertain it only after receiving the express permission of the court. The court may stay the infringement proceedings for a period and on conditions that it will prescribe. If an infringement suit is filed with the court after an application for revocation has been filed with the Registrar, the Registrar will entertain the application unless otherwise ordered by the court.

The duration and costs of revocation and opposition proceedings are essentially similar. Revocation proceedings may be somewhat shorter due to the joint submission of pleadings and supporting evidence.

IV SUBSTANTIVE LAW

i Infringement

Definition of infringement

The Patents Law defines 'infringement' as exploitation of the invention for which a patent has been granted unlawfully or without the permission of the patentee, whether in the manner defined in the claims or in a manner similar thereto and involving the main features, as defined in the claims, of the invention that is the subject matter of the patent.

In relation to an invention that is a product, 'exploitation of an invention' is defined as the production, use, offer for sale, sale or import for the purpose of any of the aforesaid acts; in relation to an invention that is a process – use of the process; and, in relation to a direct product of a process, the same activities listed with respect to an invention that is a product.

The Patents Law lists the following exemptions to patent infringement:

    1. activity that is not on a commercial scale, nor of a commercial nature;
    2. experimental use with respect to an invention, for the purpose of improving an invention or developing another invention; and
    3. experimental use for the purpose of obtaining registration for marketing the product after expiration of the patent if the use was done in order to obtain registration in Israel or in any other country that permits experimental use for the purpose of obtaining registration before expiration of the patent. Also, provided that all products manufactured within the framework of this exemption will not be used for any purpose other than obtaining the above registration, either during the term of the patent or thereafter (Bolar-like exemption).

While the list of acts constituting exploitation of an invention is a closed list that does not mention exportation, in one case the district court noted that activity conducted in Israel involving, or resulting in, exportation of the patented invention may be considered 'exploitation of the invention', if it is on a commercial scale or of a commercial nature and interferes with the exclusive right of the patentee to exploit the invention in Israel.6

The scope of the patent is defined by its claims. The claims are interpreted in light of the description in the specification. The claims must be given purposive interpretation. The applicability of file-wrapper estoppel was left open by the courts and the Registrar. However, correspondence between the patentee and the ILPO may assist the court in assessing the scope of the patent.7

Infringement may also be found where the invention is exploited in a manner similar to that defined in the claims and making use of the essence of the invention. In this regard, the Supreme Court adopted the doctrines of equivalents or variants (or 'pith and marrow') and noted that a product or process that replaces components or omits immaterial components of a patent may still be considered infringing, as long as the product or process do the same work in substantially the same way, and substantially accomplish the same result.8

Indirect infringement

Liability may be imposed on a person who collaborated with the direct infringer in attaining the infringement. Establishing liability as joint tortfeasors requires showing direct infringement as well as concerted action between the tortfeasors towards the common goal of infringement.9 In the Tsuk Or case,10 the Supreme Court ruled that the company's organs may be liable with the company as joint tortfeasors, if said requirements are fulfilled.

The contributory infringement doctrine, which was adopted by the Supreme Court in the Rav Bariach case,11 provides broader applicability. The Supreme Court set the following requirements for establishing contributory infringement:

    1. the components used by the indirect infringer constitute a material part of the invention;
    2. the indirect infringer knew, or should have known, that the components had been especially made or especially adapted for use in the infringement of a patent; and
    3. the components are not staple products that can be substantially used in a non-infringing manner.

The Supreme Court did not clarify whether direct infringement must occur within Israel, in order for liability to arise.

ii Invalidity and other defences

Typical defences in patent infringement actions may include the following (non-exhaustive list):

    1. non-infringement – the defendant may argue that the product or process in dispute is not covered by the claims or that his or her activity is not included in the statutory list of activities amounting to 'exploitation of an invention'. Sometimes the defendant may claim that his or her activity comes under the statutory exemptions to patent infringement (see Section IV.i, 'Definition of infringement');
    2. licence to exploit the patent;
    3. the defendant is the owner of the invention;
    4. right based on prior exploitation or actual preparation for exploitation in Israel in good faith on the date the application was submitted in Israel or the date of the priority application. The exploitation or preparation should be on a commercial scale and of a commercial nature; and
    5. invalidity, for example:
      • not a patentable subject-matter;
      • lack of novelty;
      • obviousness;
      • inutility;
      • insufficiency of disclosure; and
      • covetous claims – namely, the claims are not fairly based on the description.

The Patent Examination Guidelines published by the ILPO provide that in order to be patentable an invention must fall within a technological field – namely, it must involve a concrete technological process. Computer programs as such, are not patentable. If a computer program has the effect of changing any physical properties, or causes the computer to work in a new way, or establishes connections between system components that did not previously exist, then an indication may exist that the invention falls within a technological field. Similarly, methods of doing business are not patentable as such, since they fall within the field of commerce and are, therefore, not considered industrial. Patents will not be granted for method of therapeutic treatment of the human body or for new varieties of plants or animals, except for microbiological organisms not derived from nature.

According to the Supreme Court's landmark judgment in the Hughes case, a novelty-destroying publication must disclose all elements of the invention. The publication may be read in light of the general common knowledge possessed by persons skilled in the art before the effective date.12 However, in a later decision, the Supreme Court ruled that novelty may be lost as a result of a disclosure containing the essence of the invention.13 Another test for assessing novelty is the 'infringement test' ('that which infringes if later, would anticipate it earlier').14 Case law shows that the courts tend to accept the doctrine of inherency (when following a prior publication would necessarily result in the same invention).

Obviousness is assessed through the eyes of a person skilled in the art who possesses average ability, in other words, no inventive skills. Unlike novelty-destroying disclosure, inventive step may be negated based on multiple publications. However, their combination ('mosaic') must be obvious to a person skilled in the art. Another test applied in the context of inventive step is 'the obvious to try' test, assessing whether a person skilled in the art would have been motivated, based on the prior art, to undertake the route taken by the patentee with a reasonable expectation of success.15 Objective evidence may also give an indication on the obviousness of the invention. Such evidence ('sub-tests') may include evidence of commercial success, long-felt need, failure of others and unexpected results.16

The utility requirement is met if the promised result is achieved when following the information given in the specification. A credible promise of utility is usually sufficient when applying for a patent. The patentee may be required to provide evidence of utility in the framework of opposition or revocation proceedings, where the utility of a given invention is challenged.

The description must enable a person skilled in the art to perform the invention without the exercise of inventive skills. A reasonable degree of routine experiments is permissible and best mode disclosure is not required.

The claims must clearly and precisely define the claimed monopoly. In addition, the claims must reasonably be based on the description included in the specification.

In an obiter dictum the Supreme Court indicated that it tends to adopt the 'international exhaustion' doctrine and in any event held that parallel import does not amount to patent infringement.17

V FINAL REMEDIES FOR INFRINGEMENT

As in other commercial and civil litigation in Israel, the remedies granted to a successful plaintiff in an infringement case include the following.

i Damages

When awarding damages, the court will consider the infringing act and the plaintiff's position in consequence of the act. The court may also consider, inter alia, the following:

    1. the direct damages caused to the plaintiff;
    2. the extent of the infringement;
    3. the profits derived by the infringer from the infringement; and
    4. reasonable royalties that the infringer would have had to pay had he or she been granted a licence to exploit the patent to the extent so infringed by him or her.

As mentioned above, once a patent is granted, the patentee is entitled, retroactively, to full damages for any unauthorised exploitation of the invention committed after acceptance of the patent application. The Patents Law also provides that once a patent is granted, the patentee will be retroactively entitled to damages in the form of reasonable royalties for any unauthorised exploitation of the invention that took place between the date of publication of the patent application and its date of acceptance.

Where damages are claimed, the court may order the defendant to provide an account of the extent of its infringement and the profits gained, or award compensation by way of assessment. A successful party is entitled to reimbursement of its real out-of-pocket costs However, in practice, the level of costs determined by the courts is usually lower than the costs actually incurred.

Punitive damages may be awarded where an infringement is committed after the patentee or exclusive licensee has warned the infringer of the infringing activity. In such case, the sum of punitive damages cannot exceed the sum of the actual damages, thus amounting to double damages. In practice, the courts do not award punitive damages in infringement suits.

ii Permanent injunctions

If a plaintiff is successful, the court will usually grant a permanent injunction to prevent the infringer from infringing the patent in the future. As a rule, permanent injunctions remain in effect until the patent expires. The question of whether a post-expiry injunction may be granted where the infringement was committed in order to obtain a springboard into the market after the patent's expiry still remains open.18 Stays are not generally granted while an appeal is pending, except where, absent the stay, the appeal may become academic and there seem to be good chances of succeeding in the appeal.

iii Delivery up of infringing material

The court may, at the request of the seizer of assets, of the receiver, or of a party, order what shall be done with the seized assets, including their return to the premises from which they were taken or to their owners, order that assets liable to spoil be sold, that assets be destroyed or transferred, or it may give any other order that is justified under the circumstances.

iv Other remedies

In general, courts adjudicating civil matters can grant declaratory judgments, prohibitive orders, orders for specific performance or any other relief, as they deem fit.

VI OTHER TYPES OF PATENT PROCEEDING19

i Declaration of non-infringement

As discussed above, a third party may apply to the court for a declaration that his or her exploitation of the invention does not amount to infringement of the specific patent. The proceedings are conducted before the district court under the assumption that the patent is valid.

ii Proceedings relating to service invention

According to the Patents Law, an invention by an employee, arrived at in consequence of his or her employment and during the period of his or her employment (a 'service invention'), shall, in the absence of an agreement to the contrary between him or her and his or her employer, become the property of the employer. An employer or employee may apply to the Registrar to determine whether a given invention constitutes a service invention.

The Patents Law further provides that in the absence of an agreement determining whether, to what extent and on what conditions an employee is entitled to remuneration for a service invention, the matter shall be decided by the Compensation and Royalties Committee (the Committee), the members of which comprise a Justice of the Supreme Court, the Registrar and an additional member from an academic institution with a scientific background. The Committee is also authorised to determine whether a certain invention constitutes a service invention prior to deciding on the matter of remuneration.20

The proceedings before the Committee are held in camera. The Committee is authorised to prescribe its own rules of procedure, in so far as not existing under the Patents Law. Decisions of the Committee are final but may be challenged by filing a petition to the Supreme Court, sitting as the High Court of Justice.

iii Determination of inventorship or ownership

According to the Patents Law, the owner of the invention is the inventor or whomever is entitled to the invention by operation of the Patents Law, by assignment or by agreement. In addition, the person filing a patent application is deemed the owner of the invention, until proven otherwise.

Determination of inventorship or ownership may arise ancillary to opposition, revocation and infringement proceedings, or in the framework of independent proceedings before the district court seeking a declaratory order of patent ownership or inventorship.

In a decision rendered by the National Labour Court, it was noted that the labour courts are also authorised to determine patent inventorship where such determination is required in a matter falling within the labour courts' exclusive jurisdiction. However, it was decided that the labour court of first instance was not authorised to order the employee to sign the documents required for the registration of patents in the name of the employer, in light of the fact that the Registrar has judicial authority in such matters and may permit the employer to sign the documents himself or herself.21

iv Compulsory licences

If the Registrar is convinced that a patentee abuses his or her monopoly, he or she may grant a compulsory licence to exploit the patented invention to a person applying for that purpose, provided that the application is filed after the expiration of three years from the date of grant of the patent, or four years from the date of filing the patent application – whichever is the later. The licence will be mainly to satisfy the needs of the domestic market, and subject to royalties determined by the Registrar.

A compulsory licence may also be granted to enable exploitation of a patent that otherwise would have infringed an earlier patent, provided that the later invention demonstrates considerable progress with respect to the earlier invention. Where the invention in both patents serves the same industrial purpose, a compulsory licence will be granted only if the applicant is willing to grant a similar licence to the owner of the earlier invention.

VII APPEAL

i Courts of appeal

The district courts of Jerusalem and Tel Aviv hear appeals on decisions given by the Registrar (e.g., decisions given in opposition and revocation proceedings). Appeals may be either by way of right (where the decision of the Registrar concludes the dispute) or by special leave with respect to other decisions (e.g., decisions in intermediate proceedings).

The Supreme Court hears appeals from the district courts, either by right (where the district court rendered a judgment as a court of first instance) or by special leave to appeal.

ii Procedure on appeals

The losing party has a right to appeal within 45 days of delivery of the judgment.

A second appeal (where the district court sat as a court of appeal in infringement proceedings), or an appeal from a decision not being a final judgment, may only be filed if leave to appeal is granted by the court to which the appeal will be filed. An application for leave to appeal should be filed within 30 days from the date of the decision.

The notice of appeal should set out the grounds of appeal. Except with special leave of the court, the appellant is not allowed to raise any grounds of objection not specified in the notice of appeal.

As a rule, the appeal is based on the transcript of proceedings, pleadings and evidence submitted in the lower court. In exceptional cases, the court of appeal may allow new evidence. However, in the matter of Gabai, the Supreme Court noted that the court of appeal would be more inclined to allow the submission of new evidence in patent cases than in other civil cases.22

Generally, the court of appeal refrains from interfering with factual findings of the first instance and focuses on legal issues.

When a date is set for the hearing of the appeal, each party should file a volume of exhibits with the court of appeal. The appellant should file a summary of his or her principal contentions at least 14 days before the hearing, and the respondent should file same at least seven days before the hearing (unless the court instructs otherwise). When the appeal is argued orally, the appellant will argue his or her case and the respondent will then reply. The hearing is much shorter than the hearing in the lower court. The appeal may also be argued in writing (sometimes followed by short oral arguments if the court so wish, to clarify some aspects of the appeal).

The appellant must provide security for costs of the defendant, in an amount set by the court.

Generally, the duration of an appeal is one to two years (until a decision is rendered).

VIII THE YEAR IN REVIEW

i Service inventions

In a precedential decision (obtained by the undersigned) that was rendered in May 2017, the Committee acknowledged the possibility of regulating the issue of compensation for service inventions, not only in the framework of individual agreements but also in the framework of collective agreements or arrangements. The Committee held that such collective agreements or arrangements similarly bereft the Committee of jurisdiction over a claim for compensation, if filed by an employee who is subject to them. The decision infers that collective agreements or arrangements may reduce the exposure of companies conducting R&D in Israel to claims by their employees for compensation for service inventions.23

In another precedent-setting decision (obtained by the undersigned) that was rendered in May 2017 (but only published in December 2017), the Committee dismissed, in limine, a suit that was filed by Dr. Ruth Levy, a former R&D employee of Teva Pharmaceutical Industries Ltd (Teva), claiming entitlement to receive compensation for her contribution to the development of AZILECT®.24

In dismissing Dr. Levy's suit, the Committee held, for the first time, that suits filed by employees for compensation for service inventions are subject to the statutes of limitation, and that suits of such nature will become time-barred seven years after the cause of action is deemed to have arisen. The Committee rejected several possibilities, raised by Dr. Levy, as to when the limitation period began to be counted in her case. The Committee did not determine, however, when, in its view, the cause of action would be deemed to arise generally, in similar suits; instead, the Committee raised the following three possibilities for making this determination: (1) the cause of action arises when an invention disclosure is made by the inventor employee to the employer; (2) the cause of action arises when a patent application is filed, in respect of the service invention or when a patent is granted; or (3) the cause of action arises when the employer begins to commercialise the invention. It was held that in the present case all three possibilities referred to above were duly met in order for a determination to be made that the seven-year time bar had indeed expired.

A petition contesting the Committee's decision was filed with the High Court of Justice and a hearing is expected to take place in November 2018.

ii Sanctions for inadequate disclosure

In a precedential decision that was rendered about three years ago,25 and is currently under appeal, the Honourable Justice (then Judge) Prof. Ofer Grosskopf established the liability of patentees for improper prosecution of a patent application and unlawful enforcement of patent rights.

The judge rendered an account of Sanofi to report its profits from selling its drug Plavix® in Israel to a local generic company, Unipharm Ltd (Unipharm), within the framework of a suit claiming said profits. The judge ruled that Sanofi knowingly withheld information from the Registrar during the prosecution of its patent application, by including an incorrect example, and that the misleading application was the main reason for the delay caused in the entry of Unipharm to the relevant market and for increasing its development costs.

It was held that misleading the Registrar, intentionally or as a result of gross negligence, in an attempt to extend the patent monopoly, constitutes abuse of a dominant position or unjust enrichment on the part of the patentee, thereby entitling the plaintiff to claim all or part of the patentee's profits under the Unjust Enrichment Law.

In the past, compensation awarded to generic companies would have probably been limited to actual losses incurred by them. The decision, if confirmed by the Supreme Court, infers that applying for a patent, while misleading and withholding information from the Registrar, in the patent application and thereafter during prosecution, may result in significant liability being attributed to the brand company, for the unjustified deterrence of potential competitors. This could also result in compensating potential competitors for the full amount of the brand company's profits during the deterrence period.

As noted above, in June 2018, the decision in Unipharm was criticised by the Tel Aviv District Court, in another case involving that same plaintiff (i.e., Unipharm), and with similar factual background.26

In the latter case, Unipharm claimed that Glaxo failed to properly meet its disclosure obligations by concealing a corresponding British patent application that disclosed the invention, as well as an EPO examination report which concluded that said application undermined the novelty of a corresponding EP patent application. Unipharm further argued that Glaxo conducted futile proceedings (a claim based on the Unjust Enrichment Law and a request for a preliminary injunction) solely for the purpose of deterring competition and delaying the launch of a generic drug for the antidepressant Seroxat. Moreover, Glaxo did not withdraw the appeal filed by it contesting the decision denying the infringement suit, even after its patent application was refused by the Registrar.

The court dismissed the suit as time-barred, based on its conclusion that Unipharm had been aware of all the facts relating to the claim more than seven years prior to the filing of its claim. On the merits it was held, inter alia, that the sanctions provided by Section 18c of the Patents Law 27 are exhaustive and prevent the possibility of additional remedies being awarded under the Unjust Enrichment Law. In this respect, it was held that any shifting of the 'point of balance' established under the Patents Law should be made by the legislator following a comprehensive examination of the public considerations involved. The court further noted that as far as Glaxo unlawfully benefited from its failure to disclose the facts, the 'beneficiaries' entitled to the restitution are the patients who had purchased the overpriced medication.

As mentioned above, the court noted that it is doubtful whether antitrust laws applied to Glaxo's conduct as regards the Registrar. It was further held that in any case, according to the relevant provisions of the Israeli Antitrust Law and the Commercial Torts Law, the plaintiff would be entitled to compensatory damages as opposed to relief in the form of the manufacturer's profits during the alleged deterrence period.

As aforesaid, the Supreme Court would probably decide between these contradicting positions in its expected decision in the Unipharm appeal.

iii Patent term extension (PTE)

PTE is granted in Israel only if certain requirements are met, as set out in Section 64d of the Patents Law. One such requirement is that the marketing approval of the pharmaceutical product constitutes the first marketing approval, enabling use of the 'compound' contained in the pharmaceutical product for medicinal purposes, in Israel ('the first marketing approval requirement'). The term 'compound' is defined in the Patents Law as the active ingredient in the pharmaceutical product, or salts, esters, hydrates or crystalline forms of said ingredient.

A particularly significant ruling in the context of the first marketing approval requirement is Lundbeck,28 where it was held that the marketing approval of a pharmaceutical product containing an enantiomeric form, would not be considered the first marketing approval enabling use of the compound contained in the pharmaceutical product for medicinal purposes in Israel, where a pharmaceutical product containing the racemic mixture (namely, a racemate comprising an equal amount of two left and right-handed enantiomers S and R, respectively) has already been approved, since the racemate already contains the enantiomer.

In a recent decision (handed down in favour of a party represented by the undersigned), the Registrar cited the ruling in Lundbeck and refused to grant the applicant, Takeda Pharmaceutical Company Limited (Takeda), a PTE based on the marketing approval of its pharmaceutical product – DEXILANT. The active ingredient in DEXILANT is Dexlansoprazole, the R enantiomer of the Lansoprazole racemate. The Lansoprazole racemate was previously registered as a pharmaceutical product (Prevacid).29

In its application for PTE, Takeda tried to draw a distinction between its case and Lundbeck, by claiming that the ruling in Lundbeck concerned a racemic mixture, while the Lansoprazole racemate involves a racemic compound. Takeda further claimed that the Lansoprazole racemate comprises both the R enantiomer (Dexlansoprazole) and the S enantiomer (Levolansoprazole) in one crystal lattice, that cannot be separated (in the solid state) into two enantiomers. Therefore, as claimed by Takeda, Dexlansoprazole, in its isolated single crystalline form, constitutes a different compound, which was not included in the registered pharmaceutical product containing Lansoprazole.

In rendering its decision, the Registrar noted that the marketing approval of a pharmaceutical product containing a 'racemic compound' should likewise be considered as the first marketing approval with respect to a pharmaceutical product containing each of the separated enantiomers. The Registrar thus held that the classification of a racemate as a 'racemic mixture' or a 'racemic compound' is not relevant for determining whether the first marketing approval requirement has been fulfilled. Instead, it is relevant to consider whether the molecular structure of the active ingredient remains the same, when the active ingredient is isolated from the racemic compound. In such circumstances, where the active ingredient identity is not affected, no new compound is formed and therefore the first marketing approval requirement is not met.

In another precedential decision the Registrar addressed the first marketing approval requirement with respect to recombinant proteins. The decision was rendered in an appeal contesting the examiner's decision denying Bayer's PTE application based on approval of the product Kovaltry for the treatment of haemophilia.30

Bayer claimed that Kovaltry constitutes the first product approved for marketing that enables use of the protein BAY 81-8973 for medicinal purposes in Israel. In this respect, it was argued that although BAY 81-8973 shares the same amino acid sequence as the protein included in the previously registered product Kogenate (rFVIII-FS), the manufacturing process used for the preparation of BAY 81-8973 yields a high level of sialylation of branched N-glycans on the molecular surface of the protein. As a result, BAY 81-8973 has an improved pharmacokinetics profile when compared with that of rFVIII-FS. Bayer further claimed that the conclusion that Kovaltry meets the first marketing approval requirement stems also from the fact that said product was classified by the Ministry of Health as a product containing a new active ingredient and, therefore, was subject to full regulatory assessment procedure for its approval.

The Registrar held that the classification of a product by the Ministry of Health as containing a new active ingredient indeed constitutes essential criteria for satisfying the first marketing approval requirement with respect to recombinant proteins. However, the applicant must also prove that the protein concerned is structurally different from other previously approved proteins, and that the structural differences have an effect on the activity of the protein.

The Registrar concluded that in the present case Bayer failed to prove that the structural differences between BAY 81-8973 and rFVIII-FS translate into substantial differences in their pharmacokinetics. Therefore, the marketing approval of Kovaltry cannot be deemed the first marketing approval of the active ingredient contained therein. Under these circumstances, the Registrar affirmed the examiner's decision denying Bayer's PTE application.

IX OUTLOOK

i Amendment to the Patent Regulations with respect to PTE

An amendment to the Israeli Patent Regulations with respect to PTE (the Regulations) came into force on 5 December 2017.

The principal amendments include the following:

    1. updating the requirements for submitting a PTE application (including with respect to supporting affidavits and appropriated documentation);
    2. clarifying that the Regulations apply, among other things, to medical devices; and
      1. clarifying which changes in the marketing authorisation require notification.

Footnotes

1 Tal Band is a senior partner and Dovev Apel is a partner at S. Horowitz & Co.

3 Power point presentation summarising the research, available at: www.justice.gov.il/Units/RashamHaptentim/legalinfo/Pages/Pre-grant_Oppositions.aspx.

4 CC (TA) 33666-07-11 Unipharm v. Sanofi (published on Nevo, 8 October 2015) (Unipharm).

5 CC (TA) 38568-10-11 Unipharm v. Glaxo (published on Nevo, 8 June 2018).

6 DCA 814/05 (Jer) & CC 7076/05 (Jer) Orbotech Ltd v. Camtech Ltd (published on Nevo, 1 January 2005).

7 CA 407/89 Tsuk Or v. Car Security Ltd [1994] IsrSC 48(5) 661 (Tsuk Or).

8 CA 345/87 Hughes Aircraft Company v. The State of Israel [1990] IsrSC 44(4) 45 (Hughes).

9 CA 1636/98 Rav Bariach v. Havashush Car Accessories Trading House (1987) Ltd [2001] IsrSC 55 (5) 337, 352 (Rav Bariach).

10 Tsuk Or, footnote 7 above, at 688.

11 See footnote 9 above.

12 Hughes, footnote 8 above, at 103.

13 CA 4867/92 Sanitovsky v. Taamas Ltd [1996] IsrSC 50(2) 509, 516.

14 CA 314/77 LM Lipsky Ltd v. Manor [1977] IsrSC 32(1) 205.

15 See, for example, Unipharm Ltd v. Novartis AG, Opposition to patent application 195087 (published on Nevo, 21 February 2017).

16 Hughes, footnote 8 above, at 110.

17 HCJ 5379/00 Bristol-Myers Squibb Company v. Minister of Health [2001] IsrSC 55(4) 447.

18 CC 1512/93 (TA) Welcome Foundation Ltd v. Teva Pharmaceutical Industries Ltd (published on Nevo, 31 August 1995); CC 881/94 (TA) Eli Lily & Co v. Teva Pharmaceutical Industries Ltd (published on Nevo, 25 November 1998).

19 The examples detailed below are non-exhaustive.

20 Rotem v. Teva Pharmaceutical Medical Ltd, application for remuneration for a service invention (discussing the question whether, according to Section 133 of the Patents Law, an invention that constitutes a service invention should be decided by the Registrar) (published on Nevo, 25 July 2005).

21 LA 29005-07-12 Tvorovsky v. Biona Biotechnology Research Co Ltd (published on Nevo, 26 June 2016).

22 PCA 5041/13 Gabai v. Aminach (published on Nevo, 21 January 2014).

23 John Doe v. Anonymous, application for remuneration for a service invention (motion to strike out) (published on Nevo, ۳ May ۲۰۱۷).

24 Dr. Ruth Levy v. Teva Pharmaceutical Industries Ltd, application for remuneration for a service invention (motion to strike out) (published on Nevo, 25 May 2017).

25 See footnote 4.

26 See footnote 5.

27 Section 18c lists possible sanctions that may be imposed in the event an applicant provides the ILPO with misleading details in reply to a demand for information under section 18, or knowingly fails to update the ILPO of any significant change in the list of publications cited against its application by foreign patent offices. The sanctions include revocation of the patent or refusing to allow it; granting a licence to third parties; and curtailing the term of the patent. The court may even impose a fine, under the Penal Law.

28 MA (Jer) 223/09 H. Lundbeck A/S v. Unipharm Ltd et al. (published on Nevo, 25 May 2009) (Lundbeck).

29 The Manufacturers' Association of Israel v. Takeda Pharmaceutical Company Limited, opposition to PTE No. 145996 (published on Nevo, 24 May 2018).

30 Bayer Healthcare LLC, application for PTE No. 124123 (appeal on the examiner's decision pursuant to Section 161) (published on Nevo, 16 April 2018).