America-Israel Patent Law

Update – February 19, 2010 – Are Real Patent Term Extensions and Real Data Exclusivity Provisions on the Way for Israel?

Today I found this story in English online version of Haaretz and this one in the Hebrew-language Globes (the English version is here), which confirm my suspicions about the putative changes in Israel’s patent and data exclusivity laws.  In exchange for these changes, the USA will reportedly now support Israel’s entry to the OECD and will also remove Israel from its “priority watch list”.

 

One aspect of the story that intrigues me is the impetus for the change being Israel’s desire to join the OECD.  Specifically, opening up Israel’s legal services market doesn’t appear to be one of the demands being made for Israel’s acceptance into the organization.  That’s a pity, because without such opening the consumers of those services will continue to pay more than they need to.

 

I should explain.  At present, Israel has a statutorily created bar association, and to practice law in Israel you have to be a member of the bar association (unlike, say, New York, where admittance to practice is contingent upon paying a fee to the Office of Courts Administration but not upon bar association membership).  In a throwback to the guilds of the middle ages, ILBA rules state that an Israeli lawyer cannot be a partner with anyone who isn’t also a member of the ILBA.   Ostensibly this is to protect the purity of the profession (because we all know lawyers as a group have a lily-white reputation) by ensuring that all lawyers practicing in Israel adhere to the same code of ethics, but it’s really just a protectionist measure.  This rule is the one of the primary reasons why there are no multinational firms with offices in Tel-Aviv: were the Israelis to partner with lawyers from outside Israel, the Israelis would be subject to disciplinary action and possible disbarment.

 

Another primary reason for the lack of a multinational presence is taxation: foreign firms are scared that if they have partners in Israel, those firms’ entire profits will be subject to Israeli taxation.

 

The result is that Israelis needing foreign legal services often end up paying more than they ought to for those services: their local attorneys often act as middlemen who drive up the price, and the local legal services market is itself somewhat insulated from the pressures of competition from without.  (In some cases local firms have created strategic alliances with foreign firms, but that’s not the same as being integrated into a single unit.)

It’s time for Israel to amend its laws to facilitate partnering with foreign lawyers.  The OECD should be demanding such reform as part of the price of admission.

Civil Servant Gone Wild: The Israel Commissioner of Patents’ End-Run on The Patent Statute

Ok, I know that if made into a video, the subject of this post won’t sell as many copies as Girls Gone Wild, nor are its effects as wide-ranging as, say, Jon Dudas’ lame (and, mercifully, now late) attempts to circumvent the rule-making process in the USA.  But for those of us who practice patent law in this neck of the woods, the Commissioner has displayed a remarkably cavalier attitude toward the very statute that creates the position he now occupies. 

 

First, there was the announcement by the Commissioner that if an examiner has determined that an application contains claimed directed to more than one invention, then that applicant must file a divisional application along with its response to the examiner.  Divisionals filed after the deadline for response will only be accepted upon payment of an extension fee for each month of “lateness” in filing.  The Commissioner asserted that this policy was dictated by the statute, but it’s not clear that the statute really supports him on this point – and indeed, in the 40 or so years prior to the Commissioner’s announcement that the statute had been in force, none of his predecessors adopted this view.  However, since the cost of an extension is only about $16/month, it will almost always be cheaper for an applicant to wait and see if it wants to file a divisional, and then pay the extension fees, than to pay a lawyer to challenge the Commissioner’s view.

 

The next month, as discussed previously in this blog, the Commissioner imposed a requirement to submit an abstract, thus foisting on the applicant a requirement that the statute imposes on the Commissioner himself.

 

Then we had the now-you-see-it, now-you-don’t case of Australia as a country upon which one could piggy-back under §17(c) of the statute to gain allowance of a corresponding Israel application.  In December 2008 the Commissioner announced that he was taking Australia off the list because experience had shown it to be unreliable (i.e. Australian examinations weren’t very good); in September 2009, he reinstated Australia, without providing reasons.  While the statute empowers the Commissioner to list and de-list foreign patent offices in this manner, it presumes he makes such determinations based on objective criteria of the quality of foreign examination.  Here, the quick change of heart, without accompanying reasons, raised eyebrows.  In retrospect, it appears that the change of heart was motivated not by a substantive change in the situation but by politics, as part of the Commissioner’s efforts to get Israel recognized as a PCT search authority.

 

Next came more extensive reporting requirements under §18 of the statute (the rough equivalent of IDS practice in the USA).  §18 empowers the Commissioner to ask an applicant to provide a list of documents cited during the examination of corresponding applications elsewhere, or which are known to the applicant to be relevant to patentabilty, as well as copies of those documents.  The related Rule 36(1) says that pursuant to §18, before beginning examination, the Commissioner will send a letter to the applicant asking that he provide these documents.  Rule 36(2) says that when an applicant responds to such a request, he may include copies of his arguments submitted in response in the foreign jurisdiction(s).  Note that this is purely at the Applicant’s discretion. 

 

But in January of this year, the Commissioner announced that henceforth, applicants would be required to include copies of those answers, insofar as they relate to novelty and inventive step, and that failure to include such arguments would be regarded as failure to respond to the request under §18.  Nevermind that the statute itself does not empower the Commissioner to request copies of arguments filed abroad.  Or that in the cases of Europe and the USA, those documents will almost always be freely available over the internet, and that ILPTO examiners are already adept at finding those corresponding documents.  Better to act ultra vires and impose unnecessary reporting requirements on applicants than to have Israel examiners engage in a few extra mouse clicks.

 

Next up, limits on the number of independent claims.  About two weeks ago the Commissioner circulated another notice, this one informing people that the ILPTO would only accept two independent claims “of each type”, viz. one or independent claims on a product, one or two for a process for making the product, one or two for an apparatus for making the product, and one or two for using the product.  Ostensibly the Commissioner was merely reminding the public of long-standing ILPTO practice, as most recently enunciated in a 2004 decision of this same Commissioner.  However, there really is no basis in law for the arbitrary limitation of the number of independent claims; and in point of fact, I’ve personally prosecuted applications with numerous independent “Swiss” claims, which belies the assertion that this really represents long-standing ILPTO practice.

 

Finally, we come to this week’s gem.  Rather than paraphrase the Commissioner, I translate here his entire missive:

 

Commissioner’s Circular No. MN81

 

15 February 2010, 1 Adar 5770

 

To:    The Community of Applicants, Patent Agents and Lawyers

From:    Dr. Meir Noam, Commissioner of Patents, Designs and Trademarks

Re:   Division of Patent Applications

 

The purpose of this Circular is to inform the public of the interpretation given by the Patent Office to §24(a) of the Patents Statute, 1968 – 5728 [NOTE: this is a typo – the statute was passed in 1967; it is the Rules that were adopted in 1968 and reflect this in their title.  But that’s small potatoes in the present context - DJF].

 

1. §24(a) states the following: “As long as the application has not been accepted [i.e., opened to the public for inspection following completion of substantive examination – similar to publication in the USPTO Gazette in the pre-18-month publication days – DJF], the applicant may demand that it be divided into individual applications.”

 

2. This section is given to two interpretations: one, that the parent application, and it alone, may be divided until the date of acceptance; the other, that the parent, and any application divided therefrom, may be divided until each one has been accepted.

 

3. The Office hereby serves notice that the interpretation which shall be adopted is that it is the parent case, and it alone, that may be divided until the date of acceptance, and this, inter alia, because of the need to conclude examination proceedings in a reasonable time and because of considerations of legal certainty for the general public.

 

4. This circular shall take effect as of the date of its publication on the Patent Office’s web site.

 

There are several difficulties with this circular.  For starters, if one is already going to distinguish between a parent application and a divisional in terms of the ability to further divide, then there are actually three possibilities, not just two as stated in the Circular:

 

A.     Both the parent and divisional can be divided, the parent until its acceptance and the divisional until its acceptance.

B.     Both the parent and divisional can be divided, but the deadline for dividing in both cases is the date of acceptance of the parent application.

C.     Only the parent case can be divided, and the deadline for doing so is its acceptance date.

 

While the Commissioner is trying to rule out A, it’s not clear from the Circular if he’s settled on B or C as the solution.  (One wonders if in drafting this Circular he received assistance from some of the people at the USPTO who drafted the now-defunct claims and continuation rules, which after their publication required various clarifications of the ambiguities inherent therein.)

 

The bigger problem is that the statute simply doesn’t say what the Commissioner says it says.  Other than giving a divisional the same filing date and priority claims as the parent case, the statute does not distinguish between a divisional and any other application; once a divisional has been filed, the statute treats it as an application like any other, including for purposes of §24(a).  Were the Commissioner’s view correct, then the statute would throughout need to distinguish between divisional and parent applications.  But it doesn’t.

 

This can be seen most acutely by comparing §24(a) to §24(b), which states “If an application contains more than one invention, the Commissioner may, as long as he has not accepted the application, order the applicant to divide his application”.  The applicant then divides his application in accordance with §24(a).  Now suppose that I timely file a divisional, then the parent case issues, and now the examiner says my still-pending divisional claims encompass two inventions.  According to one notice already mentioned above, that constitutes an order to divide the application under §24(b).  Yet according to the latest circular, I CAN'T divide the application at that point, since under §24(a) a divisional, if it can be further divided at all, can only be divided until its parent case has been accepted (“application” in §24(a) referring to the first-filed case in the series) and in this scenario I’m already past that stage. 

 

So in this scenario I respond in either one of two ways.  I could say, Mr. Examiner, you’re no longer empowered to issue an order under §24(b) – you missed the deadline to tell me to divide the application, since the parent case was already accepted, and “application” in §24(b) refers to the same parent application as does §24(a).  Or I could respond, Mr. Examiner, you’re empowered to tell me to divide the application, since the terms “application” and “accept”, respectively, in §24(a) and §24(b) mean different things, but now you’ve given an order with which I can’t comply, since §24(a) prohibits me from dividing my application after its parent has already been accepted. 

 

The second answer makes no sense.  Why would the statute use similar phrasing in §24(a) and §24(b), yet have that phrasing mean completely different things in the two contexts?  And why would the statute empower the Commissioner to order an applicant to do something that the statute in the immediately preceding line prohibits? 

 

But the first answer makes no sense either: inasmuch as §8 stipulates that a patent shall be granted on only one invention, clearly the Commissioner must be able to tell applicants to divide their applications whenever he finds that an application is directed to more than one invention.  

In addition to the logical inconsistencies with the Commissioner’s position, it’s also interesting to note that in the over 40 years since adoption of the statute, not once has any previous commissioner or any court ruled that the time limit for filing a divisional of a divisional is the publication date of the parent case, let alone that filing a divisional of a divisional is verboten.  And given the large number of pre-grant patent oppositions filed in Israel, if indeed the filing of a divisional of a divisional was impermissible under the statute, surely someone would have cited this as grounds to oppose the grant of a divisional-of-a-divisional.  But that hasn’t happened either.  How reassuring to know that after 40-some years, this Commissioner has finally gotten it right.  And that he will no doubt have to entertain some opposition or revocation actions against divisionals-of-divisionals on the grounds that they were improperly filed.  (One wonders if he’ll be willing to refund, with interest, all the examination, publication and renewal fees paid by those applicants over the years for those divisionals-of-divisionals that he maintains the ILPTO should never have accepted in the first place.)

 

Finally, we have paragraph 4 of the circular.  This paragraph isn’t problematic so much as telling.  When one enacts a new policy that changes the status quo, that policy needs a starting date.  But if we’re talking about statutory interpretation, jurisprudential theory says that that interpretation has always been the correct one.  If indeed §24(a) says that one can’t file a divisional of a divisional, or that one can but the time limit for doing so is the publication of the grandparent case, then §24(a) has said this since it was adopted and came into force in 1967.  We don’t need to be told the proper interpretation of this section this in 2010, let alone be told when this interpretation will come into force. 

 

Thus the inclusion in the Circular of a paragraph announcing a starting date is a sort of Freudian slip.  This inclusion suggests several things.  It suggests that the Commissioner doesn’t believe what he wrote.  It suggests that that he knows full well that divisionals-of-divisionals are permissible, and that the deadline for filing a divisional from an existing divisional application is the acceptance date of the existing divisional, not of the grandparent case.  And it suggests that that he knows the issue of “interpretation” is merely a fig-leaf meant to mask his disregard for the plain meaning of the statute, and for the democratic process.  I’m not fooled. 

 

I am, however, insulted.  There may be arguments to be made for and against allowing divisionals of divisionals (though I can’t really come up with a good argument against; the fact that the EPO isn’t fond of them means they’re probably a good idea).  But hitherto Israel has allowed them, and the statute that permits such filings remains unchanged.  If anyone feels that the policy embodied in the statute should be changed, they are free to make their arguments in the public sphere and to lobby the Knesset to change the statute.  It is not the place of an unelected bureaucrat, whose position is an administrative and quasi-judicial one, to usurp the prerogatives of the public and the public’s elected representatives, and to arrogate for himself the role of policy-maker.  That Dr. Noam acts as if he may do so constitutes a slap in the face to the Israeli public.

 

Then again, maybe the Commissioner just views this as good business: after convincing the powers-that-be to allow the ILPTO to undertake a significant hiring increase in the last several years, and following a significant drop in the number of new applications filed in Israel in 2009, the Commissioner may be looking for ways to increase the ILPTO’s workload, so all those examiners don’t sit there twiddling their thumbs.  But if that’s the case, why require applicants to do the examiners’ work for them by providing examination reports and responses from abroad?

 

Unlike the Commissioner’s other forays into ultra vires land, I believe that this one has a reasonable chance of being directly challenged.  It’s not inconceivable that a pharmaceutical company will have a third-generation divisional application that it wants to get on file; or perhaps an adverse party will challenge an application or a patent on the grounds that it is a third-generation divisional. 

On the other hand, maybe here too Dr. Noam will side-step the bullet.  Most pharma patents in Israel are handled by a few large offices, who will be more than happy to advise their clients that all divisionals need to be filed before the parent case is accepted – a position that just happens to align with those offices’ interests in cash flow.

Proposed Statutory Amendment: Early Publication of Israel Patent Applications

Although in the past I’ve suggested that Israel move to an early publication system, I’m neither the first nor the only person to make this suggestion.  It seems that the great minds at the Justice Ministry (which would better be called the Law Ministry, but that’s for a different post) have been thinking about this for a few years as well, and have now circulated proposed amendments to the statute to deal with the matter; the proposed amendments (in Hebrew) can be downloaded here.  (Most legislation in Israel emanates from the bureaucrats at the Justice Ministry, and while at some point formal publication of proposed legislation occurs, earlier drafts are often circulated before such publication – sort of like pre-prints of scientific papers.) 

 

In addition to establishing publication 18 months from the earliest priority date for all currently pending and future filed patent applications, the proposed amendments would:

-   allow patentees to retroactively recover reasonable royalty damages back to the publication date;

-   result in a single, combined filing-examination-publication fee, instead of separate fees at different stages of the examination;

-     eliminate the possibility of a separate claim for unjust enrichment;

-   preclude certain types of amendments to the application, and

-   force applicants to file an abstract identifying the “essence of the invention” as part of the application. 

 

As will be explained below, I think that certain aspects of the proposed legislation constitute a good start, but on the whole the proposal is in need of more than a little tweaking.  I also think that in some respects it doesn’t go far enough, and without some significant additions will result in a patent system that is biased toward infringers.

 

The MOJ has requested comments on the proposed amendments by January 31, 2010.  Comments may be sent by email, in Hebrew or English, to howardpoliner@justice.gov.il or shirleya@justice.gov.il; please refer to proposal no. 803-10-2009-000813 in your email.

 

 

18-Month Publication; Reasonable Royalty Damages for Infringement Prior to Grant

The most dramatic effect of the draft legislation would be the publication of all patent applications filed in Israel 18 months from the earliest priority date or, in the case of PCT national phase applications, within 3 months from national phase entry, at which point the application files would be open to the public.  In exchange for this early publication, upon grant of the patent patentees would be able to sue, retroactively, for infringement of the patent during the period between publication and grant; the remedy for such infringement would be limited to reasonable royalties. 

 

The ability to retroactively obtain damages for infringement during the period of application pendency wouldn’t be complete departure from the current law.  Currently, applications are kept secret until notice of their acceptance has been published.  This is followed by an opposition period; the patent isn’t granted until the opposition period passes without incident or, if an opposition has been filed, when the opposition is rejected.  Applicants have no standing to bring suit for infringement prior to grant, and thus are powerless to collect damages, let alone stop infringement, that occurs during examination.  However, once the patent is granted, patentees can sue retroactively for damages to the date of publication, to the extent that the claims ultimately granted were published prior to the opposition period. 

 

Thus under the proposed amendment, the major changes from the current system would be (a) earlier publication of the application, giving the (eventual) patentee a longer retroactive window in which to collect damages for infringement, but (b) limitation of damages for such pre-grant infringement to a reasonable royalty.   As is currently the case, suit could only be brought once the patent is granted, but thereafter patentees would still be able to obtain prospective enforcement of the patent in the form of injunctions, and would still be able to obtain full damages for infringement that occurred after grant. 

 

 

Reasonable Royalty As Only Remedy = Compulsory License

The reasonable royalty provision of the draft legislation strikes me as a thinly-veiled form of a compulsory license.  If I’m a generic drug manufacturer, it’s worth my while to infringe still-pending claims, even if I think they’re likely to eventually be granted – there’s a significant difference between what I can make selling to the four major Sickness Funds (the Israeli equivalent of HMO’s; by law everyone pays a health tax and must belong to one of the Sickness Funds) and what I would be forced to pay under a reasonable royalty scheme.  Under such circumstances, if I’m a drug innovator, the way for me to ensure that my drug not be sold without my permission would be to delay the grant of marketing approval of the drug until after grant of the patent (because approval of the generic version is contingent upon grant of marketing approval to the innovator).  But as a consumer, I’d prefer that new medicines enter the Israeli market sooner rather than later.  Thus the draft legislation would seem to work at cross-purposes with good public policy.

 

Then again, in the pharma sector at least, this may be a red herring.  It may be that in general, the first Israel patents covering a new drug product have already issued by the time the drug is approved for use in Israel, and that it’s more likely that follow-on applications covering formulations, new uses and the like would be the ones affected by a possible reasonable royalties scheme that operates prior to grant.  If that’s so – and I don’t have statistics to confirm whether or not this is the case – then if an earlier patent was still in force, the possibility of an injunction or full damages for infringement of that patent would give copyists proper pause to consider whether or not to infringe (or to work around the earlier patent; as it is, Israel law gives third parties the right to infringe provided such infringement is done for the sake of “improving” the patented invention or “developing a new invention”, and is not done on a commercial scale).

 

It should be noted that on its face, the reasonable royalty provision is substantially the same as the corresponding provision in the USA, as set forth in 35 U.S.C. §154(d).  However, with respect to the pharma sector, one can’t draw a clean comparison between the situation in Israel and that in the USA: 

(a)     Pharma patents tend to issue more quickly in the USA than in Israel. 

(b)     The USA has the Waxman-Hatch scheme, which compels innovators to list certain patents in the Orange Book and compels generic manufacturers to give notice when they’re going to challenge a listed patent, giving innovators an opportunity to sue and obtain an injunction or, in many cases, an automatic 30-month stay of FDA review of the generic company’s NDA.  Thus as long as the innovator has at least one Orange-Book listed patent, which is invariably the case early in a product’s lifetime, there is no way for a generic manufacturer to sneak a product through the FDA without the innovator’s knowledge.  In contrast, Israel has no comparable scheme.  

(c)     The USA has actual data exclusivity: generic manufacturers can’t even submit ANDAs within the first five years of FDA approval for a new chemical entity.  Israel’s data exclusivity provisions tilt much more in favor of generic manufacturers:

(i) generic drug manufacturers may submit their generic drug applications within the first five of approval of the innovator’s product in Israel;

(ii) it is the Health Ministry (MOH) that is precluded from approving that the generic drug application during those first five years, or during the first five-and-a-half years from the first marketing approval in any WTO-member country;

(iii) MOH is only precluded from granting approval for marketing in Israel during this period; it may nevertheless grant approval for exporting during this time.

(d)     The USA does not have pre-grant patent oppositions (see discussion below).

 

Taken together, these factors mean there is a higher likelihood that a new drug product may be approved in Israel before patent protection has been obtained than there is in the USA – if not for the local market, then for the export market.  Under such circumstances, reasonable royalty damages may be insufficient to compensate the patentee.  As mentioned above, I don’t know if there are statistics that attest to whether or not most new drugs approved in Israel have some form of patent protection at the time of their approval.  What is clear is that the fact that the reasonable royalty remedy is good enough for the USA does not necessarily mean it is good enough for Israel.

 

In the high-tech arena, I suspect the difficulty would run in the opposite direction: under the proposed reasonable royalty scheme, individuals or small businesses having patentable but easily copied ideas would be at the mercy of bigger, established players.  If the goal of the smaller fry is to license the technology, then without the prospect of full retroactive damages, they will have lost some leverage in their ability to negotiate a good royalty rate.  Also, there is no guarantee that the “reasonable royalty” set by the court would be what the parties would actually have negotiated with the threat of full damages hanging overhead.  If the goal of the small patentees is to make and sell a product, or to sell the technology, their likely recourse would be to forego patent protection altogether, since the statute would now give the big players a compulsory license.  (Open question: if a big player steps in and sells infringing goods in Israel while the application is pending, then is forced to pay a reasonable royalty after the patent issues, are the downstream consumers who bought the infringing goods now immune from suit?  See discussion below re: unjust enrichment.)

 

Foregoing patent protection, however, would only work if the small companies’ products couldn’t be reversed-engineered – assuming small companies actually got as far as manufacturing something.  And without the prospect of patent protection, their leverage in negotiations with more powerful players to whom they might wish to sell the technology would tend toward zero.

 

It’s for the latter reason that I think it might be worthwhile to take a page from the U.S. playbook, and to allow applicants to retain the option of keeping their applications secret, if they haven’t filed corresponding applications (or more broadly, haven’t filed applications directed to substantially the same invention) in other 18-month publication jurisdictions. 

 

Alternatively, imposing the prospect of full damages that would be retroactive to the date of publication, assuming one of the infringed claims was in the published application, would give competitors more reason to carefully consider whether or not to infringe.  Ostensibly, the difficulty with such a scheme is that competitors would be left in legal limbo – which claims, if any, will issue?  In practice, however, this is already what goes on in other countries, evidently without detrimental effect.  In any event, sophisticated copyists are able to make reasonable assessments as to what is and is not patentable in a pending, published application. 

 

A twist on this last idea would be to allow infringers to file a notice with the ILPTO that they are infringing while the application is still being examined, including a detailed explanation of how they are infringing the patent.  This would be coupled with a bank guarantee or other surety to cover the expected reasonable royalties.  Such a notice would preclude the eventual patentee from retroactively collecting full damages after grant of the patent; but the admission by the infringer would preclude the infringer from asserting non-infringement after grant of the patent with respect to the product or process specified in the notice.

 

 

Early Publication of Already-Filed Applications

The proposed amendments would apply retroactively to all still-pending applications, with the goal being publication of all pending-but-as-yet-unpublished within two months of the amendments’ coming into force.  That’s not fair to those applicants who filed in Israel knowing that it does not publish applications early, and who relied on that fact in deciding to file in Israel.  Yes, disclosure is the quid quo pro for the exclusivity conferred by a patent, but the timing of that disclosure is also part of the bargain; publishing already-filed applications against the wishes of the applicants amounts to changing the rules in the middle of the game.  (Publishing such applications now may also create a headache for applicants who filed in Israel and in the USA with a non-publication request, knowing that Israel is a not an 18-month publication country.) 

 

A more prudent approach would be an opt-in for applications filed before the amendments come into force: those applicants with pending applications who want their applications to publish early could request such early publication, otherwise already-filed applications would not publish early.

 

 

Precluding Claims for Unjust Enrichment

Unlike most countries, Israel has a separate statute that enables plaintiffs to recover from third parties who were unjustly enriched at plaintiffs’ expense.  In principle, with respect to intellectual property, the various IP statutes themselves set the types of protections and remedies available for different types of IP, and recourse to a general unjust enrichment statute should not be available.  However, during the 1990’s a trend took hold in Israeli jurisprudence whereby courts applied the general unjust enrichment statute in situations in which parties had chosen not to avail themselves of IP protection, in which such protection was actually precluded by statute (e.g. for unpatentable inventions that were already known), or in which such protection had been obtained (e.g. in the form of a patent) but had since expired. 

 

The potential for a remedy for patent infringement apart from the patent statute has created uncertainty when it comes to assessing one’s rights to exploit another’s invention, and led in one instance to Merck suing for unjust enrichment for infringement that occurred while its patent application was being opposed.  The Merck case was in fact part of the impetus for the presently proposed amendments. 

 

Thus, hand-in-hand with providing applicants with some sort of protection during the period patent pendency, the proposed amendments would bar remedies under any other statutes for the exploitation of inventions (a) which are patentable but which are not protected by a patent in Israel, (b) for which a patent had been granted but had since lapsed or expired, or (c) which are not patentable.  The preclusion would not apply to violations of fiduciary duties arising from other statutes.

 

This proposed change is a welcome one.  It’s pity that the judiciary, which created this particular monster, did not see the error of its ways and see fit to bury its own creation without the need for a legislative fix.

 

Regarding the “open question” from above (viz. if a big player steps in and sells infringing goods in Israel while the application is pending, then is forced to pay a reasonable royalty after the patent issues, are the downstream consumers who bought the infringing goods now immune from suit?), this proposed amendment would evidently bar such recovery.

 

 

Let’s Use This Opportunity to Do Away With Pre-Grant Oppositions

It’s laudable that the proposed amendments would still only vest patentees with the power to bring suit once the patent has issued.  But the proposed amendments don’t go far enough in that they still maintain Israel’s outdated and flawed pre-grant opposition system.  Under this system, any third party can oppose the grant of the patent (without the need to identify the real party in interest).  Under current rules, the mere filing of an opposition will guarantee delay of the grant of the patent by at least two years, unless the opponent withdraws the opposition, and no patent term adjustment is available for this lost time should the applicant prevail and the patent be granted.  Furthermore, the fee for filing an opposition is relatively small, as are the costs imposed by the Commissioner on losing opponents.  Not surprisingly, as a result there are several local companies that serially oppose their competitors’ patent applications. 

 

Notwithstanding the ease of initiating opposition proceedings, in general opponents avoid infringing during those proceedings, as they currently face the prospect of full damages for infringement occurring during the proceedings should the application be upheld and the patent granted.  Removing the prospect of full damages, and replacing it with the proposed compulsory licensing scheme, would not only increase the likelihood of infringement during opposition proceedings, it would actually encourage both the filing of additional oppositions, and the protraction of those opposition proceedings: the longer an opponent can delay the grant of the patent, the longer it can benefit from the low-cost compulsory license at reasonable royalty rates.   

 

One option to avoid this problem, and the one that appears to me to make the most sense, would be to scrap oppositions altogether, and have patents issue upon publication of notice of their allowance.  Israel adopted pre-grant oppositions from the 1949 British Patents Act, but the British abandoned the practice when they revised their statute in 1977, and it’s about time Israel did the same.  (An exception could be made, perhaps, in cases of applications that weren’t published until their allowance, should the ability to maintain an application in secret be preserved under certain conditions.) 

 

Although under my proposal, opposition proceedings would be abolished, cancellation proceedings before the Commissioner would still be available to parties who think a patent has been erroneously granted.  Moreover, given the fact that applications would now be published early, interested parties would have plenty of time to track the progress of applications and decide if cancellation proceedings are warranted.  Furthermore, unlike the post-grant opposition under EPO practice, which must be filed within nine months of grant, cancellation proceedings in Israel can be instituted at any time.

 

(I note that there is some case law from the ILPTO itself suggesting that the burden of proof is somehow different, or even rests on different shoulders, during opposition versus cancellation proceedings, but this notion is specious: in either case, the party opposing the application/patent must put forward a prima facie showing of unpatentability, and once such a showing is made, the applicant/patentee must rebut it.  As there is no statutory presumption of validity under Israel law, and the only presumption of validity is the usual presumption of validity accorded to administrative action, there really is no difference between opposition and cancellation proceedings in this regard.)

 

Should the powers-that-be prove too wimpy to follow the lead of the British, at the very least they could amend the procedural rules for oppositions to make them more streamlined.  Currently, an opponent has three months from the publication of the allowance of the application to file a Notice of Opposition, then another month thereafter to file its Statement of Arguments, and yet more time later to file written evidence; it is in no small part the time periods set forth in these rules that result in the long delay in patent grant effected by opposition proceedings.  Under a system in which the substance of an application is only made public at the end of examination, there is some sense to such a time frame. But in the situation where the application file is open to the public for most of the application’s pendency, as is now proposed, there is no reason why all these steps can’t be combined, e.g. by requiring opponents to file an opposition, including arguments and written evidence, within a few months of the grant of the patent.  In fact, this is just the system in place currently for cancellation actions: the party moving to cancel a patent must file its arguments and written evidence at the time it requests cancellation of the patent.

 

 

Single Fee: Bad Idea

Another feature of the proposed amendments is the introduction of a single fee for patent applications that would cover filing, examination and publication.  This seems to be unwarranted.  Not all applications will be examined, and those that are examined will not necessarily be allowed; why should applicants pay for steps that their applications may never undergo?  The combining of the application and initial publication fee makes some sense, and in practice is what happens today; the only difference under the proposed regimen is that the initial publication would include additional details.  But the separation of application and examination fees, which does not presently occur, also makes sense, as this would allow applicants to decide if they really want to pursue examination.  (Of course, it would deprive the ILPTO of revenue, which is why my proposal is unlikely to be adopted.) 

 

 

Limiting the Ability to Correct Applications?  Limiting the ILPTO’s Ability to Request Marking of Applications?

An interesting feature of Israel patent practice follows from §§ 22 and 23 of the statute, which read as follows (my translation):

 

22.    Any time before the acceptance of the application, the applicant may amend the specification of his application, whether in response to a notice per section 20 [i.e. an office action – DJF] or of his own volition.

 

23.    If amendments of a substantive nature were entered in the application, the Commissioner may conclude that for purposes of sections 4, 5 and 9 [which deal respectively with novelty, inventive step and right of first filer - DJF] (1) if it is possible to distinguish between the amendments and the existing specification, that the date of the amendments is the date on which they were submitted to the ILPTO; (2) if it is not possible to distinguish between the amendments and the existing specification, that the date of the entire application is the date on which the amendments were submitted to the ILPTO.

 

Together, these sections give applicants the right to introduce new matter into their applications by way of amendment after the application has been filed.  To the extent the new matter is distinguishable from the originally filed application, the new matter alone receives the date on which it was filed (and consequently may not be entitled to priority); to the extent the new matter is indistinguishable from the rest of the application, the entire application is accorded the later filing date. 

 

As a result of §23, ILPTO examiners often ask applicants to label portions of their applications with the later filing date.  In practice, such requests are usually made not in situations in which new matter was added after the filing date, but rather in national phase applications where new matter was added at the time the PCT application was filed, and is thus not entitled to the claimed priority date.  Although imposing something of an administrative burden on applicants, the practice is quite useful for third parties parsing the patent, as it readily lets them know what material is entitled to what date.  (Compare this to the situation in the USA where significant effort can go into determining what part of a CIP at the end of a long chain of CIPs is entitled to what filing date.)

 

The proposed amendments would do away with §23.  This in itself seems unremarkable.  As the explanation of the proposed amendment notes, if an applicant wishes to introduce new matter, he is free to file a new application (which will be accorded the later filing date).

 

 

Limiting Applicants’ Ability to Amend or Add Claims?

Presently, an applicant may amend a pending application for any reason, and may amend inter alia by expanding the scope of the claims and by adding claims.  Under the proposed amendment, §22 of the statute would be amended to read,

 

22.    Any time before the acceptance of the application, the applicant may amend the specification of his application, whether in response to a notice per section 20 or of his own volition, for the sake of clarification, removal of a mistake that fell in the specification or for the sake of reducing [the number of] its claims.

 

Several interesting points arise from this proposed amendment.  The first is, just what would be considered “clarification” or “removal of a mistake”.  In particular, would expansion of a previously filed claim to include disclosed but previously unclaimed subject matter be considered “clarification” or “removal of a mistake”?  Or would applicants be stuck with the breadth of the claims they initially filed? 

 

While the proposed additional wording is identical to wording that already appears in §65, which governs the amendment of the specification of an issued patent, recourse to §65 is not helpful in construing proposed amended §22, because §66 states that when amending a granted patent, the scope of the claims may not be expanded.  Thus hitherto, there hasn’t been need to determine if “clarification” or “removal of a mistake” includes expansion of the scope of a previously filed claim, because such expansion was precluded by virtue of §66.  Of course, the argument can be made that if §66 is necessary to tell us that expansion of the scope of the claims in a granted patent is verboten, then such expansion of scope not forbidden under §65.  Nevertheless, the point hasn’t been decided before, and the possibility exists that the Commissioner or the courts could take a restrictive view regarding permissible claim amendments under the proposed amended §22.

 

Another point is that applicants would be statutorily barred from adding claims to their applications.  But barring applicants from expanding the scope of their claims or adding claims, is both shortsighted and impractical.  Anyone with any prosecution experience knows the addition or expansion of claims during prosecution happens all the time, for example to cover disclosed embodiments that weren’t previously specifically claimed, or in order to add dependent claims that cover species previously only covered by a genus claim.  In order to avoid such a draconian limitation on their freedom of action, applicants with the money to so will simply front-load their applications with many claims in order to preserve for themselves the right to in essence file new claims later by “amending” earlier-filed claims.  For such applicants, such front-loading will merely entail a waste of resources.  Applicants with more limited resources will be forced to make choices early in prosecution about which embodiments to protect, in the process possibly foregoing protection for commercially important embodiments. 

 

The question would also arise if under the proposed amendment, national phase applications could be amended at the time of national phase entry to include more claims than were filed in the PCT application.  Indeed, since the effective filing date for national phase applications is the PCT filing date, it would seem the proposed amendment could be construed as prohibiting PCT applicants from amending their claims under PCT Articles 19 or 34 so as to include more claims than originally filed – in contravention of Israel’s obligations under the PCT.

 

So the proposed change to §22 impractical and unwise.  But mostly, it is unwarranted.  §§ 12 and 13 of the statute already provide that the specification must contain an enabling disclosure of the invention, and that the claims must reasonably arise from the description.  Inasmuch as under the proposed amendment package, patent prosecution will now be transparent, there is no reason to force applicants to front-load their applications with every conceivable claim they might want later on.  Applicants should be able to claim anything for which there is support in the specification; interested third parties will be able to follow the progress of the application and assess their infringement and (in)validity positions vis-à-vis those claims long before the claims are granted.

 

 

Third party observations and estoppel provisions?

Since under the proposed amendments third parties will be able to follow the progress of patent applications, the question arises if third parties should be able to comment on those applications while they are still being examined.  U.S. law makes it virtually impossible for third parties to participate in the examination process once an application has been published; in contrast, the EPC allows for anonymous third party comments on pending applications. 

 

Presently there is nothing in the Israel patent statute that explicitly permits or prohibits the participation of third parties, so a third party could assert that in the absence of a prohibition, it is allowed to file observations.  However, since applications are not presently open to the public, practically speaking third parties can’t participate in the ex parte examination process. 

 

This practical consideration will change once it becomes possible to follow the progress of applications through the ILPTO.  When that happens, I can conceive of situations in which I would advise clients to anonymously file observations with the ILPTO, even in the absence of statutory provisions governing the filing of such observations.  Given the ILPTO’s hyper-sensitivity to “the purity of the patents register”, it’s entirely possible that the ILPTO would pay attention to such arguments.  If the ILPTO ignored those arguments, the client could have alternative arguments waiting in the wings for use in inter partes opposition or cancellation proceedings; and because the first set of arguments would have been filed anonymously, no form of estoppel would attach to the client’s ability to present the second set of arguments during the inter partes proceedings.

 

Which is why it would be good to include provisions in the statute that explicitly govern the participation of third parties in the examination process, and that would create estoppel so as to prevent third parties from having more than one bite at the apple.  There are essentially six grounds on which a third party can challenge a patent or pending application: lack of novelty; lack of inventive step; insufficient disclosure; claims which are unclear or do not reasonable arise from the specification; failure of the applicant to comply with its duty of disclosure; and lack of applicant’s standing to apply for the patent (i.e. it was someone else, not the applicant, who was entitled to apply for the patent.)  If a third party wants to challenge a pending application on any of those grounds, it should be allowed to do so, but it should then be estopped from later challenging the application or issued patent on a ground earlier raised (provided that the applicant did not amend its claims in response in order to moot the objection).  So during prosecution if a third party wants to assert that a pending claim lacks novelty or inventive step, and the ILPTO determines that the claim is novel and inventive, that third party should be statutorily estopped from raising a lack of novelty of lack of inventive step challenge later, even on the basis of different prior art.

 

 

Requirement to Include an Abstract – “Essence of the Invention”

Presently applicants are not required by statute or regulation to provide an abstract of the invention. Rather, at present §26(b)(5) says that when the Commissioner publishes notice of acceptance of the application, he shall include “A description of the essence of the invention, in the view of the Commissioner”.  As discussed here a few months ago, the Commissioner recently tried to shift to applicants the onus of providing an abstract; at the time, I posited that the Commissioner was not empowered to impose such a requirement.

 

The proposed amendments would enshrine the Commissioner’s requirement in the statute by adding §13(c), which would read,

 

13(c).    The applicant shall attach to the specification a brief description of the essence of the invention in his application. 

 

As explained in my earlier post, unwary applicants could find themselves sacrificing claim scope by complying with such a requirement, since the term “essence of the invention” is the same term used in §49 of the statute, which is the section that establishes that the patentee has the right to prevent others from exploiting an invention for which a patent has been granted, “whether in the manner defined in the claims or in a similar manner that includes, in view of what is defined in the claims, the essence of the invention that is the subject of the patent”.  Thus, in cases where literal infringement cannot be shown, the patentee needs to demonstrate infringement of “the essence of the invention”.  Applicants would therefore be remiss to put statements into the record that could be used to restrict the scope of this “essence of the invention”.  Unfortunately, proposed §13(c) would force applicants to do just this.  As with the restrictions on the number and amendments of claims, such a requirement would thus unfairly force applicants ab initio to potentially limit the scope of the protection to which they are entitled.

 

The addition of §13(c) need not undermine §49.  For example, at the same time §13(c) is added, §27 could be amended to read as follows:

 

The description of the essence of the invention as published under §16A(a)(5) or §26(b)(5) shall not be used by a court or the Commissioner as evidentiary material when they come to interpret the specification or in any other way establish the scope of the protection conferred by the patent in any legal proceeding.

 

Alternatively, the words “essence of the invention” could simply be removed from proposed §13(c), so that it would instead read, for example, The applicant shall attach to the specification a brief description of the invention disclosed in his application.