IP Best Practices Conference 2015

June 16, 2015

Kim's event

Intellectual Property Resources (IPR) held their annual conference entitled IP Best Practices 2015 in the Tel Aviv Sheraton Hotel on May 11, 2015. I apologize to the organizers and to readers for my tardiness in reporting this. The program can be found here.

This event has become an annual fixture in the Israel IP calendar, and is widely attended by in house counsel, foreign patent attorneys. The speaker list, as always, was impressive. The event was well attended by in-house IP counsel and by sole practitioners. There were also a number of participants who had flown in from abroad, not all of whom were sponsors or speakers.

Ruud Peters, strategic advisor to Philips gave his perspective on IP developments as did Toshimoto Mitono, a Senior IP Counsel at Sony. Whereas the issues and budgetary considerations that Philips and Sony have may not be relevant for most Israel companies and their IP counsel, whether in-house of a service provider, I did find some aspects of the talks relevant, and found the presentations as a whole, thought provoking and well worth attending. It was interesting hearing from Philips dismiss the company as a developer of shaving solutions that does strategic deals with manufacturers of other products, allowing them to use the Philips name on their products, where Philips has only a marginal influence, mostly on the aesthetics. I have long felt this to be the case, but rather enjoyed hearing someone from Philips saying it.

The regional updates were generally good, however the Indian practitioner seemed to get stuck in excruciating details of the formalities requirements for Indian native inventors having to first file in India and only later go abroad. This was of little interest to the other participants, none of whom were Indian. The Peter Sellers Goodness Gracious Me intonation merely accented the irrelevance. Micaela Modiano attempted to convince us that with the right attorney (her?) one could obtain patents for software in Europe. The problem was that one apparently requires novel and inventive hardware elements, so the jury is still out.

Chixue Wei, Chairman of the Board of Linda Liu & Partners didn’t speak English, but this didn’t stop him from giving a presentation, with his very presentable young female assistant doing a simultaneous translation for him. It was rather like a prequel for the Eurovision song contest in that one didn’t actually need to understand what he was saying to follow the gist, with the slides being quite adequate. Frankly I wondered why he didn’t have her present and apologize for his poor English, but note that His Excellence had come in person and would deal with questions on a one-on-one basis. This would have left us assuming that he had some English but just wasn’t up to public speaking. He made a valiant effort to convince us that he could solve all enforcement problems and may indeed by true, but it wasn’t convincing. I have yet to hear a foreign practitioner presenting himself as not being able to provide a solution. However, I can’t see myself intentionally engaging a practitioner who doesn’t speak English and suspect that this is true of others as well.

Terry Rea the Former Acting and Deputy Director USPTO and Deputy Under secretary for Intellectual Property (which is apparently anything but a secretarial position) gave a very polished fireside chat on changes in the USPTO. She even managed to professionally field a naughty question I asked her about when the USPTO examiners would come to realize that there might be relevant art filed in other countries and not necessarily in English.

The US practitioners that presented were drawn from Mintz Levin, Finnegan and Greenbaum & Bernstein. All spoke well and competently. The most useful presentation was that of Michael Fink of Greenbaum & Bernstein who addressed the issue of writing contracts with indemnity clauses, to roll over responsibility for IP to suppliers of components. I found myself making a written note to engage him for this task where relevant.

food at Kim's event

The food, as would be expected from the Sheraton, was plentiful and delicious. Breakfast was filling. During the breaks the refreshments provided an opportunity to graze mingle. Lunch was superb.

kim one eyed

Kim Lindy was taking a back seat on the day, and though ever present, was not introducing speakers. Not exactly a shrinking violet, it turned out that she had damaged her eye. With the patch and the military precision with which the event ran, she was reminiscent of Moshe Dayan. I suspect, that rather than being a Model Major General, behind the scenes, she was more like a Piratical Maid of all Work.

In terms of the quality of the presentations, the opportunity for networking and the refreshments, the event was extraordinary value for money. The fees were less for in-house counsel than for service providers. This is a common strategy abroad, but less frequently practiced in Israel. In theory it ensures lots of big fish for the IP harpoonists service-providers. Of course, manufacturing and research entities would generally be paying the attendant’s fees and a couple of hundred Shekels more or less may make little difference. I can understand but disagree with the short-sightedness of both employees of service providing IP firms and their employers who did not attend in large numbers. There were a number of practitioners from smaller firms, but only two employees from larger IP firms (one from Colb and one from Ehrlich).  I find this worrying. I can understand IP firms not patronizing each other’s events. I can also understand firms seeing IP Factor as competition or not being happy with some blog article or other and avoiding my events, despite their high educational and social value. With over 1600 blog posts, I have criticized decisions and rulings in which all firms were a party at some time or another and so can understand my loyal readership not patronizing my events. The thing is that Kim is not an IP firm. She is a service provider to IP firms, hosting events and training programs and offering software solutions. Now it may be annoying to some that she offers a platform to US and other foreign firms to work directly with in-house counsel but as Thomas Friedman put it, the world has gotten flatter. In-House counsel generally started life in one of the patent service providers. They are aware of foreign firms and know the advantages and disadvantages of engaging them via local practices. By boycotting Kim’s event, the larger Israeli practices are giving the US firms a free playing field.

I don’t expect an Israeli patent attorney to be expert on writing contracts for licensing or subcontracting manufacturing in the US. I would expect a local attorney to work with someone licensed abroad. Kim’s event enables one to learn who specializes in what and to get a brief overview of these sorts of issues which anyway are continuously changing. I think that Israel Attorneys owe it to their clients to have a basic handle on these issues and so am a firm believer in attending IP events like this.


Can evidence submitted in an adversarial civil legal proceeding be kept confidential from the opposing party?

June 14, 2015

trade secretevidence

Israel Patent Number 132540 “System and Method for Direct Monetary Transfer Using Magnetic Cards” to Yehuda and Yigal Tsabari issued and then lapsed due to failure to pay the renewals.

Back on 24 July 2014 the Israel Patent Office agreed to the patent being reinstated. Generally, third parties who are utilizing the patented technology in good faith relying on the fact that the patent was abandoned are granted a non-transferable license that allows them to continue their business activities.  Nevertheless, the Israel Patent Office Decision to allow a patent to be reinstated is published for opposition purposes, giving third parties three months to oppose the lapsed patent being reinstated.

In the case of IL 132540, on 23 November 2014, Going Dutch LTD filed an opposition to the reinstatement. They claimed that the patent had not lapses unintentionally, but that Tsabari had knowingly abandoned the patent and that this was evident from the way Tsabari tried to enforce his patent.

Tsabari responded to these charges but requested that part of his response be kept confidential by the Patent Office and not made available to the opposer, claiming that the information constituted a Trade Secret. The documents to be kept secret included a document describing an enabling system, a draft contract with a credit card organization, a proposal for developing a system based on the patent, a contract with an investor and a letter from the investor, canceling the contract.

The patentee argued that these documents were confidential and for the parties themselves, and that their publication could compromise the patentee’s ability to compete in the relevant market. They were submitted as evidence that the invention had not been abandoned, but beyond that, their contents were not relevant to the issue in question, and so their contents should remain restricted.

The Opposer noted that the patentee had not provided sufficient evidence to prove that the documents in question were fairly described as trade secrets. This was particularly the case due to the fact that the documents apparently related to a failed business transaction from ten years previously. Furthermore, the patentee was not a side in the agreements in question and therefore could not claim that any trade secrets were his secrets.  Substantially, any documents used to support a legal claim should be available for public inspection. In addition, the opposer noted that the documents should have been supplied together with an affidavit and their dates and the parties thereof and the editor thereof should be identified.

 

Ruling

Section 23 of the Trade Related Torts Act 1999 give the courts (including the Patent Office) authority to prevent the publication of evidence considered as including trade-secrets and to allow only restricted access.

In recent Supreme Court Decision 2376/12 Rami Levi [a discount supermarket chain] vs. Moshe Dahan, July 8, 2013, Judge Amit ruled that there was a connection between the relevance of a document to a proceeding and the extent it could be kept confidential.

Essentially, where a document is relevant to a proceeding but one side claims a trade secret, the court has to weigh up the opposing rights of the parties and also to be aware of the potential damage to further entities not party to the a proceedings.

As a general rule, in civil proceedings, documents are available to all and confidentiality is the exception – See 7598/14 Theopholus Johnopholus (Theopholus III), the Greek Orthodox Patriarch of Jerusalem vs. Hymnota LTD., albeit the precedent relating to religious confidentiality and not to trade confidentiality.

Firstly, therefore, the court has to assess the relevance of the documents in question, which is a function of the arguments between the parties. In this instance, the argument relates to the restoration of a patent under Section 61 of the Patent Law 1967:

Any person may oppose a patent being restored within three months of the publication of the restoration notice on the grounds that the Commissioner [or deputy in this case] did not have grounds to order the publication of the request [i.e. to oppose the decision to reinstate].

Consequently, the discussion regarding reinstatement should focus on the three grounds for reinstatement:

  • failure to pay the fees resulted from reasonable circumstances
  • the patentee did not intend the patent to lapse
  • the patentee requested reinstatement as soon he realized that the fee was not paid.

The opposer considers that the patentee’s behaviour over the years was unprofessional, surprising and irresponsible. In other words, the patentee either wanted the patent to lapse or at least was unconcerned about his rights.

In response to these claims, the patentee described his attempts to commercialize the invention and submitted the documents about which he requested a secrecy order. The documents in question date to the period 2007 and 2008 and are thus of little relevance to the opposition proceeding.

Due to their lack of relevance to reinstatement, it seems that the right for confidentiality outweighs the right of access. They were prepared for the patentee or for exclusive licensee and were not published after they were not successful. There is no reason why these documents should enter the public record. Based on the statement of cases, the documents are not relevant and should not be published.

As to the lack of an affidavit, i.e. a signed statement testifying to that claimed, in Patent IL 118045 AstraZenca AB from 16 Jan 2005, there was a ruling to the effect that a statement should have been submitted.  However, in the Rami Levy case the Supreme Court ruled that the affidavit requesting secrecy was sufficient and there is no need for an additional affidavit accompanying the submissions. In the present case, the documentation as supplied is sufficient since the content is clearly sensitive, rendering superfluous the need for an affidavit supporting this contention.

Furthermore, the Patentee decided to submit these appendices to his statement of case and not to later submit in the evidence stage as he could have done, relying on Section 93 of the Patent Regulations 1968. Consequently, at this stage of the proceedings, the patentee does not have automatic rights to view the documents.

Thus in the meantime, the documents shall remain confidential. Should the Opposer consider these documents relevantat a later date, he is entitled to request their publication. At this time, no costs are awarded.

Opposition to reinstatement of IL 132540 “System and Method for Direct Monetary Transfer Using Magnetic Cards” to Tsabari, opposed by Going Dutch LTD., interim ruling by Jacqueline Bracha, 7 May 2015.

Comment

I am a little confused here.  The adversarial system requires that evidence brought in a legal proceeding be available to opposing parties to examine and challenge the validity thereof.

In this instance, the Opposer is using his legal right to oppose a patent being reinstated on the grounds that the patent was willfully abandoned. The Patentee has countered that there was no willful abandonment and has substantiated this claim with various evidence that allegedly shows this to be the case. In the circumstances, the evidentiary documents are considered by the patentee to be pertinent. If the patentee does not want the opposer to see the documents, he should retract them and base his case on other evidence.

That said, the 2008 documents are irrelevant as the patent only went abandoned on 24 October 2013, presumably retroactively on 24 April 2014, when the six month grace period past.

This patent was ‘abandoned’ for less than three months. The issue is when Tsabari realized that the patent had gone abandoned and when he tried to have it reinstated. Reinstatement is thus unlikely to be difficult, and one suspects that the patentee would be better served if he had chosen to use professional counsel for the reinstatement.

money plany

I had a look at the patent in question. It is a variation of the hoary old wedding present patent for directly transferring money from a credit card to the celebrants at a wedding. This is what a call a hardy perennial as approximately once a year some inventor comes in with this great idea he’s had.

Ironically the patent appears to be eminently voidable due to both lack of novelty and obviousness in light of the prior art and also on the substantive grounds that it is a software implemented business method and the fact that it is hardware implemented is insufficient to change this characteristic.


Does Size Matter? Dun & Bradstreet Publish their Silly Stats Again

June 2, 2015

1.Does Size Matter

Dun and Bradstreet has published their annual IP rankings once again. See here for the Globes article based on the Dun & Bradstreet 2015 rankings.

As readers of this blog will know, I consider the rankings infantile. D & B ranks based on the number of patent attorneys and this year, Reinhold Cohn with 43 patent attorneys has been knocked off its perch as Israel’s largest IP firm by Pearl Cohen, the new branding of PCZ”L that allegedly employs 46 patent attorneys. It seems that Dun & Bradstreet would fail their matriculation in both Maths and Geography.

The problem is that whereas Reinhold actually employs 37 patent attorneys in Israel and a further several attorneys-in-law that work in Intellectual Property, and these are all bona fide employees or partners and are all licensed, Pearl Cohen does not employ 46 patent attorneys in Israel.

Unfortunately, Pearl Cohen and D&B are somewhat misleading regarding what a patent attorney is, what an Israel licensed patent attorney is, what an Israel firm is, what an employee is and what part of the world may be considered part of Israel.

Allow me to elaborate:

1. There is a confusion between general attorneys-at-law and patent attorneys. The 55,000 odd Israel licensed attorneys-at-law may practice before the Israel patent office, but only a small fraction have any IP competence whatsoever, and a smaller fraction still understand anything about patents.

2. To practice before the USPTO one needs to be an US Patent Agent or a US Patent Attorney.

3. Pearl Cohen has a US office, a Boston office and a UK office. The employees of these offices cannot be considered as being part of an Israel firm, unless, of course, one considers Finnegan, the US’s largest IP firm as being an Israel IP firm by virtue of their Israel office and website. Finnegan has only one attorney, Gerson Panitch, based, part-time in Israel (he is actually based in Washington DC according to Finnegan’s website). If Finnegan is an Israel IP Firm, they are clearly larger than Pearl Cohen. Actually, from his profile, I am not sure that Gerson is a patent attorney licensed to practice before the USPTO, but that’s beside the point. According to the warning previously published on the Israel Patent Office website, it is also illegal for anyone other than Israeli attorneys-at-law and Israel patent attorneys to advise clients in Israel:

הובא לידיעתנו, כי אנשים שאינם עורכי דין או עורכי פטנטים עוסקים לכאורה, בשכר, בפעילות שנתייחדה לעורכי דין ולעורכי פטנטים, ובכלל זה הכנת מסמכים המוגשים לרשם הפטנטים בישראל ובחו”ל, גם אם אינם חותמים על המסמכים בשם הלקוח.כל אדם מהציבור הזקוק לשירותי ייעוץ ורישום בתחום הפטנטים, סימני המסחר והמדגמים מוזהר בזאת שלא לפנות לאותם גורמים הפועלים בצורה בלתי חוקית, שכן הסתייעות באותם גורמים עלולה לגרום להם נזק בלתי הפיך.

This is a rough translation:

Let it be known that people who are not patent attorneys or attorneys at law apparently practice, for payment, services that can only be provided by patent attorneys or attorneys at law, including preparation of documents for submitting to the Israel Patent Office and to foreign patent offices, even if they don’t sign in the name of the client. Any member of the public who needs advice or registration services relating to patents, trademarks and designs is hereby warned not to turn to such illegal practitioners, since doing so may result in irreversible damage.

This is based on Section 20(4) of the Israel Bar Law (Professional Ethics) 1988 which forbids anyone who is not a licensed attorney-at-law in Israel (or an exception, such as a Patent Attorney for IP Law) from giving legal advice. Note, I am not sure that the Israel Patent Office’s interpretation of this law is in accordance with International Obligations, and arguably (as Mr Panitch argues), a US attorney can advise re US law. Even if he is correct, I suspect that the advice will be lacking when it comes from a US attorney not licensed in Israel, as there are Israel tax and other issues that affect the decision making process. Consequently, even when the jurisdiction of interest is the US, China or Europe, an Israel firm is advised to work with foreign counsel via a local practitioner.

The one shop model of a firm with US, Israel and European offices is also, not necessarily in the client’s interest. If a local firm drafts the application and a separate US firm (and not a branch of the same firm) makes a decision regarding whether or not to litigate in the US, it is likely that the additional level of review will avoid the filing of frivolous law suits such as the Source Origin case.

4. An employee is someone who works for a company and receives a salary. Pearl Cohen has a highly dubious arrangement by which attorneys and patent attorneys that work for them are considered as not being employees and new employees are coerced into signing a statement to that effect.  Pearl Cohen’s professional employees are perhaps best considered as being free-lancers. Pearl Cohen does not pay the license fees of these professionals.

5. There are 19 patent attorneys that list their address in the Israel Patent Office database as working for Pearl Cohen in Herzliya. This is a mere 41% of the 46 patent attorneys that Pearl Cohen claims to employ. This list includes Assaf Weiler who is living in the UK according to Pearl Cohen’s website. It also includes Zeev Pearl who according to Pearl Cohen’s website is considered the managing partner working from the New York office. Pearl is licensed in Israel, but is not licensed as a patent attorney in the US.

I can’t opine about the legality of this situation since I am not licensed in the US. For those interested in exploring this further, see New York City : 1st Department, Chief Counsel, First Judicial Department, Departmental Disciplinary Committee, 61 Broadway, 2nd Floor, New York, NY10006, (212) 401-0800, Fax: (212) 287-104, Website: www.courts.state.ny.us/ip/attorneygrievance/complaints.shtml Also see the unauthorized practice of law committee in New York.  Their contact information is as follows: Kathleen Mulligan Baxter, New York State Bar Association, One Elk Street, Albany, NY12207, Tel: 518/463-3200, Fax: 518/487-5694 kbaxter@nysba.org See also ABA Formal Opinion 01-423 Forming Partnerships With Foreign Lawyers (2001). Report 201H (Licensing of Legal Consultant) Report 201J (Temporary Practice by Foreign Lawyers) as presented by the ABA Multijurisdictional Practice Commission and adopted by the ABA House of Delegates in 2003. See Also Report 107C as Amended by the ABA Ethics 20/20 Commission (ABA Model Rule on Pro Hac Vice Admission) that was adopted by the House of Delegates in 2013.

Of course, size isn’t everything. Pearl Cohen’s employment arrangement is not limited to that firm, and some competing firms have similar practices. I consider the model unethical, not least because it is both open to abuse by the ’employer’ and is frequently abused.

Dun and Bradstreet’s table has other problems. For example, Colb does not appear in the table listing the top 12 firms, and I am fairly sure that they are larger in terms of number of Israel Patent Attorneys than some of the firms that are listed.  Despite losing much of his litigation team recently, I think Dr Shlomo Cohen Law Office has enough Lawyers and patent attorneys working in IP to enter the table. There are, of course, also very large Israel law firms that have one or more patent attorney or IP lawyer working for them. Shibboleth and Shin Horowitz come to mind.

What is, of course, of more interest to clients is the competence and track record of the individual attorney who handles their files. Some of Israel’s best patent practitioners in private practice, including patent attorneys work for small firms or are sole practitioners.  This is true of both patent attorneys that draft and prosecute patents, and litigators that fight validity issues. It is also true of trademark attorneys, many of the better ones in Israel work for small firms.

The size of an IP firm can provide depth of knowledge and experience, but this is not necessarily the case. There are few economies of scale in this industry, and Parkinson’s Laws go a long way to explain why the same service from larger firms is more expensive, yet the sole practitioners and partners of smaller firms are usually better off financially than their colleagues in the larger practices.

The lists of IP firms put out by the professional magazines is also skewed towards the larger firms. The more attorneys that club together to form a single shop window, the more and larger clients they are likely to attract. The irony is that the when a successful attorney decides to grow his or her firm, the head attorney does more administration and less legal work, and is likely to take on less competent staff who are less of a threat. The more competent staff tend to break away and form their own firms. The upshot is that the average ability per attorney is generally lower in the bigger firms. A more objective statistic of a firm is the average billing per attorney, or something similar that normalizes absolute values by the number of practitioners.


Justice in the Eye of the Beholder

June 2, 2015

multifocals   Optika Halperin

This decision relates to parallel importing, to slander and to inequitable behavior.

Luxvision is the licensed importer of Zeiss lenses. Optika Halperin, a national chain of opticians in Israel (founded by a Rabbi who was a boxer, a world freestyle wrestling champion and bodybuilder, and then a Karate expert who introduced and promoted the sport to Israel) advertised multi-focal lenses that they sold as being Zeiss lenses.

Luxvision ran a vicious campaign of letters and advertisements from 2010-2011 arguing that Optika Halperin’s lenses were not original Zeiss lenses. Optika Halperin sued Luxvision, its CEO Erez Avner, and Ami Lapidot, who is the director of the Lapidot Group which owns Luxvision, claiming that this campaign caused then damages of 10 million shekels including cancellation of contracts with ELAL (Israel’s national airline) and with HaMashbir (Israeli department store), and had unjustly enriched the defendants. Luxvision counter-sued for 200,000 in 2011, as maximum statutory fine for willful slander without proof of damage, concerning four advertisements by Halperin, which they alleged were slanderous, defaming and insulting.

The relevant details are as follows:

On 22 December 2010, Avner sent an email to ELAL, and without revealing that he was an employee of Luxvision, informed them that the advertisement of a discount between Optica Halperin and ELAL infringed intellectual property since the guarantee was not recognized by Zeiss. On 13 April 2011 the defendants contacted HaMashbir in writing and informed them that Zeiss International had canceled the manufacturing and distribution rights of the Indian company from where Halperin had purchased the Zeiss lenses mentioned in the discount, and that the lenses were not merely imported without a license, but that there was a question regarding the origin of the lenses. Luxvision also contacted Halperin’s employees with a letter titled “Notice of Cancellation of Agreements” ordering them to cease and desist from selling or purchasing Zeiss lenses. Luxvision further published misleading notices in newspapers and on Internet websites regarding the origin of Halperin’s lenses that stated “Zeiss importers: Optika Halperin together with ELAL sell lenses from India. The [Halperin] chain: they are original”, and in an article in the financial supplement of Idiot Achronot, 2 February 2011, “Zeiss Germany does not stand behind the special offer and the Guarantee is not authorized.” In the business paper the Marker on 13 April 2011 the defendants  allegedly planted an article titled “Optical Illusion, the German Company Zeiss: Optika Halperin sells Zeiss lenses that are not originals.”

In their defense, Luxvision denied any responsibility for articles published by newspapers and the alternative defense that the facts discussed in the articles were true. Luxvision further denied that they caused damage to Halperin and claimed that the damage was self-inflicted since they published false information regarding the source of their lenses, and this was self-risk or contributory damage to the extent that they were not entitled to any compensation or legal recourse. This was also the basis of their counter charges of 200,000 Shekels in compulsory compensation without proof of damage.

Both sides brought evidence regarding the relationship between Luxvision and Zeiss India, from which it seems that Luxvision had themselves purchased and sold Zeiss lenses from India. The relationship between Zeiss Germany and the Zeiss Middle East had apparently been broken however there was an agreement between them. Judge Ginat ruled that these details were not necessary to rule on the case in question.

The Ruling

Optika Halperin as an independent and private company that imports and sells optical equipment and eye-wear imported Zeiss lenses with the Zeiss logo from the Indian manufacturer, which is a factory established by Carl Zeiss Vision International Gmbh, the German mother company.

On 27 February 2008, Zeiss Germany set up a joint venture with GKB HI-Tech Lenses Private LTD, an Indian company set up to sell Zeiss lenses to the Middle East. Under the agreement, with GKB HI-Tech Lenses Private LTD would be allowed to sell lenses with the Zeiss label in the Middle East, including Israel. The Companies had their differences and went to court in India, after which the business relationship ceased as of October 2011. However, Zeiss continued to allow their name to be used on lenses from India that were sold in the Middle East.

On the basis of evidence filed, including affidavits, Zeiss never showed any reservation that lenses from the Indian company were being marketed as Zeiss lenses in Israel and elsewhere. Zeiss never complained to Halperin nor did they file suit in an Israel court. They are not a party in this dispute. Indeed, Zeiss India had initiated an action against Zeiss Germany and not the opposite. Judge Ginat therefore ruled that the evidence leads to the conclusion that the imported Indian lenses may be considered as ‘parallel imports’ and not as imports of the authorized Israel dealer. As with the Hilfiger case, this is perfectly legal.

Cancellation of the ELAL contract 

In 2009 and 2010, ELAL and Yaakov Halperin signed various agreements under which Business and First Class passengers on ELAL flights would receive vouchers for purchasing Zeiss lenses at Optika Halperin.  Luxvision wrote to ELAL claiming misrepresentation and the eventual upshot was that ELAL did not renew their contract with Optika Halperin who claimed damages of 2,515,000 Shekels in loss of contract and loss of future business.

Although eventually ELAL wrote to Luxvision that they were not renewing the contract with Optika Halperin so the charges were moot, Luxvision argued that this letter was not an indication that they canceled an agreement, nor was it an indication that the decision was the result of Luxvision’s campaigning.

What was clear was that Luxvision embarked on a media smear campaign against Optika Halperin, and the articles are available on line and still cause damage. Furthermore, they contacted third parties having contractual relations with Optika Halperin so Luxvision did do serious damage to Optika Halperin’s reputation.  The articles were unequivocal and there is a basis for bringing charges of Slander under Sections 1 and 2 of the Slander Act.

However, it will be appreciated that Section 14 of the Slander Act provides the defense that the allegations are true. This requires that the publication is true and is of public interest. The truthfulness defense is objective. It is important as it strikes a balance between Freedom of Speech and the right to one’s good name. The public interest consideration is subjective, and the court has to rule on each case according to its merits. Regarding the truthfulness of Luxvision’s allegations, the onus is on them, as defendant to establish that their allegations are indeed true.  However, Luxvision were within their rights to indicate that the lenses were not guaranteed by them and with multi-focals, there is a real likelihood of lenses being unsuitable and rejected as such.

Judge Ginat was impressed that Zeiss Germany would have gotten involved if there was any truth that the Indian lenses were substandard. Zeiss themselves and not the importer owns the rights in their name. Furthermore, Luxvision contacted ELAL before contacting Zeiss Germany. Judge Ginat concluded that this case is not one where the lenses are not originals or are fakes, but is a case of parallel importing, and, as established in Dyson and in the Tommy Hilfiger  case, parallel importing is legal in Israel. Consequently, the defense that Luxvision told the truth is not a totally accurate reflection of reality and the defense is not available to them.

Contacting the media and Optika Halperin stores around the country does not seem to be a reasonable act that can be considered as equitable behavior as the publications were inaccurate and Luxvision was aware that the Indian company was authorized by the German company to produce Zeiss lenses, even if the relationship between the Germans and Indians was somewhat rocky. Consequently, Judge Ginat rejected the defense that the slander was unintentional.

Nevertheless, the estimate of 10,000,000 Shekels of damages was less than substantiated and consequently Luxvision was ordered to pay the maximum statutory damages of 50,000 Shekels for slander. The allegation of unjust enrichment was also not substantiated and was rejected.

Charges against Lapidot were rejected as any actions he conducted through the company were considered as the responsibility of the company and not personal responsibility.

Luxvision’s counter-claims of slander for Optika Halperin’s media campaign stating that ‘only companies that want to profit likes pigs sell expensively’, was rejected as Luxvision had started the smear campaign and the description seemed somewhat apt. Furthermore, there was nothing wrong with Optika Halperin showing the difference in price between themselves and competitors. In general, Optika Halperin’s campaign was considered acceptable. Luxvision, was, however, also ordered to pay 33,999 Shekels for causing the ELAL contract to be breached and they were also ordered to pay the court’s expenses including the cost of the court recorder, and 38,000 Shekels in legal fees incurred by Halperin.

28167-04-11 Optica Halperin vs. Luxvision LTD, by Gidon Ginat of Tel Aviv District Court, 29 April 2015


Israel Court Issues Injunction against ISPs and Recognizes Contributory Copyright Infringement

June 1, 2015

ISP

NMV Entertainments LTD (formerly NMC Music LTD) et al. records Israel music and represents some of the larger foreign music canneries. They have sued Bloomberg Inc. and various Internet Service Providers (ISPs) including Bezeq International, Partner, 013 Netvision, 012 Smile Telecom, Hot-Net Internet LTD and Aharon Perfori (then the owner of Unidown, which was subsequently transferred to Bloomberg).

Unidown is a limited company incorporated in the Seychelles. The issue in question is access to the Unidown and Downsong websites as found at http://www.unidown.co.il and http://www.downsong.net which serve as a supermarket of music that enable the public to download songs without any royalties being paid to the rights holders.

The plaintiffs applied for the websites to be closed down, 150,000 Shekels in statutory compensation without proof of damages (the amount limited to minimize the court fees), and legal fees to be carried by the defendant, and most significantly, that the various internet service providers (ISPs) block access to the websites.

The plaintiffs alleged that the primary infringing permitting website was a straw company and that closing it down would not stop the service being provided. For reasons of utility, the ISPs were a legitimate target. In addition to legally constructing cases of indirect infringement, the plaintiffs accused them of Unjust Enrichment.

Bloomberg Inc argued that the website was merely a search engine that operated worldwide in seven languages and that offered four features: (i) searching and direct listening to musical content from YOUTUBE, (ii) Finding relevant information from Wikipedia, (iii) Creating a playlist and (iv) searching for musical content and allowing consumers to locate and download such content from third party websites. Since three of the four features were not under challenge, they felt that the attack on their website was excessive.

Judge Gidon Ginat of the Tel Aviv District Court acknowledged that the infringer who accesses copyright infringing material via a website and downloads it to his computer is the actual infringer, but considered that the website owners are responsible for contributory infringement in that they enable end users creating copies and reproducing copyright material.

In this instance, the copyright owners have pursued the internet service provides arguing that where infringement is being conducted on two separate websites, the Internet Service Provider is responsible for encouraging or at least aiding abetting copyright infringement.

The Court ruled that website UNIDOWN is nothing more than a platform for downloading copyright infringing copies that are discovered by search engines. Unidown converts YOUTUBE playable content into media that can be downloaded and saved as MP3 format files. Whilst it is certainly the case that the downloaders themselves are the primary infringers, the website owners that allow the links are contributory infringers in that they facilitate the downloads.

The Court concentrated on Unidown, also available as .com and with other parallel sites, after the plaintiffs abandoned Downsong after failing to show a link between them and Unidown. Additionally, the court was willing to act against the ISPs where the identity of the site owner was concealed, but with Downsong this wasn’t the case. Consequently Judge Ginat did not rule regarding blocking access to Downsong but did note that this ruling did not affect the plaintiff’s rights to take legal steps against that company.

As to Unidown, Judge Ginat ruled that the site should be taken down and that Bloomberg should pay 100,000 Shekels in statutory compensation.

Judge Ginat relied on UK precedents, including Judge Arnold’s rulings in Paramount Home Entertainment International Ltd & Others v British Sky Broadcasting Ltd & Others [2013] EWHC 3479 (Ch); Twentieth Century Fox and others v British Telecommunications plc [2011] EWHC 1981 (Ch);Dramatico Entertainment Ltd v British Sky Broadcasting Ltd [2012] EWHC 268 (Ch); EMI Records Ltd v British Sky Broadcasting Ltd [2013] EWHC 379 (Ch); Football Association Premier League Ltd v British Sky Broadcasting Ltd [2013] EWHC 2058 (Ch) and Justice Birss’ ruling in Twentieth Century Fox Film Corporation v. Sky UK Ltd [2015] EWHC 1082 (Ch).

Judge Ginat noted that in an Appeal to the Israel Supreme Court, (Appeal 447/07 Mor vs. Barak ITTT (1995) and Bezeq Benleumi P.D. 63 (3) 664 (2010)) the Supreme Court refused to fulfill the lacuna in the Law and to grant an injunction but called on the Knesset to legislate. However, since that case related to the rights of anonymity, it was different and wasn’t binding case-law, and since five years had passed without the Knesset addressing the issue, Ginat did not see fit to wait for the legislative to do their job. In addition, Bloomberg should bear legal costs of 50.000 Shekels, and, in an interesting wrinkle, it seems that as Partner argued that it was unjust to award legal costs against the defendants, Judge Ginat ruled that they alone should bear the legal costs of 34,000 Shekels, and the other defendants were not required to bear legal costs. However, should Partner choose to present coherent legal arguments, they would not be penalized for so doing and might even prevail.

Civil Ruling 33227-11-13 NMC United Entertainment LTD et al. vs. Bloomberg et al. Tel Aviv District Court by Judge Ginat, 12 May 2015

 

COMMENT

The responsibility or otherwise of ISPs to police the Internet is a hot issue. However, it seems reasonable to issue injunctions against them on a case specific basis.

Personally, I am in favor of a shorter and more liberal copyright regime, but think that Israel does have an obligation to uphold international standards. I am not sure, however, that Judge Ginat is correct that there is a lacuna for the Israeli legislative to address and their failure to do so authorizes him to judicially create contributory copyright infringement or aiding and abetting copyright infringement. The Israeli legislature passed a brand new copyright law in 2008. Even back then, the issue of ISPs was established and there was US pressure on Israel. See here for example. Israel was not and is not a signatory to the treaties that require forcing ISPs to police the web.  It seems that the Knesset intentionally decided not to include this lacuna in their legislation. Since CBS vs, Amstrad, providing the technology for infringing (back then, it was a tape to tape double cassette deck) has not been considered culpable in the UK.

Is this ruling a case of judicial legislation? It seems to be.  I am against judicial activism preferring that judges leave legislation to the democratically elected parliament. I note that even in the US, recent decisions have overturned the judicial doctrine of incitement to infringe or contributory infringement of patents.


Waters of Eden – Nature’s Champagne

May 25, 2015

Mei Eden

Mei Eden (Waters of Eden) is a mineral water bottler and distributor.  Mei Eden advertised their mineral water as Nature’s Champagne.

The Comite Interprofessionnel du vin de Champagne (CIVC) which represents the wine manufacturers in the Champagne region of France, who perform a second fermentation of their wines in the bottle to produce a sparkling wine, have a geographical appellation. Only wine from that region may be called Champagne. The Comite Interprofessionnel sued Mei Eden on grounds of Infringement of their Geographical Appellation of Origin, Unjust Enrichment, the TRIPS Amendment to Israel’s IP Laws 1999 and Commerce relates torts 1999.

We note that MEi Eden is sold in blue tinted plastic bottles. Notably, in the period on question, the company did not sell sparkling mineral water, only still mineral water.

In an erudite 52 page ruling Judge Ginat reviewed Israel trademark cases, TRIPS legislation, Perrier related decisions from Germany, and UK rulings by well respected IP Judges Arnold and Laddie.

I can’t be bothered to reproduce the whole ruling here. I will confine myself to two quotes:

“The necessary elements for a claim in passing off were restated by the House of Lords in Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341 as follows:

the claimant’s goods or services have acquired goodwill in the market and are known by some distinguishing name, mark or other indication;
there is a misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by the defendant are goods or services of the claimant; and
the claimant has suffered or is likely to suffer damage as a result of the erroneous belief engendered by the defendant’s misrepresentation”

As noted above, both of these points were well explained by Laddie J in Irvine, in particular in the following passages:

“First, it is well established that, even in the absence of competition and hence diversion of sales, a misrepresentation leading to the belief that the defendant’s business is associated with the claimant’s is damaging to the claimant’s goodwill. Secondly, it is also well established that, if there is a misrepresentation which erodes the distinctiveness of the indication in question, then that is damage for the purposes of a claim in passing off.”

Expressed in these terms, the purpose of a passing-off action is to vindicate the claimant’s exclusive right to goodwill and to protect it against damage. When a defendant sells his inferior goods in substitution for the claimant’s, there is no difficulty in a court finding that there is passing off. The substitution damages the goodwill and therefore the value of it to the claimant. The passing-off action is brought to protect the claimant’s property. But goodwill will be protected even if there is no immediate damage in the above sense. For example, it has long been recognised that a defendant cannot avoid a finding of passing off by showing that his goods or services are of as good or better quality than the claimant’s. In such a case, although the defendant may not damage the goodwill as such, what he does is damage the value of the goodwill to the claimant because, instead of benefiting from exclusive rights to his property, the latter now finds that someone else is squatting on it. It is for the owner of goodwill to maintain, raise or lower the quality of his reputation or to decide who, if anyone, can use it alongside him. The ability to do that is compromised if another can use the reputation or goodwill without his permission and as he likes.”

In his ruling, Judge Gideon Ginat issued an injunction against Mei Eden using the term Champagne to describe their water, fined the water bottler 400,000 Shekels and awarded a further 200,000 Shekels in legal fees.

02-22286-33 Comite Interprofessionnel vs. Mei Eden LTD et al. Judge Gidon Ginat, 19 May 2015

COMMENT
This decision issues as WIPO members are hammering out the Geneva Act of the Lisbon Agreement. See here for more details.
I have nothing against appellations of origin per se being taken seriously. However, this specific case was filed well after the events and long after the advertising Champagne campaign was initiated. Once a complaint was made the defendant stopped using the slogan. Arguably therefore, there were adequate grounds to throw the case out. I can, however, see grounds for issuing an injunction to prevent Mei Eden describing their product as Nature’s Champagne.

Damages? Unjust enrichment? Not convinced.

Unlike some Israeli sparkling wines which are as good as the French ones, mineral water, no matter how good, is not confusingly similar to Champagne wine, regardless of how bad. Mei Eden is not a sparkling water nor is it sold in glass bottles like Perrier. It cannot be compared to Babycham which was a cider that could allegedly be confused with Champagne by occasional Champagne drinkers or by the inebriated.

I don’t think that Laddie’s comments regarding an alleged misrepresentation leading to the belief that the defendant’s business is associated with the claimant’s is damaging to the claimant’s goodwill are in anyway relevant to this case.

I don’t find the argument of “passing off’ convincing. I don’t see a reasonable likelihood of customer confusion, or even a faint possibility of customer confusion. I can accept that European trademark practice would consider this type of usage ‘dilution’ and would forbid it. I can therefore see a legitimacy in the Comite Interprofessionnel suing for an injunction, and obtaining their costs. However, I don’t see a justification for this rather large fine. At worse, Mei Eden promoted their water using this Nature’s Champagne campaign. Arguably they increased Mei Eden’s market share of the mineral water market and maybe even increased mineral water consumption, but I seriously doubt it was at the expense of Champagne sales. I just don’t buy this.
The basis of the costs ruling was statutory damage and the damages awarded were “estimated” after weighing up all the considerations. I suspect that this sum will be appealed.

Peckham Spring

Readers are referred to “Mother Nature’s Son” the 1992 Christmas Special of Only Fools And Horses, which is perhaps the most iconic episode ever, and one of the funniest programs ever aired by the BBC, where the Trotters successfully market Peckham Spring Water.
http://www.bbc.co.uk/comedy/onlyfools/christmas/1992.shtml


Software Rewrites

May 11, 2015

medical software

ICM is a software program designed for doctors, clinics and hospitals. A Mr Yehuda Ungar had the requisite skill set and experience to develop the program and signed a founders agreement with Yaakov Cashdi and others, the result of which was ICM Links Technologies and Information LTD, a company dedicated to creation of the ICM software for managing a medical database.

Cashdi, the other founders and ICM LTD claim that Yehuda Ungar copied and marketed the program to Bircon LTD, infringing their rights and becoming enriched at their expense.

The plaintiffs have sued for a declarative judgment that Ungar has infringed the founders agreement; an accounting regarding Bircon LTD’s use of the program and 750,000 Shekels compensation.

Statement of Case

The plaintiffs, Yaakov, Eli and Milik are shareholders of Ordan Computers and Data Systems which is a software developer that specializes in administrative software for clinics and medical chains.

Yehuda Ungar developed his ICM system that is complimentary to Ordan’s program and Ungar approached Yaakov, Eli and Milik to create a business partnership for the continued development, marketing and sales of ICM in Israel and abroad. Yaakov, Eli and Milik agreed and ICM Links Technologies and Information LTD was established.

Under the agreement, Ungar was to transfer all rights, source code and documentation to the company and to make his experience and medical file management available to the company.

Yaakov, Eli and Milik were to dedicate their resources, knowledge and experience to the program and eventually to market it.
The contract also included a non-complete clause for a minimum of three years and at least six months longer than any of the founders were serving as director, employee or shareholder in the company. The shares were divvied up and all share holders were to serve as directors for at least 24 months.

In 2003, Yehuda Unger met with a Mr Tenne, the manager of a chain of clinics who agreed that the chain could serve as a beta site for the software. The plaintiffs thought that the beta testing was going well, but in March 2004, Unger informed them that Mr Tenne had given notice to stop the trials. The plaintiffs failed to raise investment capital and further development stopped, freezing the company.

Yehuda Unger offered to resign and find alternative employment until a further opportunity would present itself. As a severage package Unger requested the right to compete, and to use ICM’s program whilst remaining a director and shareholder. Yaakov, Eli and Milik refused these conditions and contact between the parties was lost. In July 2008, Yaakov, Eli and Milik discovered that despite being an employee and shareholder, Unger had continued to develop the software together with Mr Tenne through Mr Tenne’s company Bircon LTD, which had marketed the product, earning money for both Unger and Tenne.

Yaakov, Eli and Milik considered Unger’s behavior as breach of contract, unjust enrichment and fraud. They further considered Bircon LTD as guilty of unjust enrichment and copyright infringement and sued for:

  • A declaratory judgment that the program was the property of ICM that Yehuda Unger was in breach of contract and breach of trust as a shareholder and director
  • Copies of accounts regarding the software
  • An injunction against further use
  • 100,000 Shekels in statutory damages and
  • 750,000 Shekels in lost earnings resulting from the breach of contract.

Statement for the Defense
Yehuda Unger is a systems analyst with 30 years of experience in managing software projects. Via his wholly owned company Irit Model, he has been working since 1995 at developing the ICM medical record database platform.

Unger alleges that Yaakov, Eli and Milik approached him in 2002 and suggested that Ordan would market the ICM platform either as stand-alone software or together with their ‘Clinica’ program.

Following this approach, a marketing and joint venture agreement was signed in July 2002. Six months later, Yaakov approached Yuhuda Unger and offered that Yaakov, Eli and Milik would purchase his shares via Ordan.

Under the agreement, via Ordan, Yaakov, Eli and Milik would transfer 40,000 Shekels a month. However, they did not meet this, and in September 2003, they informed Unger that they did not have the resources to fund ICM.

According to Unger, at Bircon, he programmed from scratch using public domain code and his personal knowledge, without using ICM, its source code or other resources. Unger even filed a counter-claim but subsequently retracted it.

The subsequent case relied on testimony from the parties, software engineers of both Ordan and Bircon and Dr Matthew Golani as an expert witness to the court.

Ruling
Ordan marketed Clinica and Irit marketed an early version of ICM to the Eynayim chain of clinics that was under the management of a Dr Levinger. The sides realized that they each had complementary software products that were half a solution and they discussed working together. After negotiations, in July 2002, the parties signed a marketing agreement under which Ordan would market ICM. About six months later, at the beginning of 2003, the sides discussed Ordan purchasing ICM and a framework agreement was signed. Following this, Unger continued working on ICM, but as an employee of Ordan and the code was transferred to Ordan which allocated a programmer to the project and Milik undertook the marketing.

In parallel with the ongoing development work, the parties negotiated a full contract, under which Unger was to be paid “consultancy fees” and a new company was to be set up. The contract was signed in July 2003.

Judge Shwartz summarized the agreement and interpreted the lacuna. and the various parties’ actions in following signing of the agreement.
He found Unger’s programming for Bircon was unjust enrichment, breach of copyright and brach of contract, but held Tenne and Bircon innocent of wrong doing.In Conclusion, Judge Swartz ruled that:

ICM LTD was the right holder in the software.

  • Unger breached the founder’s agreement
  • Unger is forbidden to make any use of the software without permission from ICM LTD.
  • Unger has to pay ICM LTD 100,000 Shekels statutory damages.
  • Unger has to pay costs of 4500 Shekels and 25,000 Shekels legal fees.

47761-11-11 Cashdi et al. vs. Under et al., ruling by Judge Shwartz, 26 April 2015.

COMMENTS
To a large extent, the issue is factual rather than legal. Judge Shwartz has to rely on the agreement as signed to work out what the parties intended.


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