Trade Secrets in the Employer-Employee Relationship

July 21, 2014

forum shopping

In Israel, workers have freedom of occupation and can change jobs or set up their own businesses and may compete with their former employers. The work relationship often exposes the employee to trade secrets. Ex-employees are obliged to maintain confidentiality with regards to trade secrets and cannot compete with former employers by using such secrets. But was a legitimate trade secret?

Work related disputes are dealt with by the Labour Courts, but what establishes the employer-employee relationship?

Nissim Versano appealed an interim Decision of the Tel Aviv District Court given by Judge Ginat to refer the case to the Labour Court to decide whether or not there was an employer-employee relationship. Judge Amit of the Israel Supreme Court refused the Appeal.

On 25 March 2014, Nissim Versano filed suit in the Tel Aviv District Court, claiming that for a number of years he has been involved in the tobacco industry, and has developed contacts with a number of parties in the field. He claims that he took Moshe Ninio into the business as a partner, with a verbal agreement that Ninio wouldn’t use acquired knowledge against the wishes of Versano.

Versano claimed that Ninio set up a competing shop with similar design, stock and prices to Versano’s and that this created a situation of passing off, Unjust Enrichment and theft of trade secrets.

Ninio claimed that he was an employee of Versano and not a partner. He claimed that the District Court was thus not the correct forum to hear the case which should have been filed in the Tel Aviv Labour Court, and requested that the case be thrown out as not within the jurisdiction of the Tel Aviv Court. To substantiate his case, Ninio appended three salary slips testifying to him being an employee.

Judge Ginat of the Tel Aviv District Court referred the case to the Tel Aviv Labour Court to rule on the issue of whether there was an employee-employer relationship, and Versano appealed this referral.

Versano claimed that the District Court should decide whether it was competent to hear the case and, if not, should refer it.

The Supreme Court ruled that Ginat should either hear the case, refer it or throw it out. In other words, he should have ruled on whether or not it was a labour related dispute, and not referred that decision to the Labour Court. Cases cannot be batted back and forth.

However, the appeal was thrown out. The appellant should have appealed by right instead of requesting right of appeal. If a case is heard by District Court instead of by the Labour or Rabbinical tribunals, there is a right of appeal. However, if a case is transferred to a tribunal, one should appeal immediately.

The Supreme Court could use the Request for Right of Appeal as grounds to rule substantively on the Appeal, but did not see fit to do so.

The issue is a partial transfer, which is correctly seen as an interim decision and therefore there are grounds to file an interim appeal.

The Supreme Court related to a case transferred to the Rabbinical Court by a woman claiming financial support on the grounds of having acquired status of a wife by having had intercourse with a man in a manner establishing common law wife status as being an example of an interim decision that could be appealed, but ruled that in this case, the claim of employee – employer relationship should be heard by the labour tribunal who not only have sole discretion to hear labour disputes but also to rule on whether there is an employer-employee relationship.

Furthermore, cases concerning trade-related disputes having an employer-employee aspect are in the sole jurisdiction of the labour court. Trade secret related cases are also the sole jurisdiction of the labour court if there is an employment aspect to the case.

Once transferred to the Labour Courts, cases should stay there rather than be transferred on.

Appeal to Supreme Court  3930/14 Versano vs. Ninio, by Judge Amit, 26 June 2014

COMMENTS

Having one court only being the correct forum for hearing a case prevents ‘forum shopping’. This decision is likely to have repercussions on employee compensation for patents as well as for trade-secret issues. Many companies might be less than happy with this, since the Labour Courts are seen as being pro-employee. With the Iscar case (Plony vs. Company) on appeal to the Supreme Court, this could get interesting.


What Happens When One Party of a Jointly Owned Application is Not Interested in Continuing with Examination?

July 7, 2014

Three parties: CNRS, University of Pierre and Marie Curie, and the Centre Etudes et de Valorisation des Algues, Ceva filed a national phase of FR2011/051384 into Israel as IL 224677.

On three separate occasions, the Centre Etudes et de Valorisation des Algues, Ceva indicated a lack of interest in the European and Israeli applications being examined. In the circumstances, the other two parties applied to continue prosecuting under Section 25, with their request supported by a statement from Ludovic Hamon the VP of CNRS.

RULING

In cases of multiple owners, Section 25 allows for a jointly owned patent application to be prosecuted in accordance with the desires of only some of the parties, but the Commissioner will only abandon an application or patent at the request of all of the parties.

Section 25 has not been clarified by the case law, and the accompanying explanation to the Law from prior to its legislation, does not relate to this section.

The Deputy Commissioner suggests that the purpose of the Law is so that a pending application may be moved forwards without agreement of all parties, so long as they are all kept in the picture.

In this case, despite the disagreement on ownership, two of the applicants are willing to the prosecution of the application without the involvement of the third party.

Since the Commissioner cannot see how the third party can lose from this, she ruled that examination should continue, with the third party being informed of developments.

Whereas all applicants may submit for an application to be abandoned, there is apparently no mechanism for one applicant of many to disengage himself from the examination process. Consequently, the Deputy Commissioner suggests that she should act as per the Law of Chattels. However, without clear indication from the third party that they are relinquishing all rights in the application she is unwilling to do more than simply to follow advice of the other parties.

Ruling, Jacqueline Bracha, 30 June 2014

COMMENT

This type of case could get very messy. Any of the joint owners can license the patent if allowed. Where parties are jointly owned, one should try to have clear contractual obligations in place. In this sort of case, ideally the interested parties should try to buy out the rights of the disinterested party.


Public Interest as Grounds for Accelerated Examination in Israel

June 29, 2014

Eruv

In Israel, patent applications are provisionally categorized into technology areas by the Israel Patent Office on receipt. Applications are then examined in turn by the examiners assigned to the specific technology area.

There are various ways to have an Application examined out-of-turn, by requesting accelerated examination with due cause, if the application is environmentally friendly (green classification), if the applicant is old or ill, or by using the PPH mechanism where there is a corresponding application abroad that has already been examined.

Section 19a(a)5 provides public interest as grounds for accelerating patent examination in Israel. In a ruling concerning Application 216870 Cimas LTD, the patent office ruled that examining in turn was essentially in the public interest, and that to examine something out of turn, requires extraordinary justification.

IL 231173 is titled “A Halachic and technological Eruv”, and accelerated examination was requested on the grounds that it contributed to the quality of life of the Halachically Observant population in Israel.

The Commissioner of Patents, Assa Kling refused the request, since he did not think that this was what the legislature intended when they allowed Public Interest as grounds for Accelerated Examination. He went on to rule that “Public Interest” implies a specific public interest, and this wasn’t shown here. The application is queued for regular examination.

COMMENTS

Jewish Law prohibits Jews from carrying in the public domain on Shabbat (the Sabbath).  An Eruv is a Halachic device developed by the Rabbis for reclassifying public domain as communal domain, thereby allowing carrying therein. Essentially, an area is enclosed by a symbolic boundary, often comprising poles connected by string and this makes it semi-private or communal.

Approx. 25% of the Knesset is Shabbat Observant and this is reflected by the percentage of observant members of the Israeli public. Carrying on Shabbat affects this sector of the population once a week. An Eruv makes a significant difference to the quality fo life of this significant minority of the population. Unlike a lot of religious initiatives, developments and legislation that adversely affects the quality of life of non-Jews and secularists, it is difficult to see how this type of development can adversely affect anyone, at least not in Israel. (In London, there were assimilated Jews who complained that the Eruv made them feel that they lived in a ghetto. Possibly this argument holds true abroad, but Israel is a Jewish state and anyone having a problem with religious neighbors is simply xenophobic and anti-Semitic).

I find it difficult to imagine that over-riding public interest should be limited to things that affect a higher percentage of the population than 25%, more of the time than one full day a week.  It could be that applicant,  Shira Attia, who appears to be unrepresented, failed to make her case properly. Nevertheless, despite whether the Commissioner himself has a problem with carrying on Shabbat, he should be aware that a lot of Israelis do.


Secondary Use Claims – Some Thoughts…

June 27, 2014

second use

Yesterday I attended a meeting of the Association of Israel Patent Attorneys in ZOA  House, Tel Aviv. The invitation and program were blogged here.

The topic under discussion was Secondary Use Claims. Unfortunately, I arrived late and missed the first talk by Adv. Yair Ziv, but caught most of Adv. David Gilat’s presentation, that of Dr Ron Tomer, and that of Ena Pugatsch.

The event was well-organized and well attended. From the remains of the refreshments by the time I arrived, they seemed the usual ZOA fayre. Kudos to the committee headed by Ex-Commissioner Dr Noam, for organizing the event. There were 85 participants in the meeting. This is impressive for a highly specialized topic at an event open to a small organization (noting with approval however, that there were both lawyers and in-house patent coordinators present that are not patent attorneys and thus not members, and also trainees).

Adv. David Gilat posited that drug patents were necessary to compensate the drug developers for their investment, and that secondary uses were also the result of research.  Dr Ron Tomer (confusingly called Dr Yaron Tomer in the original invitation to the event) expertly and clearly countered all of Davidi’s positions, and demonstrated that the pharma industry were creatively filing secondary uses that lacked inventive step and were obvious. He gave various examples. Firstly, he referred to sildenafil citrate, originally developed for treating angina and now used almost exclusively as a treatment for erectile disfunction, as a hard problem. (I thought it was a flaccid problem and a hard solution, but I digress). He went on to argue that an oncological drug for one type of cancer may fairly obviously be tried for another type of cancer since the underlying effects of the drug would treat both mutant cells the same way.  He noted that patents were not awarded for research but for inventions. He claimed that there was nothing new in the drug, despite the new use. He gave convincing examples of ever-greening, and also argued that if it is surprisingly found that a drug treatment for gastro-reflux also kills bacteria in the stomach, then the patient using it takes the same drug for the same purpose that he took it for originally. Since the drug is public domain he could take the generic drug, but to kill the bacteria, he’d have to take the patented drug for a couple of weeks and then move back to the generic. similarly, someone taking a generic statin for cholesterol, on being diagnosed as having genetic cholesterol, would have to switch to the patented version offering protection for this ‘secondary use.’ The talk was intelligent and entertaining, and it was a valuable demonstration of the ubsurd results of secondary use patents.

Ena Pugatsch gave an example of a secondary use claim for a mechanical device that issued in Israel and was upheld by the courts. The device in question was a blackboard that could be used as a screen for showing projected images, where the device and method of manufacture were known but the secondary use wasn’t, and the court upheld the patent. Comparing to European case-law and to US law, she felt that the ruling was ‘problematic’ (a nice way of saying that she considered that the court had got it wrong).

When the floor was opened for questions Mr Zebulun Tomer (Ron’s father and the director of Unipharm) took the opportunity, as he has done on other occasions, to give a little impassioned speech, rather than a question. He made some noises about the results of lobbying and argued that Section 7 prohibits therapeutic treatment of the person and that no-one can convince him that a secondary use is anything other than a method of treatment of the person. Instead of merely pointing out that the issue wasn’t convincing him, but of convincing neutral judge, Adv. David Gilat agreed with him, but said that this was precisely what the Use Claim (Swiss type claims) were for – that is, to allow patents for pharmaceutical methods of treatment despite the prohibition for patents for methods of therapeutic treatment, and this was because of the costs incurred in research and development.

COMMENTS

David Gilat spoke well as would be expected from an experienced litigator. Dr Tomer’s response was also very clear and well constructed. Ena Pugatsch is not an orator, nor is Hebrew her first language (or, I expect, her second language). Nevertheless, her talk, though not the most fluent, was the most thought provoking. All three speakers had far too much content per slide, but none are lecturers. Designing good slides is an art.

David and Ron each presented their opposing positions. As Gilat Bareket represents drug development companies and the Tomer family own Unipharm which manufactures generic drugs, their views were hardly unexpected. I suspect that those in the audience actively involved in prosecuting or litigating pharmaceuticals have equally strong positions based on their source of income. (Richard Luthi, another leading litigator who represents pharma, once told me that under the former Commissioner Dr Noam, the pharmaceutical development industry didn’t have a chance. Whether Dr Naom was biased, whether Unipharm had better arguments, or whether Adi Levit is simply a better litigator, is open to discussion).

The percentage of my income coming from work on pharmaceutical patents is very small. I’ve been involved with both local and foreign clients on both sides of the fence. I tend to find the generic companies’ arguments more persuasive, but can’t tell if this is an inherent bias or whether their arguments are actually better. It is also possible that drugs that are opposed or challenged in cancellation procedures are ones that generally should not have issued, and the both the drug development industries and their litigators have an uphill battle. What is clear, is that Unipharm have had some impressive victories in recent years against Mercke, Smithkline Glaxco, Lunbeck, etc.

Ena’s talk got me thinking. I believe that the original Section 7 law against methods of therapeutic treatment is a historic artefact designed to protect doctors from being sued and represents a moral position that despite obvious utility, novelty and inventive-step, such subject matter would not be patentable. It is a remnant from a period predating the modern pharmaceutical industry. David is correct however. Without effective patent protection, drug development companies would not invest the significant sums required to research and bring a new drug to market. The long approval period also justifies patent term extensions. This development is indeed the result of lobbying, but is, nevertheless, justified. What may not have been justified, is to apply the extensions on cases that were already filed, granting the pharma industry a massive handout that perhaps resulted in them NOT investing in developing new drugs.

Drug developing companies can fairly be accused of ever-greening, and their tactics in filing for secondary uses are commercially driven. However, despite the Special 301 Reports, the generic drug industry are not Robin Hood like outlaws. It is there right to challenge the validity of patents, and some applications are allowed that shouldn’t be. Nevertheless, I suspect that sometimes oppositions are filed for commercial rather than solid legal reasons.

The Swiss Claim (use claim) format is a legal work-around the method of therapeutic treatment clause. Use claims are acceptable in European and Israeli law and are essentially method claims. They do not exist in the US, however in the US one can file methods for therapeutic treatment. What one cannot do, is enforce them against the doctor or surgeon.

After TRIPS, it is clear that one cannot exclude drugs from patent protection. One can still have a principle against patenting methods of treatment. However, countries have to allow patent protection for drugs.

As David Gilat reminded us, patent term extensions were indeed allowed as a package with and justified by a bone thrown to the generic industry – the so-called TEVA amendment, allowing the generic companies to experiment and obtain marketing approval, but not to stock-pile generic patents prior to the patent terminating.  However, one right does not balance the other. Mr Zebulun Tomer is correct that the current balance is the result of lobbying. There were lobbyists on both sides. The ‘one size fits all’ patent law does fail for pharmaceutical patents if such patents have, in the past, been allowed after the 20 year expiry date.

As to second use, the first thing to understand is that use claims are method claims and should be treated as such. The Rav Bareakh crook-lock ruling by the Israel Supreme Court allows contributory infringement and inducement to infringe. However, in Srori vs. Regba, the fact that a sink could be mounted flush with the work surface was insufficient grounds to grant an injunction against the importer, since, As Adi Levit argued effectively, the sinks in question could be mounted under the work-surface, or could be mounted with the lip overlapping the work surface (over-mounted) or could be filled with earth and used as a flower-pot.  Thus, the proper infringers were the kitchen installation companies, and there was no effective bottle neck to sue in the supply chain.  Getting back to secondary uses for drugs, lets assume that using aspirin to dilute blood to prevent thrombosis is indeed novel and inventive. This does not prevent patients buying aspirin over the counter for treating aches and pains and then using it for the new patented use. Manufacturers of aspirin are not infringing the secondary use patent. Similarly, generally speaking, patents for secondary uses are not for the drug itself, but for its use in treating a particular illness. They are method claims. I agree with Dr Ron Tomer that the manufacturer is generally not the infringing party. The physician or patient might be, that the US exception against suing health care officials should apply. There are, of course, some particular dosages that are borderline cases. In such cases, the newly packaged drug is a new product. Whether or not, it is also inventive, is arguable.

Referring back to the blackboard; Ena is correct, it was not a new product, nor was its method of manufacture new. The novelty lay in the method of use, i.e. for projecting an image thereonto. The patent provided grounds for suing schools and teachers for direct infringing – both customers of the patentee and of competitors. This is a patent without teeth. If competing manufacturers note that their blackboards may also serve as a screen, is this inducement to infringe? Maybe it would be better for them to note that although the blackboards may be used as screens, this use is protected by Israel Patent Number IL XXXX, and as long as the patent is valid, is not allowed. This is very different from the crook-lock case where the imported part was designed and manufactured for combining with two common elements to provide the crook-lock, and could only be used for infringing the patent, or for a trivial use such as a paper-weight or land fill.

At the end of the day, it is the job of the patent attorney to draft patentable and enforceable claims. I note that in the US, the pendulum has recently swung away from secondary infringement. See US Supreme Court Ruling 12–786 Limelight Networks v Akamai Technologies Inc et al., June 2, 2014. I believe that often these cases result from poor claim drafting, as do Marksman disagreements. In the past, I drafted and successfully prosecuted a  patent for a kitchen sink AFTER Tsrori vs. Negba. See  US6782593B1.  I’ve also had fun drafting together with Adv. and Patent Attorney Tami Winitz a patent for a new method of using an existing heart valve, where I believe the creative claim-set provides enforceability. See US8408214B2.  Patent attorneys drafting applications try to protect their client’s inventions and stretch the law. Litigators opposing patents do the opposite. We all have our roles to play.

 


Employee’s IP – When Things Get Multinational…

June 19, 2014

academic

Smart & Biggar, a Canadian firm with a memorable name has a good article comparing and contrasting the rights of an employer in employee’s copyright and inventions. See here.  

This is an issue that comes up around the world, and which I have reported on and organized seminars on.

Dr Shlomit Yanitzk-Ravid has recently published a book on the subject, based on her PhD theses. There were also a recent Israeli court ruling and a committee decision that referred to that book.

As academics, including Shlomit, spend time on sabbatical and as visiting professors (currently she is seconded from ONO to Yale), there are territorial complications. If a paper is written by a visiting professor whilst staying at a college who supports royalty free publishing, should he/she have to publish in such a journal? What about if the college where he/she is tenured prefers publication in one of their own Law Reviews?

Companies are often multinational. It is not inconceivable that a company formed and headquartered in the US State of Delaware could develop an invention by collaboration between research groups in Israel and Europe. Apart from Employment Law and Patent Law in the different countries, perhaps being different, funding from binational govt. research funds may have strings attached. Some of the research could be done by a post-graduate student in a university. One inventor may be a tenured university professor consulting to industry and another might be an industrialist who teaches a course in the university. Research could be performed in a university of industrial lab, but what if it is performed on a computer terminal in the company whilst logged on to a university computer?

Where I get drawn into these types of issues, I may be consulting to US council of the Head Office, perhaps outside-council, and could be billed by a US law firm. If the company that perhaps owns the IP has a research lab or factory in Israel, should I be charging VAT on my fees even though I am being paid by money that is laundered, conditioned and neatly pressed by the US Law Firm?


BioLineRx Receives Notice of Allowance for US Patent Covering Novel Treatment for Celiac Disease

June 15, 2014

 

celiac

Israeli company BioLineRx has announced their receiving a Notice of Allowance for a US Patent  covering a novel treatment for celiac disease. See http://online.wsj.com/article/PR-CO-20140611-903862.html for more details.

 

 


Amit Ben-Yehoshua Appointed Foreign Arbitrator in China

May 29, 2014

Amit Ben-Yehoshua has been appointed to serve for a three year term as a foreign arbitrator in China International Economic and Trade Arbitration Commission (CIETAC) which is the biggest arbitration institution in China and one of the prominent in the world. CIETAC resolves commercial and trade disputes by means of arbitration and mediation. Amit becomes the first Israeli Lawyer appointed to this position.

 

International arbitration is the most common mean chosen by parties to resolve disputes related to international business. International arbitration is recognized by 149 countries global wide according to the “New York Convention” of 1959.

 Amit works for Dacheng Law Offices which was founded in 1992 and is one of the first and largest partnership law firms in China. There are currently over 1,900 lawyers and staffs working for Dacheng Law Offices, most of whom are graduates from leading law schools within China or overseas.  A substantial number of our lawyers have expertise in areas including international trade, finance, construction, business administration, accounting, and taxation.

Amit is licensed to practice law in California and Israel, and holds a Master of Law degree in Chinese Law from Tsinghua University of Beijing.  He has been living in China since 2006 and has been working at two of China’s most elite law firms Da Cheng Law Offices and Zhong Lun. Amit is also the Vice Chairman of the China Law Committee ofthe International Law Section of the American Bar Association and is the Chief Editor of the China Law Committee’s publication the China Law E-Bulletin. Amit has had the unique opportunity to work as lawyer and as a Senior Counsel in three distinct jurisdictions (California, China and Israel) as a transactional lawyer and as an experienced litigator.

 Before coming to China, Amit served as a criminal defense attorney in United States. Earlier in his career, Amit served as a judicial clerk for the honorable Judge Haran Fainstein in the State of Israel.

I first met Amit at a Patent Conference in Shanghai. Israeli companies having issues with Chinese companies should consider arbitration as a alternative to the courts. Particularly where there is a lot of business between the entities which could be damaged by a no-holds bar war. I expect that Amit would be a good person to talk to about such matters.


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