The Strange Affair of Israel Patent Application Nos. XXX and YYY to ZZZ

Under the Israel Patent Law there is a provision whereby sensitive patent applications affecting national security and the like must be first filed by Israeli inventors in Israel, and the patent office refers such applications to the Minister of Defense who have six months to decide whether to ‘classify’ the application and issue a gag order, preventing the application from being filed abroad or otherwise published.  If the Ministry of Defense does not issue such an order, the application may be filed abroad.

 

Whilst many applications of possible military significance are forwarded to the Ministry of Defense, it is fairly rare for applications to actually be classified, and generally, after six months, the applicant can proceed with his invention.

 

Z had three such applications, all filed in 1981. The first was abandoned, however the other two were eventually were examined and allowed. The State of Israel never did not do anything with the inventions, and only some 12 years later, lifted the restrictions. Z himself did work to bring a product to market, even after the restrictions were lifted.

 

There is a committee that very occasionally convenes to rule on appropriate compensation. The committee, in its current constellation, rather different from that that first deliberated on this issue, has now issued a ruling and this article reports on the deliberations and ruling of the compensation committee regarding this claim.

 

Since there was no utilization by them, there is no patent royalty payable by the State. Z claimed 22 million dollars compensation for damage caused by the restriction order; the sum being an estimate of anticipated profits had the invention been commercialized.

 

According to the decision, after their allowance, the State of Israel requested re-examination of the patents. However, the patent office refused, pointing out that the Ministry of Defense could have conducted secret opposition proceedings, and presented a basis for their claim of invalidity.

 

The patents are therefore valid, but Z apparently did not produce adequate justification for the compensation claimed.

The committee offered to pay for an expert acceptable to Z to do a valuation, but Z didn’t take up this offer. However, when given another opportunity to base his claim for compensation, he provided details of direct expenses laid out, based mostly on 1700 hours work at his consultancy rate of $250 and requested compensation, regardless of culpability of the State. 

 

Z could only produced one receipt showing that in 2005 he could bill at $250 an hour for consulting. The State claimed that the expenses were inflated and not substantiated.  Z claimed that the very fact that a restriction order issued, was grounds for statutory compensation.

 

The case hinged on whether real damage had been done. Could the plaintiff prove his case? Should the fact that the State effectively prevented him from attempting to monetize his invention be taken into consideration when any damage was purely speculative, since there were no sales?

 

The committee appeared to be very uncomfortable with the case before them, but noted that Z was represented by a prominent and very experienced IP litigator and that the Israel system is adversarial and not inquisitional, so they could only rule on the basis of the claims made evidence submitted by the parties.

 

The committee ruled that the law could not be understood as indicative that any application that becomes ‘classified’ automatically deserves compensation as that would be an incentive for filing spurious military inventions. After rejecting that compensation was forthcoming under property rights, unjust enrichment and the like, the committee nevertheless decided that some sort of compensation was in order, and ruled that the wording of the law gave them the rights to rule on compensation based simply on the rule. They assumed that the 200 hours taken to develop the 3rd invention, after the second was conceived, was a reasonable assumption to decide that of the 1700 hours, 1300 were spent on the first, non-compensationable invention, and 200 on developing each of the 2nd and 3rd inventions – bearing in mind the time between the first and subsequent filings, this is not unreasonable.

 

Noting that consultancy fees of $250 or NIS 1000 an hour, obtainable 20 years later after much experience was not a fair basis for calculating how much Z’s time was worth at the time of filing, the committee dismissed this hourly rate as being fanciful.

 

For lack of any better tool, the committee used the most generous Central Govt. Statistics hourly rate of an employed researcher with a Ph.D. in a comparable field in 1981 – the time of the invention. The figure decided upon, and stressed as being the most generous figure they could find in any comparable job description was 6.7 NIS. The committee index-linked this sum, added interest and came up with the almost arbitrary figure of NIS 67,000 which is close to $20,000, or about 1000th of that claimed. 

In the circumstances, they ruled that awarding costs was inappropriate. 

 

Comment

 

Public security should certainly override personal enrichment, and the restriction order, which has its parallels in other patent systems, is therefore reasonable. However, presumably there was some value to the technology or the restriction order would not have issued.

 

The main problem with critiquing the decision is that there are too many unknowns. Was the invention valuable or worthless? Did the Ministry of Defense simply lose the file, or had they tried to implement the invention and only on failing to do so, decided it was worthless. There are, of course, a large numbers of patent applications that are filed that have dubious scientific basis. Many more are not commercially practicable.

 

That said, I am not convinced by the court’s assertion that pending patents cannot be considered property and that they only become property on issuance, and therefore preventing a patent for issuing does not mean that there is no tort under property laws. There are well established speculative markets for options, futures, bonds and the like. I do not think that a patent issuing creates property. Rather it assigns property created by invention to the inventor/applicant for a period of up to 20 years.

 

Whereas many patent applications do not result in commercial goods, there are inventions that have real commercial value and where the inventor is prevented from commercialization by the State, it is difficult for a committee to determine the worth of the invention.

 

Counsel for Z is an eminent IP litigator but is not a scientist. Neither are the committee members. Valuable inventions often appear to be light years away from commercialization at the time of conception, but some are eventually commercialized.

The invention may have required significant development and perhaps was not enabled. The application may, therefore, have been invalid on the grounds of lack of enablement. It’s difficult to tell without running experiments or examining the case. I don’t think the examiner or the committee could tell either.  In cases like this I am not sure whether the attorneys argue the law theoretically, or whether they have full access to the application as filed. I am not sure that it would necessary make a difference.

 

Did the Ministry of Defense attempt to develop the invention and subsequently determine that the concept was fundamentally flawed? Was the application overlooked for 10 years due to applicant negligence, compounded by his attorney, as may be inferred from the decision, or was there nowhere for the applicant to turn? Maybe, he worked on other inventions and this was side-tracked, but was, nevertheless, potentially valuable, and were the military to have encouraged him, could have had real value? The Ministry of Defense argues that even with the patent application restricted, the inventor could have manufactured and requested an export license. I think this may be true, but is irrelevant since without a patent portfolio, manufacturing would have rendered development and marketing pointless. 

 

A famous and significant case regarding restricted inventions was an invention by the actress Hedy Lamarr, the actress who starred in Ecstasy and went on to play Delilah in the Cecil B. de Mille epic.

 

Whilst married to Mandl, a prominent German arms dealer and Nazi sympathizer, and the first of six husbands, she overheard discussions on the problems of torpedo navigation and together with magician George Antheil who provided enablement based on the drum of a mechanical piano, filed a patent application for frequency hopping in 1941, that issued a year later as US 2,292,387, but was restricted for decades. It is now widely used in mobile telephony.

 

Incidentally, instead of using her inventive talent, the US Government decided that her contribution to the War Effort would be selling kisses for War Bonds.



Categories: Intellectual Property, Israel, Israel IP, Israel Patent, Israel Patent Office, Israel Patent Office Rulings, Israel Related, Opinion, patentable subject matter, Patents, Uncategorized

2 replies

  1. Great post.

  2. really a fantastic post, thanks

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