Employee Appeals Invention Compensation Committee Ruling to Israel Supreme Court

Israel-supreme-courtWhen ruling as the High Court of Justice – Bagatz, Israel’s Supreme Court rules on the legality of decisions of State authorities: government decisions, those of local authorities and other bodies and persons performing public functions under the law, and direct challenges to the constitutionality of laws enacted by the Knesset.

Section 134 of the Israel Patent Law 1967 allows for inventors to sue for compensation in a  special committee that comprises a judge, the Commissioner of Patents and an Academic.

Dr Ruth Levy sued Teva for compensation for her invention.

AzilectDr Ruth Levy worked for Teva for 27 years from 1986 to 2013, first as a project identifier and subsequently as the head of development of Azilect which treats sufferers of Parkinson’s Disease.

Dr Levy was involved in the development of significant inventions that were registered as patents and generated large profits. Dr Levy alleges that were it not for her contribution over two decades, the development would not have borne fruit. In 2013, before retiring, Teva requested that she sign a waiver of rights from her inventions. She claimed that the waiver was not clear and she only realized the significance on taking legal advice. She refused to sign and TEVA initially withheld her employment compensation, but eventually paid after the sides canceled the waiver clause. The parties attempted to reach a negotiated settlement without success.

tevaConsequently, on 20 April 2015, Dr Levy approached the committee requesting that it ruled compensation for a list of service inventions under Section 134 of the Patent Law 1967. Teva provided a detailed response but also claimed that the committee had no authority due to an implicit contractual arrangement with Dr Levy as she had received a special payment for her invention, and also that the statute of limitations applied as 7 years had passed since the inventions in question were conceived.

Dr Levy denied that there was any agreement on the matter with TEVA and argued that the special payment was not for inventions and that the basis of suing only came into effect on their giving her a special payment in 2012, or on her leaving in 2013 when TEVA’s attempt to sign her on a waiver raised the issue and reset the clock.

statute-of-limitationOn 25 May 2017, the Committee invoked the Statute of Limitations and dismissed Dr Levy’s claims. They rejected the argument that the disagreement had restarted the clock around the time that she left the company.

The committee raised three events as triggering the seven year period: (i) when the invention was conceived, (ii) when the patent application was filed or was allowed, and (iii) when the patent was implemented. The committee saw no reason to decide between the options as Dr Levy’s claims had aged under all three of them.

Dr Levy claimed that TEVA has admitted her rights in a manner that triggered Section 9 of the Statute of Limitations 1958, but this claim was rejected. The committee found in accordance with TEVA that there was an agreement in place between the parties that canceled the committee’s authority. Furthermore, the special payment was made on the assumption that it was consensual and was not an acknowledgement that Dr Levy had the right to approach the committee.

Dr Levy then appealed to the Supreme Court with an Appeal that is 33 pages long, and TEVA responded with a 50 page response; both sides lengthening their claims and widening the issues under discussion, whilst the real issues are simply when the Statute of Limitations is calculated from, and whether TEVA acknowledging Dr Levy’s rights restarts the clock.

Dr Levy’s Claims

Dr Levy considered that the grounds for suing for compensation for an employee invention commence when a disagreement between the employer and employee occurs, and failing this, from when the employer employee relationship ends and issues of compensation arise. She did not deny that the inventor could approach the committee  on conceiving the invention, but argues that to do so is prior to the specific grounds for suing that starts the clock ticking.

Dr Levy considered that her understanding is in alignment with the Patent Law which wishes to incentivize inventions and to encourage the parties to reach an agreement on appropriate compensation. It takes into account the relative powers of the parties and the difficulty of the employee to request payment whilst still employed. She argued that if the Statute of Limitations runs whilst the employee is employed, it would be contrary to the underlying rationale of the law in that it would encourage employers to do nothing to further reaching an agreement with the employee and to would result in them letting the seven years pass. As to the times that the committee suggested were the proper ones, she pointed out that each of these options raises problems in fair implementation. Furthermore, she alleged that some of her inventions were not  implemented seven years previously, and so could be dealt with even under the third option suggested by the committee.

employee inventionA further point raised by Dr Levy is that TEVA admitted to her conceptual right of compensation for her inventions, and even made partially good on this, thereby re starting the clock., as per Section 9 of the Statute of Limitation and the case law in Civil Appeal 8438/09 Tovav Property Company vs. Dunitz Brothers ltd. The plaintiff claims that this ‘admittance’ by TEVA  was expressed in the ‘special payment’ that she received in 2012. Furthermore, she argued that the no claims clause in the draft severance contract requiring her to state that she had no claims, was an inherent acknowledgement by TEVA that she deserved compensation (this draft was shown to her in 2013). So, according to Dr Levy, only 2 or 3 years had passed since these acknowledgements and admittances and her filing her case before the committee in 2015, and so it was within the seven years statutory period of limitations. Finally, the plaintiff claims that TEVAs allegations of tardiness were made in bad faith since any delays in contacting the committee were due to TEVA’s wrongful behavior as the company had done nothing to inform its workers of their rights regarding employee inventions. Furthermore, the committee’s ruling was groundbreaking and thus could only fairly be applied going forwards and should not have retroactive effect.

TEVA’s Response

TEVA countered that Section 134 only gives the employee the right to contact the Committee for Compensation, but it does not give the employee rights for compensation. Consequently, TEVA considers that the time for approaching the committee is when the invention is made, if there is no agreement between the sides. TEVA considers that this is the time from which the clock starts ticking, and this is in accordance with the underlying rationale of the Statute of Limitations.

In addition to explaining their interpretation, TEVA argued that Dr Levy’s interpretation does not accord with either the Patent Law or the Statute of Limitations. TEVA alleged that Dr Levy’s reading of the law misses the balances within the Law, and it would encourage the employee not to seek an agreement with the employer, but to wait until their employment is over. TEVA considers that Dr Levy’s interpretation would expose  industry in general and R&D industries in particular, to claims by employees long after an invention is crystallized. Similarly, TEVA alleges that Dr Levy’s understanding that the clock only starts to tick from when the employer-employee relationship finishes, has no relationship to any law, including employment law. As to the difficulties regarding the alternatives that the committee had posited, that Dr Levy had alluded to regarding the starting of the seven year period, TEVA does not think that these difficulties justify the Supreme Court getting involved, particularly as the committee had not even ruled between the alternatives. Additionally, TEVA considered that these difficulties remain even were Dr Levy’s understanding to be implemented.

As to Dr Levy’s allegation that TEVA was aware of her rights, but did its best to wait for the statute of limitations period to pass, TEVA does not agree that the notification has to be clear and explained. Teva claims that the right of the employee to compensation only arises from a contractual agreement between the parties or from a ruling of the committee, and without an agreement the employee can contact the committee to rule on whether she deserves compensation. However, where there IS an agreement, the employees claims are within the framework of an agreement that is to be decided by a forum different to the statutory committee. Teva claims that the company never stated that there was no agreement, and thus certainly never agreed that the Appellant could claim under Section 9 of the Statute of Limitations. As to the payoffs, Teva claims that these were not obligatory on them, and cannot be seen as acknowledging that Dr Levy had a legal right to compensation. Furthermore, Teva alleged that such payments made within the framework of an agreement estoppels the appellant from pursuing her claims before the committee.

RULING

To what extent can the Supreme Court get Involved?

Before relating to the appeal, it is necessary to review the rights of Supreme Court to review committee rulings. In this regard reference is made to Section 11 of the Law of Patents which states that compensation is at the sole discretion of the committee. The court cannot relate to anything that is under the authority of the Committee for Compensation which has sole authority to consider such cases, and whose decision is final.

The parties do not disagree that despite the sole jurisdiction of the committee under Section 111, the Supreme Court can still hear an Appeal against the committee. However, it is important to state the obvious: that the rights of the Supreme Court under Section 15(c0 of the Basic Law, Judgments does not  gives the Supreme Court the right to review rulings of the committee. Rather, \authority of the courts in this matter was denied by the legislator, and special appeals to the Supreme Court as a High Court of Justice (Bagatz) were never meant to bypass the law.  Thus, as clarified by Deputy President Amnon Rubinstein, the court’s involvement of committee rulings is minor, and only in extreme cases (Bagatz 4353/14 Barzani vs. Iscar ltd, 8 July 2015. Thus the court will not get involved in issues that are essentially appeals of the committee rulings.

In re Barzani, Judge Rubinstein ruled that the court’s involvement would be minor due both to the law that makes the committee’s rulings final, and to the fact that the committee itself is headed by a retired Supreme Court judge and includes the Commissioner of Patents and an academic. To these two reasons, a third may be added. That of the ‘right’ that the committee rules in:

Section 132(a) of the Law of Patents 196 states that “an employee invention that arises due to the employment and whilst employed, is a service invention that becomes the property of the employer unless there is an alternative agreement.” Further on in Section 134 hat rights of the employee to turn to the committee for compensation are discussed.

Compensation for Service inventions

Where there is no agreement that establishes the rights and conditions for the worker to receive  compensation for his service invention, the Committee for Compensation established under Chapter VI will rule on this matter.

The issue is that where there is no agreement between the employer and employee about the matter, the default is that such service inventions are the property of the employer, The wording of the law even implies that the employee-inventor of a service invention does not have an inbuilt right to compensation. What he does have is the right to approach the committee to make a determination of whether he is entitled to compensation, and if so, to what extent and under what conditions. To put it differently, the employee does not approach the committee based on a property right or based on a contractual right, since the committee only gets involved in the absence of agreement. Furthermore, Section 134 of the Law and the way it has been interpreted makes it clear that it is not a social right that is cognitive and part of the employment law, but that it is dispositive and depends on the agreements of the parties. This was ruled in re Barzani and the Supreme Court declined to reconsider this arrangement. See section 4 of re Barzani and contrast with Appeal 3564/12 Beyer vs. Plurality ltd (disbanding). Sections 4 and 6, from 1 August 2012 which predates re Barzani by five years. There the possibility that the employee inventor’s rights to payment as part of the employment laws was raised, but the court did not rule on this. The court referred the case back to the bankruptcy court, and after this was thrown out in a laconic manner, the worker requested to assert his rights against the company before the committee.

In light of this, the legislative decision that the committee’s ruling would be final becomes clear. The reason is that the ‘right’ of the employee-inventor under Section 134 is a weak right, that does not give the employee property rights. One can say that the committee basically considers if the employee deserves compensation or not, and is by nature more beyond the letter of the law than an actual black letter legal right. Consequently, and without belittling the need to provide appropriate rewards for employee inventors, the court does not limit rights of the employee, and so the right of the High Court of Justice to interfere is limited.

The right to sue has various aspects. There is a need to stop the clock for plaintiffs that cannot sue or where it would be unlikely that they would sue, as Judge Gronis stated in 7401/00 Ezekieli vs. Gluska, p.d. 289, 2002. Some aspects relate to the plaintiff and, such as a minor, someone with mental health issues or limited intelligence (sections 10 and 11 of the Statute of Limitations). A further aspect relates to externalities that prevent the case being clarified, such as where the plaintiff is abroad in a country not having diplomatic relations, section 14 of the Law.

A third aspect, which is the most important in this instance, suspends the right to sue where the plaintiff faces “an objective barrier to file his statement of case that has nothing to do with a related previous case that is before the courts. “ – See Civil Case 7589/13 Establishment Akoda vs. Machon Weizman for Science 8 June 2015, paragraph 9 and the references cited there. In other words, to start the Limitations clock, it is not enough that the plaintiff has legal grounds to sue, but must also have substantial grounds to sue, that allow him to lay out his case before the appropriate courts (see Civil Action 9128/07 Pisgat Ashdod Civil Engineering and Industry ltd vs. Chen Gal Investments and Trade ltd, 24 May 2010, paragraphs 17-18 and citations. Adoka 9-10, Tal Chavkin aging, 134-136 (2014). The closest example to the present case is where the employee and employer disagree regarding whether a specific invention is indeed a service invention, and they turn to the Commissioner of Patents under section 133 of the Law. In such a case, it seems logical that one would not expect the worker to turn to the committee under Section 134 until the commissioner has ruled that the invention is indeed a service invention. The lack of a right to sue does not reflect the basis for suing, but only at best is something to be considered within the general framework of aging and the statute of limitations, see Israel Gilad “The Basis to Sue in cases of Statute of Limitations in Civil Law, the concept of aging, Conceptual vs. Concrete and the right to Sue.” Shaarei Mishpat 9,46- 47, 2017.

As stated above, the Appellant argued that the clock for the Statute of Limitations starts on the day that a disagreement between the worker and the employer regarding payment, or when the worker leaves the employment. This claim is to be rejected for a number of reasons.

The Appellant’s position is self-contradictory in that she acknowledges that the employee can  approach the committee at an  earlier stage, when the invention is made, and doing so is not premature, but nevertheless wants the clock for the seven year period for filing suit to start later, when the employment is terminated. This is inconsistent. If the employee can contact the committee to determine whether he/she has a case, he/she has both a legal theoretical and a practical option to do so. In fact everyone agrees that at that stage, the employee inventor can contact the committee and can sue and so the starter’s gun has gone off, and the clock for the statutory period has started ticking. This is different from a tort prior to signs of damage becoming apparent. When damage IS apparent, one has to file straight away and not wait for its full extent to become clear (see Civil Action 165/83 Buchris vs. Housing for Immigrants ltd. p.d. 38(4) 554 (1984) and 9413/03 Elenqua vs. The Local Committee for Planning and Building, Jerusalem, p.d. 62(4) 2008.

It is feasible that the amount of compensation that the employee would receive close to the invention being made would be low, and that as time passes, commercial success would make the pay off more attractive. But changes in the value of an invention do not influence when the time for bringing one’s case starts and the period of seven years of the Statute of Limitationsis triggered. It is only Section 136 that allows the employee to turn again to the committee. This means to say that the plaintiff was aware of the possibility that an early turning to the committee would result in a low value. The solution proposed was that of reconsideration, but it does not restart the clock. (It will be noted that the language of Section 136 also gives the employer the right to submit a request for reconsideration, where he considers that the changing situation justifies reconsidering the payoff to the employee. However, this is beyond the case in question, and need not be discussed further at this stage.

The court saw the long time to market for pharmaceuticals as a relevant consideration, but could not find a legal basis for taking this into account.

TRhe court acknowledged that in 2012, Teva had made an award to Dr Levy. Although  there is a basis in the law for claims that an admission would restart the clock, the court agreed with the finding of the committee that this payment was in no way an admission that compensation was in fact due. Basically, the court saw that where  Reuben pays Shimon a 100 Shekels, that does not mean that Reuben admits to owing 200 Shekels. Were Teva to write that they would be making a payment of 1,000,000 Shekels and then they were to pay out only 500,000 Shekels, this would be seen as an admittance and partial payment. However, this is not the case in this instance.

In summary, the request for compensation under section 13 of the Law was rejected and despite Section 9 of the Statute of Limitations, the clock is not restarted.

The Appeal is dismissed and Ms Levy has to pay 20,000 Shekels costs to Teva.

Bagatz 8672/17 Levy vs. Teva, 1 December 2019, ruling by Judges Amit, Mintz and Wilger.

COMMENT

This is the last in a long line of rulings where requests for compensation were rejected by the committee and their decision was upheld by the courts. While the judicial arguments are convincing, there are a lot of disgruntled inventors out there. I disagree with my friend,  Dr Shlomit Yanitzky Ravid whose PhD thesis and book on the subject conclude that employees should own their inventions. Nor do I think that R&D personnel are entitled to massive bonuses for inventing. Still there does seem to be a problem in the system.



Categories: employee, Intellectual Property, Israel Court Ruling, Israel IP, Section 164, החלטת בית משפט, פטנט, פטנטים, קניין רוחני, קנין רוחני

3 replies

  1. Michael Interesting Report. Thanks. I take it the explanation: ” Basically, the court saw that where Reuben pays Shimon a 100 Shekels, that does not mean that Reuben admits to owing 200 Shekels.” is yours rather than the Court’s. How refreshing to use such (post-)Biblical comparative models Regards *🇮🇱** Ephry **🇮🇱*

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