Statute of Limitation for Compensation for an Employee Invention

January 28, 2018

This ruling considers when the seven year Statute of Limitations starts for an employee to turn to the tribunal for service inventions for a ruling regarding appropriate compensation.

Background

10-american-idol-judges

Section 134 of the Israel Patent Law establishes a tribunal comprising a judge, the Patent Commissioner and an academic, whose job it is to determine an appropriate level of compensation for an employee inventor if asked to do so.

The Law is clear that such inventions are the property of the employer. If there is a contractual arrangement regarding compensation it is usually upheld. Nevertheless, the committee has the authority to hear cases and make rulings, and several such rulings have published in recent years.  See re Barzani.

azilect

In this instance, on 20 April 2015 Dr Ruth Levy who was previously employed by Teva Pharmaceuticals, requested that the committee rule compensation for her employee invention of rasagiline which because the active ingredient of AZILECT™.

teva

Teva opposed based on her tardiness in bringing the claims and the Statute of Limitations for such actions. They also requested that the tribunal set out a timetable for discussing the issues, and that they firstly address whether the case should simply be dismissed out of hand due to the time passed.

The witnesses concerned were aged, and Dr Levy opposed the timetable. Eventually it was decided to collect testimony first and then to establish a time-table for everything else.

After the usual preliminary skirmishes, on 30 June 2016 the tribunal ruled that Professor Cohen should be cross-examined at his home on 12 July 2016 and the other witnesses (including Dr Levy) would be cross-examined on 28-30 August 2016 at the Israel Patent Office.

Professor Cohen was cross-examined as scheduled, and the testimony of the other witnesses was postponed unto December 2016 at request and consent of both parties.

On 29 September 2019, the tribunal set a date for discussing initial questions, and delayed the hearing on the stature of limitations and aging of charges until later on.

On 25 October 2019, Dr Levy submitted her response to the initial requests together with affidavits and appendices and submitted that the affidavit of Professor Eldad Melamed which was part of her original submission, be included in the evidence, despite his having passed away in the meantime, making his cross-examination impossible.

swamped

Being swamped with material, the tribunal cancelled the scheduled cross-examinations and decided to relate to whether the case should be thrown out due to the statute of limitations first, so that if they concluded that the application for compensation was filed too late, it would not need to be addressed substantively.

The Main Claims of the Parties

claimsDr Levy has a PhD in microbiology and was employed by TEVA in various capacities relating to the Research and development of drugs from 1986 until retiring in 2013. She claimed that she was an active participant in a number of significant inventions, the most prominent being the active ingredient rasagiline which is used in the treatment of Parkinson’s Disease in the drug AZILECT™ which was marketed in Israel and Europe since 2005 and in the US since 2006.

compensation

TEVA responded that Dr Levy received full compensation for her inventions. I addition to her salary, she received a special grant of _______________ for her contribution to the development of AZILECT™. Teva considers that this grant was beyond that required by law and its acceptance created an implicit agreement between Dr Levy and the company regarding compensation for her inventive contribution. TEVA further claims that all the inventions that Dr Levy requests compensation for were invented over seven years before filing her request for compensation. Even if one counts the time period from when a patent application was filed, this is still seven years previous, and so the statute of limitations applies and she is not entitled to anything else.

Furthermore, Teva contends that by her behavior prior to suing, Dr Levy apparently gave up on any rights to additional compensation by not making any claims beyond her salary and grants, and so the case should be thrown out due to laches.

give up

Dr Levy disagrees. She considers that the special payment or grant that she received from TEVA was an admission that she had inventor rights. Furthermore, she only became aware of the right in 2012, and citing section 9 of the Statute of Limitations argued that the clock only starts ticking from her becoming aware of her rights.

It should be noted that Dr Levy denies that the payments made were compensation for her inventions. However, she claims that the fact that she denies this does not alter the fact that Section 9 of the Statute of Limitations starts with her becoming aware.

Alternatively, Dr Levy claims that if one does not accept the 2012 date, one should consider the period as starting with TEVA acknowledging her rights  which occurs in Paragraph 2.2 of the draft retirement agreement that TEVA drafted and sent her in 2013, and which was not included in the final version that was signed by the parties.

The paragraph remains confidential.

giving-up

Dr Levy claims that had she signed the agreement including paragraph 2.2, this could be considered as being a waiver of her rights. She further alleges that raising the issue of Statute of Limitations is itself an act of bad faith since TEVA failed in their obligation to inform her about her right to compensation and to turn to the tribunal. Furthermore, as long as the parties consider that they have not reached an agreement by not being silent on the compensation issue, and have not performed an action that makes it clear that there remains disagreement between the parties, Section 134 has not been fulfilled and the employee has not yet got the right to claim compensation. So the period for making a concrete claim only starts with her retiring in 2013 when she made her final request for compensation.

Dr Levy considers that section 135(4) of the Patent Law regarding actual exploitation of the invention, is not a necessary condition for the committee under Section 134 to establish grounds for suing. However, it does reset the Statute of Limitations. She considers that there is reciprocity between the exploitation by the employer and the employees right to compensation.

The Applicant bases this assertion on the law under which the statute of limitations for suing for infringement of a patent can only occur from when the infringement first occurs, without any relevance being given to any previous infringements. She considers that every product that exploits a service invention recreates the employee’s grounds for suing. She considers that this is clear from the fact that the tribunal can reconsider its rulings as circumstances change.   Thus there is time limit to when one can approach the tribunal under section 136. Any change in circumstances, such as exploitation of the patent in practice, reestablishes grounds for the employee suing.

window

Were the tribunal to rule differently, pharmaceutical inventions would have two windows, the first within seven years of inventing and the second within seven years of a change of circumstances under section 136. This is inefficient.

Dr Levy further alleges that only after seeking legal advice did she become aware of the her right for compensation under the Israel  Patent Law. She considers that the employer is obliged to explain all rights to employees and should have made a formal approach to her to settle the issue.

Dr Levy further alleges that a narrow window would force the employee to fight the employer during the period of employment and risk dismissal, and would force the negotiation to be from a position of weakness. Furthermore, a narrow seven year period would require her to have fought for each invention separately. This would have required her to approach the tribunal several times sometimes widely spaced, regarding a single pharmaceutical. Finally, she does not acknowledge being a side to any agreement with TEVA regarding employee inventions during her period of employment.

DISCUSSION

The Statute of Limitations does apply to rulings of the Committee for Compensation to Employee Inventors since it is a judicial body, see Appeal 402/77 Goldman vs. Herman, p.d. 32(2) 421 page 428:

When the legislative defined “court” in the Statute of Limitations it bothered to clarify in the definitions section that the term court did not only refer to the law courts or Rabbinic courts but also to any judicial authority, and even to an arbitrator who is not an Authority in that he is not an Institution that generally exists, but is rather an ad hoc authority. This means to say that the legislation specifically opined tat any play where the Law provides judicial authority to any entity, the Statute of Limitations applies.

Section 2 of the Statute of Liberties states that:

A claim for any right is subject to become aged, and if a legal submission is made for an aged right and the one sued claims the defense of the Statute of Limitations, the court need not address the issue, however the Statute of Limitations per say does not cancel the abrogated right.

Section 5 of the Statute of Liberties states that apart from real estate issues, the Statute of Limitations is seven years.

Section 6 of the Statute of Liberties states that:

The period from which seven years is counted starts with the incident that created the grounds for filing the complaint.

conception

In Appeal 10192/07 Pisgat Ashdod Civil Engineering LTD vs. Chen Gal Investments and Trading ltd. (24 May 2010) paragraph 17 of the ruling establishes that the time when a claim is conceived for the purposes of starting the Statute of Limitations clock is when the significant facts that are the basis of the requested claim come together. See Uri Goren “Issues in Civil Law” p. 118, 10th edition, 2009, Appeal 242/66 Jacobson vs. Gez p.d. 21(1) 85, 92 (1967). Estate of Williams p. 271, Appeal 244/81 Patent vs. Histadrut Health Fund p.d. 38(3) 673, 678-679 (1984). However, this definition does not fully cover the concept of when a claim is born. As far as the Statute of Limitations clock is concerned, it is insufficient for the claimant to have grounds for suing; he needs a concrete incident that can be proven in court for him to be able to file his claims and win the sanction he applies for. See 1650/00 Zisser vs. Ministry of Housing, p.d. 57(5) 166, 175 (2003).

monkey tribunal

Section 134 of the Israel Patent Law states that the tribunal has the authority to determine that an employee has the right to compensation for Service Inventions in cases where there is no agreement between the employer and employee:

If there is no agreement that prescribes whether, to what extent and on what conditions the employee is entitled to remuneration for a service invention, then the matter shall be decided by the compensation and royalties committee established under Chapter Six.

The Applicant claims that her rights as an employee come into play when the employee invention is made and she is entitled to compensation for inventing. However, she claims that her concrete right to file her complaint under Section 134 come into play only when there is no agreement between the parties regarding the employees rights. So long as it is not clear that there is no agreement, there is no concrete grounds for suing and thus the clock does not start to tick.

The tribunal rejects this claim. Section 134 states that where there is no agreement that regulates the employee’s right, the employee has the right to turn to the tribunal to determine if the employee is entitled to compensation and if so, how much? The requirement for a lack of agreement is a factual one objective one and is not subjective, as claimed by the complainant. As to when the concrete claim from which the clock starts to tick, this will be addressed below.

working together

Unlike other legal systems, the Israel Patent Law does not require that employer and employee will actively work towards forging an agreement as a preliminary action for Section 134 of the Law to come into effect. There is also no need for the parties to have a disagreement regarding compensation. So in accordance with the conditions laid out in re Ashdod Engineering (above), the plaintiff could have turned to the tribunal before negotiating on retirement, and the tribunal could have ruled that the plaintiff is entitled to compensation. In light of this legal situation, there is no basis for the claim that the employer is obliged to approach the employee and offer compensation. However, it is good for the employer to do so. Similarly, it is fitting for the legislation to consider including an obligation of this nature in light of the respective power of the parties, in light of Judge Rubinstein’s comments in re Barzani which are related to below.

concrete

The time when a concrete obligation was born

It is pertinent to discuss when an employee invention as defined in the Israel Patent Law comes into being for the purposes of the Statute of Limitation. One possibility is that the employee invention comes into being at the moment that the employee informs his employer that he has come up with an invention due to his employment or during his employment, as per Section 131 of the Law and the employer decides to monopolize the Invention under Section 132(a). There is an assumption that the parties do not disagree that this is a service invention. The logic behind this choice is that from the moment that the employee and employer fulfill their obligations under Sections 131 and 132 of the law, the parties are aware that there is a service inventions and have declared their interest regarding ownership, and this is the first opportunity to relate to the question of compensation. It is noted that by this approach the conceptual right and the concrete right.

A second possibility for when the right to compensation starts, is either when a patent application is filed or when a patent issues. These periods are periods when the employer shows interest in the invention. However, these dates are problematic since there are cases when an employee invents something that the employer does not apply for a patent for.

A third possibility for the concrete right is when the employer exploits the patent as per section 135(4) of the law. On the face of it, it seems that until the patent is utilized, it is not clear that the parties can really evaluate the worth of the patent. However, this approach is also problematic: exploitation does not occur in a single unequivocal event but is rather an ongoing process  during which various variables can affect the profitability of the invention. Similarly, it raises the question of whether the worker is entitled to a share in the profits if the employer sells the patent and does not exploit it directly.

That said, both the second option, and particularly the third one raise a further problem which it whether a concrete ground for suing as opposed to a conceptual ground for suing is cause to turn to the tribunal? Perhaps there is a difference from when the clock starts to tick, and the time period when the tribunal has the authority to relate to the employee’s claim for compensation. This means to say that it may be sufficient for there to be a conceptual claim for the tribunal to have authority, but a concrete right is required for the Statute of Limitations clock to start ticking. In the regard one should note that in Actelis Networks vs. Yishai Ilani (3 Feb 2010) discussed below, the tribunal concluded that one can request compensation prior to actual exploitation occurring.

In this instance, the tribunal sees no reason to rule on the issue of when the seven years Statute of Limitations period starts since the Complainant’s case was filed more than seven years after all the candidate dates.  Below claims by complainant to prevent the Statute of Limitations applying are discussed.

The Statute of Limitations as per re Schechter

Seven_year_itch.jpg

The Applicant relates to the decision ruled in217/86 Mordechai Schechter vs. Abmatz LTD, p.d. 44(2) 846, following which Section 73b of the Israel Paten Law was amended to state that the Statute of Limitations does not apply to patent cancellation requests. Dr Levy considers that the Schechter right to request a patent cancellation comes into effect when the Applicant for Cancellation has an interest in the patent being cancelled. So there is no single Statute of Limitations of seven years from when a patent issues, as stated in paragraph 5 of the decision:

When is the point at which the right to sue becomes grounds to sue? If we use a metaphor, what is the point at which a grain of sand in an oyster becomes a pearl? When translating this picture to the issue before us and to answer the question, when does the right to challenge the validity of a patent become grounds for filing a cancellation proceeding that starts the Statute of Limitation clock? In this instance, the cancellation period for filing a cancellation proceeding only starts when the Applicant for cancellation has a personal right to have a patent thrown out of the register.  (which also serves the public interest).  

In re Schechter, Judge Netanyahu explains that the rationale behind the establishment of the time frame in this manner is to enable the public to challenge the validity of the patent. The rationale for this is the purity of the register:

To block the possibility of attacking a patent on grounds of the Statute of Limitations or laches would lead to the result that after the period has passed, the patent would become an absolute right which contradicts the spirit behind The Patent Law. There is no policy or logic to justify a patent becoming inviolate from direct attack by cancellation proceedings after seven  years when the same reasoning allows a patent to be enforced for 27 years or more. What logic is there to make things difficult for a responsible person who wars that applicant to check the status of a patent in advance and to make is easier for someone to defend himself during infringement proceedings for an ‘at risk’ product launch? The logical conclusion from the perspective of Patent Law is that Patent Law is incompatible with laches and Statute of Limitations and does not coexist with it.

Judge Netanyahu explains that the conceptual right is a public right to have patents cancelled. However, only if someone is interested in cancelling the patent is there a concrete right to request for cancellation. The period for so doing starts with the day that the concrete right comes into effect:

This way, that differentiates between the conceptual right and the concrete grounds for an action lead to the following conclusion: The right to cancel a patent is a ‘right open to every person’, it is a fundamental concrete right that remains simple until it aggregates into a concrete right and an issue develops for the Applicant for Cancellation. Only then does the clock start running. So where the cancellation request is filed by a third party, and not the patentee who is owns the invention, the public is drawn in by virtue of their conceptual right to the concrete private claim. However, this is not the claim of the appellant. The claim is made on behalf of the public –that the invention is not patentable. Until there is a private concrete claim to use the patented invention, the clock does not start ticking.

The present case is different. The right to submit for a patent to be cancelled is a right that the Patent Law gives the public; that means to say that anyone can submit a cancellation request. The claims for compensation for inventing is conceptually limited to the employee inventor as a personal right that he has by virtue of inventing. The employer’s obligation is, to the extent that the tribunal decides that it exists, is an in personam contractual right to the specific employee and not a general in rem public right. Thus the conceptual right, i.e. that of compensation and the concrete right, which is that which initiates the seven year period of the statute of limitations- both are private rights that exist between employee and employer and do not extend beyond this relationship.

The reciprocity of the relationship between the Exploiting the Invention and Claims for Compensation

reciprocity

The supplicant Dr Levy claims that there is a reciprocity between the Exploiting the invention by the employer and the ability of the inventor to claim compensation. She claims that as long as the employer exploits the inventions, the worker’s right to compensation is continuously regenerating.

The tribunal rejects the supplicant’s claim in this regard. Such reciprocity does not accord with the wording of the Patent Law and does not accord with the underlying logic.

In re Schechter, Judge Netanyahu stood firm in her belief that the rationale was to allow the public to attack registered patents, and stated that:

As stated previously that the perspective at the base of the patent law and the public aspect is to ensure the ‘purity of the register’. I also explained that since the commissioner has limited tools to test that patents have correctly issued, the system relies on the public and encourages them to submit challenges. However, the most effective challenge is by persons with a personal interest, whether claiming that he is the true inventor, or claiming that he is exploiting the invention and considers that it does not deserve patent protection, and whether he attacks it directly [by cancellation proceedings] or indirectly by at risk product launch, allowing the patentee to sue him, and him being able to use invalidity defense], no one will exert the effort or costs for a thorough inquiry into the questions raised, which may be complicated and require expert testimony, as well as someone with a personal interest.

In parallel with the public right to challenge the validity of a patent, the patentee has the right to claim damages for patent infringement. This right mirrors the right to attack the patent. The patentee has a monopolistic right to the invention but only if it is held to be protected by a valid patent.  Thus he can protect his invention  from infringement, but only as long as there is a valid patent.

In cases of expensive infringement, the infringer infringers the patentee’s rights each time that he uses the patented invention without permission. So each act of infringement is free standing.  However, individual acts of exploitation by the patentee are not individual grounds for the employer inventor to claim compensation that each reset the clock. Section 132 of the Patent Law fixes that a service invention “shall become the property of the employer”.  Due to his contribution, the employee inventor has a right to compensation. So the action creating rights for the inventor is a single event.

Nevertheless, the patent law does not ignore the complicated employer-employee relationship, and the conditions that can develop during the life of an invention.  The inventor can return to the tribunal if it can proven that “the conditions existed at the time of the ruling have changed”.  As stated in Section 136 of the Law, there has to have been an earlier ruling for the worker to be entitled to return to the tribunal. Thus section 136 is a special arrangement that that Law provides the worker, so as not to leave him unprovided for. But one should not assume asymmetry between the employers utilization of a patent and the right of the employee inventor to compensation such that each utilization restarts the Statute of Limitations period.

(The arrangement of Section 136 is similar to the entitlement of the estranged wife to support by the husband pending divorce. The financial support is not final and can be revisited if circumstances change, as, for example in Appeal 442/83 Moshe Pam vs. Deborah Kam, p.s. 38(1) 767 on page 771).

However, this is not really relevant to the issue of finality in the employer-employee case. The issue is when the employee can first request compensation? In marital support, personal law applies and there is a tendency to consider a woman that is tardy regarding claiming support, as giving up on it. In cases where the general law applies, the period of aging is very short in the amendment to Section 11 of the Family Law (Support) 1959. Nevertheless, if there is a submission for support prior to the period of the appropriate Statute of Limitations, the parties can claim for changes due to changes in circumstances.

It is noted that the significance of Section 135 of the Law is not the aggregation of circumstances that makes it possible to sue for compensation for making an employee invention. The purposes is established in the heading “Guidelines for Establishing Compensation”, and these are only the guidelines for the tribune to use when considering compensation:

  1. In making a decision under section 134, the compensation and royalties committee shall also take into account the following factors:
  • the capacity in which the employee was employed;
  • the nature of the connection between the invention and the employee’s work;
  • the employee’s initiative in making the invention;
  • the possibilities of exploiting the invention and its actual exploitation
  • (expenses reasonable under the circumstances incurred by the employee in order to secure protection for the invention in Israel.

One could argue that clause (4) regarding actual exploitation of the invention is forward looking and does not require a certain knowledge that this will be the case. This was why the Legislative also included Section 136 which enables the tribunal to revisit and reconsider cases rule don under section 134 if they consider that the circumstances have changed. From here it can be seen that if a first request was filed during the seven year period, the conditions underpinning the Statute of Limitations apply and both the employee and his employer have certainty that the issue can be reconsidered. This is whilst the tribunal can request possibilities of the invention being utilized at all times, and even early on, before there is practical usage.

As the tribunal ruled in re Actelis Networks vs. Yishai Ilani (3 Feb 2010) in Section 9 of the ruling, that actual usage is not required to give the employee the right of standing before the tribunal:

The claim that the request is theoretical and premature since there is no actual exploitation in practice is rejected. Section 135 states that one of the conditions for determining the amount of compensation is the possibility of implementation if the invention. So there is no need for actual implementation and the request for compensation is not premature.

In the Actiles case it is noted that the previous tribunal considered it had authority to hear the case despite no actual exploitation. The content of the ruling is based on tests in law, and it is possible that the tribunal will postpone ruling until a later date, such as when there is actual exploitation, if this circumstances require this, as per section 136 of the Law.

Not knowing the Law

ignorance.jpg

Contrary to her assertion, the question of whether or not the Applicant had knowledge of her right to turn to the tribunal is not relevant to the concrete basis of her claims under Section 134. Section 8 of the Statute of Liberty states as follows:

If the claimant is not aware of the main grounds for claiming due to reasons beyond claimant’s control, and which with reasonable care, would still have been unable to prevent, the period for calculating the claim aging is calculated from when the claimant was first aware.

However, Appeal 1960/11 Almog vs. General Medical Services, 6 May 2013, page 7 states that Section 8 of the Statute of Limitations includes the objective test regarding when the period starts, but the burden of proof of its existence was only leaned later falls on plaintiff:

This claim is incompatible with the Guy Lipel, Donenfeld and Ganaim rule. It is difficult to argue that the period for reckoning the Statute of Limitations will start with receiving a professional medical opinion or when the law or a precedent becomes known. Otherwise, the clock for the Statute of Limitations is in the plaintiff’s control, which contradicts the rationale underlying the concept of claims aging. Section 8 of the Statute of Limitations gives both objective and subjective tests:

I will also note that since Section 8 of the law is an exception to the general rule of cases becoming aged, the burden of proof regarding retroactive awareness lies with the party claiming it (See Guy Lipel paragraph 41 and appendages.

It is true that not knowing the Law is not comparable to not knowing facts that would could have caused the plaintiff to file their suit; see Appeal 2919/07 State of Israel – Committee for Atomic Energy vs. Edna Guy Lipel, p.d. 64(2) 82, and paragraph 42 of the ruling:

The extent of the revelation: the law contains four conditions:

  • the existence of facts that were concealed from the plaintiff
  • the facts are significant and central to the claim
  • The plaintiff was unaware of these facts for reasons beyond his control
  • The plaintiff could not have prevented these reasons by taking due case

See Yehudai, page 204 and 1164/04 Herzliya vs. Yitzhaki, 5 Dec 2006. And note, the ruling states facts and not law, and so lately becoming aware of one’s legal rights is not considered retroactively becoming aware.

Furthermore, the facts required for the plaintiff to turn to the tribunal were known to her in fact long before the argument broke out on her retirement in 2013. The plaintiff claims a right to compensation for a number of inventions that she invented during her employment, the last being in 2006 at the latest. Dr Levy was aware of her contribution back then, and also was aware that TEVA had filed patent applications for these inventions.

In light of the above, the tribunal concludes that whichever date one considers as the period at which Dr Levy could have sought compensation, over seven years has passed and the complaint is thus aged.

Application of Section 9 of the Statute of Limitations

The Applicant added and claimed that even if the complaint has aged under section 6 of the Statute of Limitations, the defendant has admitted her right in section 2.2 of the agreement, and that some of the right___________________________________. Consequently, the Statute of Limitation should be calculated from when the defendant acknowledged her right.

Section 9 of the Statute of Limitations states that:

If the defendant admits in writing or before a court, whether during the seven year period or subsequently, that the plaintiff has rights, the period for the Statute of Limitations starts with that admission; and an action that pays out some of the rights is considered as such an admission.

In this section, the term ‘admit’ excludes an admission that accompanies the Statute of Limitations.  

expiredThe defendant denies the allegation that the conditions of Section 9 should be implemented. TEVA argues that to reset the clock, they have to admit that the complainant has the right to turn to the tribunal, and has to admit that there is both an employee invention and a lack of agreement regarding appropriate compensation. TEVA considers that these have to be clearly and explicitly stated, both formally and in terms of content. They argue that this remains the case even if some compensation is paid by the defendant.

time out

Under Section 9 of the Statute of Limitations, the new period starts notice. Since the Complainant submitted her case for compensation for her worker invention on 20 April 2015, the notification restarting the clock has to have been submitted in the previous seven years. So the question is whether there was such a notification within the relevant period, such that the seven years have not passed.

Section 2 of the Statute of Limitations states that aging alone does not cancel the right. The question is whether the respondent’s behavior can be considered an admission, in the sense of Section 9 of the Law, that revives the plaintiff’s claim? The tribunal does not consider this to be the case. One should remember that the applicant’s right to sue depends on the fact that there is no agreement between the parties regarding compensation. Thus any time that the defendant claims that there is an agreement, he does not accept the right of the Applicant to turn to the tribunal, and this cancels the authority of the tribunal. The result is that not only does he not agree with the right to file a complaint with the tribunal but he denies the right of the tribunal. Paragraph 3.3 of the draft retirement agreement  that was offered in the negotiations is not an admission of the right to file a complaint to the committee. The draft agreement states “and will not have further monetary demands beyond that paid by TEVA. This means that the claim for compensation is a claim that cancels the committee’s authority.

The Relative Strengths of the Employee and Employer

tug of war.jpg

The Applicant claims that the Statute of Limitations requires that the understanding that the worker should request compensation for the employee invention close to when the invention was conceived forces the worker to enter into a fight with the employer. Such a fight could risk the future employment and this means that the employee is in a weakened position with respect to the employer.

In general, the employer-employee relationship favors the employer, as Head of the Supreme Court Aharon Barak stated in Appeal 6601/96 AES Systems  vs. Saar, p.d. 44(2) 850, paragraph 12:

Not only this. In the contractual relationship, the employer and the employee are not equals The Employer generally has the upper hand, and can dictate the terms of the employment. Judge Berenson discusses “the Employees weakness with respect to the employer who dictates employment terms”  (Appeal 4/75 Berman vs. The Office for Lorry Transport Pardes Chana –Carcur “Amal”” ltd [12] on page 722. The national Labor Court of Appeal stressed that “labor law assumes a basic condition that there is a fundamental lack of equality between employer and employee (re Checkpoint [29] page 312. It will be appreciated that this inequality changes over time. It is affected by the market and the workers’ unions. Nevertheless, as a principle one can state that the worker’s and the public  interest is to protect the employee’s creativity and work.

As to the assumption of inequality between employee and employer in the workplace, see. The words of the Head of Labor Court Steve Adler in Case 164/99 Dan Fromer s. Red-guard ltd. pd”a 34 294 (1999) paragraph 14:

Labor law takes it as granted that there is an inequality between the employer and employee and so certain clauses in the work contract are not upheld by the court, if one can assume that a reasonable worker would not have agreed to them without this coercion. This is similar to the worker signing a waiver of rights he is entitled to under labor law. It is stressed that as a rule, the worker signs such clauses out of lack of choice; since the worker wishes to be accepted to the workplace, since it is reasonable to assume that failure to sign would result in him not be employed.

However, alongside the determination that the worker is in a position of weakness, and the binding nature of the relevant legislation the case-law does recognize a legitimate employer interest, see Red-Guard paragraph 16:

 True, the Employer has his interests, and the worker, his interest. These interests are different from the public interest. However, we are not concerned in the interests of the parties. We are concerned with the legitimate interests of the parties. The legitimacy is determined by general considerations, principles and assumptions of the legal system. The legitimate public interest and the legitimateinterests of the parties are the same. Although one refers to thelegitimate interests of the parties, the intention is the public order in which some of the parties interests are defended and others are not.

It seems that an arrangement based on an assumption that the employee is always in a position of weakness vis a vis the employer will create undesirable results. The purpose of the Patent Law is to incentivize the parties – both employee and employer, to create employee inventions, whilst regulating the property rights of the employer and the monetary rights of the employee. The employee’s rights are protected by a contractual agreement that arranges them or by the Tribunal for Compensation. Section 131 of the Law obliges the worker to inform the employer of the service invention as close to the time of inventing as possible. Section 132(a) of the Law obliges the employer to inform the employee of whether or not they intend to take ownership of the invention within six month of the notification under Section 131.

The arrangement of the Patent Law chooses to incentivize the parties to reach an agreement as early as possible. Neither the language of the law nor the context imply a separation between the period for informing the employer and the time frame for compensation.

One should remember that the employer has a real interest in knowing the employee’s intention to seek compensation for the service invention. This may be significant and can affect the management of the company and should be reflected in the balance sheet. So there is an importance for the employer that there is a Statute of Limitations to prevent the issue of compensation first being raised many years later, which could surprise the employer and cause significant financial difficulties.

It should be noted that the section 134 rights are not cognitive and do not provide social rights requiring special protection see the Application for Compensation (preliminary requests) Gideon Barzani vs. Isscar LTD, 4 May 2015 paragraph 30:

 We consider that section 134 which provides compensation,  are not cognitive. These are not social rights requiring special protection. In this light, but in a different context, the District Court ruled in Appeal 1843/-1 S.G.D. Engineering vs. Baruch Sharon, 25 January 1993, that  the question of employee inventions is not a social right, but a right in the invention under the Patent law. The conclusion that the right is dispositive concurs with the general cognitive nature of the write in re Shocker as ruled by judge Heishin.

In Barzani paragraph 32 it is stated:

Since conceptually the right is not a social right that requires protecting, as testified by Section 135, the legislation did not decide a cognitive right to compensation similar to the right to be named as an inventor under Section 42 of the Law. In these circumstances, the lack of such a condition in the law forces the understanding that the tribunal gives way to any agreement. It is noted that Dr Shlomit Yanivski-Ravid who champions the cause that the employees rights should be cognitive, establishes in her book IP and Innovention at Work, Theory, Practice and Comparative Law 2013, that the law as it is, is dispositive and if there is a contractual agreement, the tribunal does not have the right to intervene (see pages 305, 311).

The Supreme Court decided not to intervene in our ruling on re Barzani See Bagatz 4353/`4 Barzani vs. Isscar ltd. 8 July 2015.

The legislative body chose to apply the regular Statute of Limitations to employee invention compensation. Had it intended something else, it would have written this into the Patent Law, as indeed, some other legal systems have done. Dr Levy has related to special laws in Germany and the UK.  There is also reference to the law in France, Switzerland and Austria. It is accepted that there is interest in the balances found in these laws but it is the job of the legislative body to consider this, and we can only advise the Knesset to consider these arrangements and to adopt them if it finds it appropriate to do so.

We conclude that the request for compensation was submitted too late and the request for a ruling is rejected.

Bearing in mind the conclusion and the relative resources of the parties, each party will bear their own costs.

As a final comment we note that the arguments put forwards by the parties were of great help to the committee in addressing the issues raised which were considered for the first time and the legal counsel of the parties (Richard Luthi for Dr Levy, and Shin Horowitz for Teva) were of great help in understanding and ruling this complicated case.

The decision is of interest and will be published with the names of the parties, but the sides will have seven days to request that certain details remain confidential.

Ruling in Tribunal for Employee Compensation Levy vs. Teva, 25 May 2017 ruling by Prof. Engelhard, (then Commissioner) Asa Kling and Professor Doron Urbach.

COMMENT

I accept that there should be a Statute of Limitations for claiming an employee right but I do not find this ruling particularly convincing in its analysis regarding cancellation of a patent. I think the correct perspective is that an issued patent has a rebuttable assumption of validity but it may be challenged at any time by bringing evidence of lack of novelty or inventiveness, and doing so does not so much as cancel a patent in the way that a trademark is cancelled, but rather it shows that the patent should never have been granted it demonstrates that it is invalid rather than invalidates.


A Ruling Concerning Service Invention Compensation by a Worker of a Unionized Industry

August 10, 2017

This is the third decision on employee compensation that issued this month.

In this case, the employee inventor requested that the committee for discussing employee compensation for service inventions rule compensation under Section 134 of the Israel Patent Law. On 22 July 2014, the Company responded by requested three interim rulings:

  1. That the case be thrown out due to the Statute of Limitations.
  2. That the case be thrown out due to tardiness or the employee having given up on receiving compensation
  3. (in absence of above) that the committee set a timetable for the proceeding.

The parties filed responses and further submissions and attended a hearing on 24 December 2015, and the committee decided that the parties should concentrate on the issue of whether or not the committee had standing in this instance.

The Applicant (inventor) submitted his summation on 12 April 2016 and the respondent (company) submitted their summation on 13 December 2016, and a counter response was submitted on 1 March 2017.

The Applicant submitted an affidavit as did Mrs. XXXX (job description not given) and Mr. YYYYY, the head of the patent committee of the respondent.

The facts (censored)

The Applicant started working for the company in 1993 and was employed to_________. In the scope of his duties, he suggested some efficiency improvements and inventions as detailed below.

The company is_____________________.

The applicant detailed eight suggestions that he submitted: Read the rest of this entry »


Israel Supreme Court Issues Long Awaited Decision regarding Service Inventions

July 23, 2015

employment agreement

Isscar is a leading Israel company that manufactures hard metal cutting tools. As an employee at Isscar, Gidon Barzani was involved in the development of hard metal cutting tools at Isscar during the years 1992 to 1995, and again between 1997 and 2001 and was involved in a certain service invention, his actual contribution being a matter of contention. The employee signed various documents that gave up on monetary claims.

In Israel, an employee invention is owned by the employer. However, under Section  134 of the Law, the employee is entitled to compensation, the amount of which is determined by a special committee under Section 109.

The Committee, at the head of which sits the retired Supreme Court Justice, Itzak Englard, the Commissioner of Patents and an university professor, rejected Barzani’s claims as he had had waived his rights to consideration for the inventions when he signed on the general waiver.

Barzani appealed to the Supreme Court as a High Court of Justice (BAGATZ) see here which resulted in the committee freezing its actions.

One of the more interesting legal questions is whether a general waiver as part of the employment contract, where no invention is yet conceived can be considered as legally binding. (Talmudist’s may note a similarity to discussion of unlaid eggs).

The Supreme Court rejected the appeal arguing that it had limited power to interfere since under Section 111, the Bagatz ruling was final. The Supreme Court ruled that Section 134 describes a non-cogent right that is not a socialist employee right that requires special defense. On the face of things and with deference to the language of the clause, the decision appears to be correct, and certainly is sufficiently reasonable that there is no justification for court interference.

Nevertheless, the court noted that in a dynamic and changing world there is room for additional legislation or for companies to come up with voluntary compensation schemes. However, there is no reason for the court to interfere.

Judge Reuven, Deputy President of the Supreme Court quoted Section 109 of the Law as follows:

Where there is no agreement providing compensation to the employee for his service invention, regarding the amount of compensation and the conditions, these will be determined by the Committee for Compensation and Royalties.

Section 111 fixes the finality of the committee’s decision, but there is no doubt that in extreme circumstances, the Supreme Court sitting as a High Court of Justice can interfere. Since, however, the committee includes a retired senior court justice, the commissioner and an academic, interference in its conclusions are likely to be minimal, and this instance does not justify the court’s involvement.

The main argument, following the Actelis ruling of 2010 is concerned with the question of whether Section 134 should be considered cogent or dispositive. The committee came to the conclusion that it is not a cogent right and is not an example of employer-employee labour law where (due to the inherent differences in power between the sides) workers’ rights require special protection. The ruling seems to be correct, but anyway, since the Law states that the committee’s rulings are final, there is no room for the court to interfere.

Nevertheless, the court has criticized the current situation and noted that common sense and natural justice indicate that there is room for a more equitable arrangement,  whether the result of voluntary agreement or of legislation, and such arrangements exist in the private sector.

4353/14 Appeal to Supreme Court, Barzani vs. Isscar, Ruling by Rubinstein Fogelman and Mazuz 8/7/15

COMMENT

There was a lot of interest in this case, and we believe that employers will be giving deep sighs of relief. Employees will probably feel that the system favours the company against the individual. I am aware that some academics have strong feelings, see for example, Dr Shlomit Ravid’s position here and here.

Since the court has criticized the committee’s ruling and is not prepared to get involved, it is not inconceivable that a future committee could reach the opposite conclusion. Indeed, one of the judges of this ruling might, on retirement, sit in such a committee. There may, therefore, be room for clear legislation on the issue.

Personally, I think the Supreme Court decision is correct. I encourage corporate clients to institute compensation programs or at least weekend breaks and the like to encourage employees to come forwards with ideas, but think that changing the law in Israel may result in multi-nationals taking their R&D centers elsewhere, and that is not good for the economy or the workers.


The obligations of a business partner to further an inventor’s patents and product

June 9, 2015

mines This ruling on Appeal by the Supreme Court relates to patents.

Avichai Madmoni, an inventor, sued Ahidatex Nazareth (1977) LTD, Abraham Hazor and Export Erez US Inc. and Export Erez Israel LTD. for failing to successfully commercialize his invention. Judge Barak-Erez summarized the dilemma before the court as follows:

A new invention is dreamed up by a person who then engages with a commercialization company to realize the product via patent registration, manufacture and marketing.  The relationship is less than successful in that registration took place in one country only and the invention was never realized in a commercial product.  Is the commercial company at fault, or does the failure of the product commercialization reflect mistakes of the inventor and market forces that are beyond the control of the commercialization company?

Avichai Madmoni has military field experience which led him to invent a device called a ‘sapper’s sandal’ that protects foot soldiers from mines. Over the years, Madmoni made various improvements, and the following discussion refers to the ‘old sandals’ and the ‘new sandals’. In the distant past, Madmoni sued a different service provider he’d engaged to commercialize the old sandals. He managed to prove that that company had not kept him informed on the scale of the sales and Judge M. ND”V had ruled (Civil Ruling 3509/96) that he was entitled to compensation. Following this ruling, Madmoni and the earlier service provider came to a contractual understanding that Madmoni would forfeit the compensation and would be entitled to sell the old sandals. In February 2000, Madmoni contracted Ahidatex Nazareth (1977) LTD to commercialize his Sapper’s Sandals. Abraham Hazor was the CEO of Ahidatex Nazareth (1977) LTD and the two Export Erez companies were share holders in Ahidatex Nazareth (1977) LTD. The contract related to the marketing and development of the Sapper’s Sandals, and for the registration of patents thereon in accordance with requests from Admoni. The contract stipulated royalties and a requirement to detail sales in the event that Ahidatex manufactures and markets the different sandals and obliged Ahidatex to carry the costs related to the sandals and to finance the patent registration, as stated in the following paragraph (my translation with the parties as identified by the judge):

[Ahidatex] undertakes to finance the drafting and registration of patents in Israel and the world, if requested to do so [by Madmoni], via the attorneys to be selected [by Madmoni] – this on condition that the manufacturing and marketing rights accruing from the patent if developed and registered, will be transferred to Ahidatex as a condition of this agreement, and all with the agreement and approval of [Ahidatex].

 Following this initial agreement, the sides signed other documents. In 2002 Madmoni signed a document assignment his invention to Ahidatex, and a further document that stated that the rights were assigned in light of and in accordance with that stated in the original contract from 2000. In 2004 a further contract was signed that stated that it did not cancel the original contract by that it introduced a number of modifications, including Ahidatex’ financial obligation and Madmoni’s involvement in sales. In the years following the original contract between the parties, there were various steps taken to advance the invention. On 18 March 2002 a new patent application was filed in the US that related to the new sandals, and this eventually issued as US 6,751,892  ” Minefield shoe and method for manufacture thereof ” however corresponding patents were not registered in other jurisdictions. Madmoni was not happy with the relationship with Ahidatex and negotiated to terminate the relationship, and the parties agreed that if Madmoni pays $350,000 to Ahidatex, the commercialization rights would be transferred back to him. To facilitate this, Madmoni contacted a third party, Lior Stitching LTD, to undertake the manufacture and to pay the $350,000 to Ahidatex. Since the patent was ONLY filed in the US, Lior Stitching did not accept the agreement. At this stage, Madmoni sued the defendants in the Jerusalem District Court (Civil Complaint 3070/09), arguing that defendants had violated their contractual agreement and caused him heavy losses.

Madmoni argued that the defendants had failed to file the patent applications in other jurisdictions and had failed to effectively market the Sapper’s Sandals to the Israel Defense Forces and other potential customers. Ahidatex counter-sued Admoni for revealing trade secrets to Lior Stitching, and for return of money they had paid him (Civil Complaint 3551/09). Judge Jacobi of the Jerusalem District Court rejected both the complaint and the counter-complaint in a ruling of 24 June 2012. The District Court reviewed the contracts and heard witness testimony and concluded that there was no breach of contract. The District Court did not find that Ahidatex had contractually obliged itself to file patent applications in other jurisdictions but only if requested to by Madmoni. The District Court found Ahidatex obliged to prosecute the pending patent applications but not to file them unless Madmoni specifically requested applications be filed. Consequently, Madmoni himself was responsible for their not being additional filings. Furthermore, Madmoni himself knew that the patent was not filed in Israel and that the corresponding European application was abandoned.  As far as the old sandals were concerned, Ahidatex was not obliged to market these, but was merely entitled to. As to contracting the Israel Defense Forces, the District Court considered that Ahidatex had acted reasonably and could be held responsible for the failure of the IDF to express an interest. The counter-case was dismissed as being a reaction to Madmoni’s filing suit and lacked inherent validity.

THE APPEAL

Madmoni contended that it was clear to Ahidatex that they should file more widely and in particular, should file applications in Israel and Europe. He alleged that the assignment gave Ahidatex, as the more experienced partner, free reign to file wherever they wanted. Consequently, he didn’t contemplate the eventuality that Ahidatex would not file in Europe and Israel. Madmoni alleged that the District Court had erred in their understanding of the contractual relationship and had ignored provable evidence that Ahidatex had failed to fulfill their obligations. Madmoni also alleged that Ahidatex had been tardy in negotiating with the IDF. Madmoni further accused Hazor of negligence and inequitable behavior and thus considered the District Court had erred in dismissing charges against him. The defendants requested that the Appeal be dismissed on the grounds determined in the Court of First Instance. The Appeal was essentially against factual and not legal determinations and was thus an illegitimate attempt at forcing a retrial. The Supreme Court suggested that the parties attempt mediation but this was not successful.

RULING

After reviewing the case, the Supreme Court upheld the District Court’s findings and dismissed the appeal. The defendants had not undertaken to absorb any and all costs in patent prosecution but merely to underwrite the cost of prosecuting and maintaining the patents filed by Madmoni himself. The Supreme Court also did not see fit to interfere with the District Court’s findings that the IDF’s failure to purchase the product was the result of Ahidatex’ poor marketing. As far as equitable behavior of the CEO, despite accepting that the obligation on the CEO and investors should be interpreted widely, the court did not see fit to find them responsible in this case. There is no doubt however, that this is one of those difficult cases, not because of the legal aspects, but because of the sorrow and feelings of loss of an inventor whose hopes are dashed. Nevertheless, the court did not find that legal obligations towards him were ignored. The decision was upheld but no costs were awarded.

Civil Appeal 7300/12 to Supreme Court concerning Madmoni vs. Ahidatex et al. The ruling by Judge Barak-Erez, with Judge Rubinstein and Chayot concurring, 3 June 2015.  

COMMENT

The ‘Sapper Sandal’ or ‘minefield shoe’ is a sort of snow shoe with a large surface area due to inflatable pockets underneath that engages a soldier’s boot. I have no doubt that it spreads pressure over a larger surface area and that it reduces sudden pressure. It should, therefore, have some efficiency against mines of various sorts. On the other hand, it may be less successful than the inventor imagines, and I suspect will make walking difficult. That as may be, having a patentable invention is not necessarily the same as having a workable solution.

I do not know if armies need a solution for a soldier to cross a mine field or a way for clearing mine fields. I do not know if this solution has military value. Presumably, however, the Israel Defense Forces is quite capable of such a determination. If the Israel Defense Forces IDF had adopted the idea but manufactured without Ahidatex, there would be some argument that failing to file in Israel had caused damage. This does not, however, attribute this damage to Ahidatex rather than to Madmoni.

In general, military hardware inventions should be filed in the US, Europe and Israel to cover major manufacturers. This particular invention is low tech and could be manufactured widely and if it works, could be of interest in all conflict zones.

In my experience, inventors sometimes have unrealistic expectations.  They get emotionally attached to their solutions, whereas commercial entities are more likely to be motivated by commercial considerations. It is an unfortunate characteristic of entrepreneurship in general, that one cannot know up front what is the correct strategy, and patents of this type, are, by their nature, aimed at creating new markets. If there is a real need, someone else may come up with a competing product that is as good or better, or merely cheaper. Finally, it should be appreciated that when entering into contracts, both parties should be very careful that the contract is clear and unambiguously covers all eventualities. This can avoid unnecessary litigation from which all parties (except for the attorneys) lose.