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Intellectual
Property Rights in the State of Israel
Last updated: May
2003
1)
Introduction
Israel’s canon of intellectual property law, as with many other areas of
Israeli law, is based in the English law that prevailed in Palestine
during the time of the British Mandate, prior to the creation of the
State of Israel in 1948. Since the founding of the state, however, this
body of law has evolved independently, through the adoption of new
statutes, extensive amendments to the mandatory ordinances and through a
growing body of case law, in an ongoing effort to keep pace with the
rapidly advancing modern-day technologies.
Each of the three main areas of intellectual property law – patents,
copyrights and trade marks – is regulated by a separate statute, with
ancillary statutes covering areas of lesser importance.
2) Patents
2.1
Source
Patent rights in Israel are expressed in the
Patents Law - 1967
(“the Patents Law”). Since 1995, the Knesset has made substantive
amendments to this Law, one of the most significant of which is
discussed below.
2.2
Patentability
In order to obtain a patent in Israel, one must register a patentable
invention with the Registrar of Patents at the Ministry of Justice, and
thereafter receive a grant of patent from the Registrar. It is notable
that the Patents Law does not explicitly define an invention, but rather
establishes criteria for what constitutes a patentable invention. These
criteria require that an invention be:
a) new; (meaning unpublished anywhere in the world, whether in
written, visual or audible manner, in such a manner that a person of
knowledge in the relevant field could perform it or by exploitation or
exhibition in such a manner that a person of knowledge in the relevant
field could perform it (though the Patents Law does list certain
exceptions whereby the right of the owner to the grant of a patent is
not affected by publication, most notably where publication is without
the owner’s consent and where the invention is displayed at an
industrial or agricultural exhibition));
b) useful (meaning the promises of the inventor as to the
benefits of the invention are fulfilled when the invention is used in
accordance with its description in the patent) ;
c) capable of
industrial or agricultural application; and
d) an inventive step which would not have been obvious to the
average person in the relevant field based on publications prior to the
date on which application was filed in Israel.
The Supreme Court of Israel has held that the inventive step requirement
does not require a significant advance. A “modest step” is sufficient,
so long as there is an “inventive spark.” Israeli courts have developed
additional tests to help determine if an invention constitutes an
“inventive step,” such as the "long-felt need," "the commercial success"
and the "substantially identical" tests, though none of these tests are
conclusive. Israel’s Supreme Court has held that the existence of an
“inventive step” will not be examined with hindsight (C.A. 47/87
Chesem Limited et. al. vs. Abraham Bachari et. al.,
45 P.D. (V), 194).
The Patents Law expressly classifies some inventions as unpatentable
regardless of their utility. These include: inventions that are
unrelated to the industrial or agricultural fields, new varieties of
plants and animals (except human engineered microbiological organisms),
and processes (but not products) used for therapeutic treatment of
humans (though diagnostic methods are patentable).
In addition, the courts and the Registrar of Patents have decided that
systems or methods of education are not patentable inventions under
Israeli law, and that an invention which substitutes a mechanical or
other process for a mental process is also not patentable.
Computer programs are patentable so long as they are new, useful,
capable of industrial or agricultural application and consist of an
inventive step, and produce a physical effect by the combination of the
computer program and some other material. Computer programs by
themselves are not patentable, unless they are coupled to a physical
object, since computer programs, or algorithms, are intellectual
creations with no concrete manifestation, and are thus most
appropriately protected by copyright law which protects rights in
non-physical matters. The Jerusalem District Court in United
Technologies Corporation vs. The Registrar of Patents and Trade Marks (VA
23/94) held that the definition of “process” for the purpose of
patentability may include a system where the only new element is a
computer program.
It is notable that the Patents Law allows for the patentability of an
invention which may be illegal, immoral or contrary to public policy,
although the registration of the patent does not legitimise such use.
2.3
Registration
Process
The first step in the Israeli patent registration process is for the
owner of the invention, either himself or through an Israeli lawyer or
patent agent, to file a patent application with the Patents Office. The
application consists of a formal application form along with a
specification detailing the features of the patent and the modes of its
utilisation. The specification comprises a description, drawings when
necessary, and at least one claim defining the invention. Soon after
the application is filed, the Patents Office publishes a notice, at the
applicant’s expense, detailing the application in the Official Gazette
(“Reshumot”).
The next step in the patent registration process is for a patent
examiner (the “Examiner”) to examine the application in order to satisfy
himself that the proposed invention meets with the Patents Law’s
criteria as set out above. Additionally, the Examiner checks to make
sure that the application forms sufficiently disclose the nature of the
invention. The examination process may take two to three years from the
date the application is filed, though an application for acceleration of
the examination process may be filed. The final step in the patent
registration process occurs when the Examiner either refuses the
application or provisionally accepts it. In the latter case, a notice
of acceptance is published by the Patents Office in Reshumot, the Patent
Office’s Official Gazette. This publication initiates a three month
period during which time any person may lodge an objection to the grant
of the patent.
The grounds for opposition, which are listed in the Patents Law, are as
follows:
a) A reason exists for which the Examiner is justified in refusing to
accept the application;
b) The invention was previously used or a description of the invention
was published; or
c) The person filing the objection, and not the applicant, is the
actual owner of the invention.
If the Examiner accepts the opponent’s claim that he or she is the
actual owner of the invention, then the Examiner has the discretion to
grant the patent to the opposing party. In the event that no opposition
is filed, or if all opposition is dismissed, the patent will be
granted.
A decision of the Examiner may be appealed to the Registrar of Patents
under the Patents Law. The Patents Law also provides that decisions of
the Registrar may be appealed to the District Court.
If more than one application is filed covering the same invention, the
first to be filed will be granted the patent, assuming that it meets the
above-mentioned legal requirements.
2.4
Rights Deriving
from Patent
Under the Patents Law, the grant of a patent entitles the patent owner
to prevent any other person from exploiting the invention without
authorization. Unauthorized exploitation includes practicing exactly
what is claimed in the patent, or alternatively whereby only the main
features are exploited. “Exploitation” includes any use of the
invention and the derivation of benefit therefrom, except where such use
is not of a commercial nature and is not practised on a commercial
scale. An exception to this principle is discussed in section 2.12
below.
2.5
Term of Patents and
Fees
The term of the patent is 20 years from the date the application is
filed, provided that renewal fees are paid to the Patents Office on the
sixth, tenth, fourteenth and eighteenth anniversary of the filing date.
If the renewal fee is not paid within six months of the due date, the
patent expires, although it is possible to apply for restoration of the
patent. It is important to note that anyone who exploits the patented
invention after such an expiration may continue to exploit the patent
without the requirement to pay royalties even if the patent is
subsequently restored.
Under Section 64 of the Patents Law, it is possible to apply for a
patent term extension in the event that the patent application or the
patent itself was subject to administrative delays. This section is
similar to 35 U.S.C. 154, which also allows for patent term extension
for certain delays. Under Israeli law, the patent term extension will
only be granted for medical-related patents. The grant of the patent
term extension cannot extend the normal period of patent protection (20
years from the date of filing the patent application) by more than 5
years. It is important to note that in the event a marketing licence is
issued for the patent, then the total amount of patent protection, both
the original patent term and the patent term extension together, cannot
exceed 14 years from the date the first marketing license agreement was
received in a Convention state.
The grant of a patent term extension does not confer the same rights as
a patent receives under its normal period of protection. Section 64H
(d) provides that during the patent term extension the patent holder may
prevent someone else from “marketing” the invention or from producing
the invention “in order to market” the invention. Thus, a patent holder
can only prevent someone from practicing his patented invention if they
are doing so for marketing purposes. So long as someone practices the
invention for some other purpose they would appear not to infringe the
grant of the patent term extension.
2.6
Ownership of Patent
The one who files a patent application is regarded as the owner of the
invention, absent proof to the contrary. However, any natural or legal
person may acquire ownership of a patent if he derives this title from
the inventor by agreement, by assignment, or by operation of law.
A patent may be jointly owned. In such a case, the joint owners are
presumed, in the absence of a written agreement or contrary legal
provision, to own the rights embodied in the patent on equal terms and
shares. Thus, each joint owner may individually, and without the
consent of the other owners (barring a written agreement to the
contrary), exploit the invention. However, if by such exploitation one
joint owner deprives other joint owners of their ability to exploit the
patent themselves then the other joint owners have a right to a
reasonable royalty or a share in the profits from the exploitation of
the first joint owner.
If an employee invents an invention during his employment and in
consequences of his employment, then, absent a written agreement, the
invention becomes the property of the employer. In such a case, the
employee is entitled to remuneration for his or her invention, the sum
of which is to be determined by a special royalties committee convened
by the Patents Office.
2.7
Transfer of Patent
Rights
2.7.1 Assignments and Licenses
Patent rights may be transferred either in writing or by operation of
law, such as in the case of an employee under the criteria discussed
above. An owner of a registered patent may assign the patent to someone
else, or may grant an exclusive or non-exclusive licence for the
exploitation of the patented invention. An exclusive licence places the
licensee squarely in the shoes of the patent owner, thus preventing all
others, including the patent owner, from exploiting the invention in
Israel in competition with the licensee. A non-exclusive licence allows
the licensee to exploit the invention according to the conditions of the
licence. Where a patent is jointly owned, all joint owners must consent
to the granting of a licence. Both assignments and licences must be
registered with the Registrar of Patents in order for the licence to be
valid against third parties.
2.7.2 Taxation Issues
Section 2 of Israel’s Income Tax Ordinance, which was passed into law
before Israel became a state, deals with the tax consequences of selling
and licensing patents. Although Israel now has a capital gains tax, at
the time that the Income Tax Ordinance was written, Israeli tax law did
not recognize capital gains, meaning that all income received, including
income from the sale of a patent or any other form of intellectual
property, was subject to income tax.
If the permanent sale of a patent is done within the normal scope of
one’s business, then the patent sale is to be treated as either business
income (under Section 2 (1) of the Income Tax Ordinance) or employment
income (under Section 2 (2) of the Income Tax Ordinance). This is also
true of licensing of patent rights. Distinguishing whether the scope of
the patent is related to the business that one is in determines whether
the transfer of patent rights is to be treated as income or capital
gains.
Today, Israeli tax law recognizes capital gains tax for the sale of a
capital asset. Although the sale of a patent can be thought of as the
sale of a capital asset, Section 89c of the Income Tax Ordinance states
that when the sale of an asset might be liable both to income tax and to
capital gains tax, it will be seen as liable to income tax only.
The consequence of subjecting the transfer of patent rights to income
tax as opposed to capital gains tax is not as severe as one might
think. Under Israeli tax law, there is no separate tax bracket for
capital gains tax. Capital gains are charged as income, meaning that
capital gains are simply added to one’s income in a particular tax
year.
An important distinction between Israeli capital gains tax and Israeli
income tax is that under Israeli tax law, capital gains can be spread
out over the previous 4 tax years. This could be a significant tax
advantage if the patent owner was not in the highest tax bracket during
this period of time. On the other hand, if the transfer of patent
rights is treated as income tax, then the patent owner may deduct all
business-related expenses in developing the invention and pursuing the
patent. Any loss can be carried forward to set off future business
income. The rules for deduction of expenses and set-off of past losses
in the future are much more restrictive for capital gains transactions
in Israel.
It is essential to note that each individual case involving the transfer
of patent rights under Israeli law must be examined on its own merits
and it is important to seek professional tax advice in this area.
2.8
International
Aspects
Israel is a signatory to the
Paris Convention for the Protection of Industrial Property (the
“Convention”), which is an international agreement between countries
designed to allow an inventor to file a patent application in a member
country while claiming priority back to an earlier filed foreign patent
application filed in another member country. Under the Paris
Convention, the Patents Office grants those filing a patent application
in Israel the ability to get the protection of an earlier filing date
from a patent application filed in one of the member countries under
certain conditions. In order to receive the benefit of the earlier,
foreign filing date, the Israeli filed application must be: 1) filed
within 12 months after the filing of the foreign application; 2) the
applicant must request the right to claim priority to the foreign filed
application within two months from the Israeli filed application; 3) a
certified copy of the foreign application must be submitted; and 4) the
foreign application and the Israeli application must be prima facie
identical in the eyes of the Patent Registrar.
On June 1, 1996, Israel became a member country to the Patent
Cooperation Treaty (the “PCT”). Under the PCT, one can file an
international patent application, designating any number of member
countries to which the applicant desires to pursue patent protection.
Under the terms of the treaty, a national or resident of one of the
member countries can file an international application which will be
subject to an international search. The applicant may then opt to
proceed with an international examination or file patent applications
directly in any number of member countries. If, after proceeding with
an international examination, the applicant is satisfied with the
results, the applicant may then file patent applications for his or her
invention in any number of member countries. One of the benefits of the
PCT is to create a uniform application, which will satisfy the
requirements of the member countries and therefore streamline the patent
application process in each member country.
Under the combined provisions of the Paris Convention and the PCT, a
national or resident of Israel may file a patent application in Israel
(or any other member country to the Paris Convention), and then within
twelve months from the filing date of this application, file a PCT
application claiming priority back to the first filed application. Once
the PCT application is filed, the applicant has eight more months to
decide whether to proceed directly to a member country for filing, or
opt for a PCT examination. If the applicant opts for the PCT
examination, the applicant has an additional ten months by which time he
or she must either file national patent applications directly in the
member countries of his or her choosing, or abandon the patent
application. Therefore, under the provisions of the Paris Convention
and the PCT, one can file a patent application in Israel and then have
up to 30 months to file a patent application covering the same invention
in another country through the PCT framework and still maintain the
benefit of the original filing date. Alternatively, one can file a
patent application in a member country other than Israel, and then have
up to 30 months to file a patent application in Israel through the PCT
framework and still maintain the benefit of the original, foreign filing
date.
Israel is also a party to the Trade-related aspects of intellectual
property rights (TRIPS) agreement. As part of the General Agreement,
Tariffs and Trade (GATT) agreement, the TRIPS pact brings trade related
aspects of intellectual property into the framework of international
trade. The TRIPS agreement sets universal minimal standards for
protection of intellectual property, including patents, and countries
that do not maintain those standards can be both sued in the World Trade
Organization (WTO) and subject to trade sanctions.
2.9
Antitrust
Considerations
A patent, by its very nature, is a monopoly. A patent permits its owner
to prevent all others from practicing his or her invention for 20 years
from the filing of the patent application (enforceable from the date the
patent is issued). According to the Controller of Restrictive
Practices, all patent owners are monopolists, whether or not a
declaration has been made to this effect.
Israeli antitrust law is embodied in the Restrictive Business Practices
Law - 1988 (the “RBPL”). Under the RBPL, there are three kinds of
potentially anti-competitive activity: restrictive arrangements,
mergers, and monopolies.
Patents, so long as they are properly registered, are specifically
excluded from the RBPL’s prohibitions against restrictive arrangements.
Thus, restrictive licensing arrangements are allowed under the RBPL when
they are entered into by patent owners, though case law has added that
in order for this exemption to apply, all restrictions in the agreement
must apply to the right of using the patent in question (and may not,
for example, restrict the use of other products).
When a patent is acquired in a business merger, and the merger is one
that requires approval of the Controller of Restrictive Trade Practices
(the “Controller”), such as when the merged company’s share of a market
exceeds 50 percent, the legality of the transfer of patent ownership to
the merged company is contingent upon approval of the merger.
Although patents have been excluded from the RBPL’s provisions regarding
restrictive licensing arrangements, the RBPL’s prohibitions as to
monopolies do apply to all patent holders. A patent holder, as a
monopolist, is prohibited from abusing his or her monopoly. Thus, for
example, a patent holder may not unreasonably refuse to supply a
patented product or method, and the patent holder may not abuse his or
her market position in a way which is likely to damage the public.
2.10
Compulsory Licences
and Patent Abuse
Given that the rationale behind granting a monopoly in the form of a
patent is to ultimately benefit society, the Patents Law encourages
patent holders to exploit their patent to its fullest capacity. When
the patent owner refuses to exploit their patent or grant others a
license to do so, the Patents Law provides a remedy to ensure that
society will benefit from the patented invention. For example, when a
patent owner does not manufacture his or her patented invention in
Israel and refuses to licence a local manufacturer to produce the
invention in Israel, he or she may be deemed to be abusing his
monopoly. In such a case, the Patents Law may provide for the grant of
a compulsory license. In order to receive a compulsory license, the
applicant must apply to the Registrar of Patents and demonstrate both
that there is an abuse of monopoly, and that the applicant will be able
to cure this abuse by being allowed to manufacture the patented product
in Israel. In deciding whether to grant a compulsory license, the
Patents Law requires that the Registrar consider both the public
interest and the applicant’s ability to remedy the situation.
In the event that the Registrar grants a compulsory license, the patent
owner is nevertheless entitled to royalties which, absent a written
agreement between the parties, are determined by the Registrar.
To further prevent patent abuse, the Registrar is also authorized to
revoke the patent upon which a compulsory license was granted, if the
Registrar is of the opinion that the grant of the compulsory licence did
not remedy the abuse of monopoly.
The State of Israel may use a patented invention (whether registered or
not) if such use is necessary for the defence of the country or for
assuring the continuation of necessary supplies or services. As with
eminent domain property issues in most countries, the government of
Israel is required to compensate the inventor in the event that the
government practices the inventor’s invention by necessity. In the
absence of an agreement between the parties, a royalty committee set up
by the government establishes the amount and kind of compensation. The
government also enjoys broad powers to delay, restrict or practice
patents in specific areas, such as those relating to nuclear power.
2.11
Infringement
2.11.1 Action for Infringement
Legal proceedings for patent infringement may be filed by a patent
owner, a joint owner or an exclusive licensee. Although one may not
file suit for patent infringement until after the patent has been
issued, the Israeli courts are permitted to find damages from
infringements occurring from any point following publication of the
patent application.
Patent infringement may take its form in any kind of commercial
utilisation or exploitation. A defendant is permitted, as a defence, to
challenge the validity of a patent. If the patent is found to be
invalid, then the court will find in favour of the defendant and may
revoke part or all of the patent.
Relief for patent infringement in Israel is granted in the form of
damages and injunction. Damages are ascertained based on the following
criteria: 1) actual damage caused to the plaintiff; 2) extent of the
infringement; 3) actual profits received by the infringer; and 4)
reasonable royalties which the infringer would have had to pay had there
been a license. Punitive damages are provided when the infringer
knowingly infringed on the plaintiff’s patent after receiving a warning
from the patent owner or exclusive licensee. This is one of the few
instances that Israeli law recognizes the right to receive punitive
damages.
2.11.2 Injunctions
A plaintiff in a patent infringement proceeding may request either a
temporary or permanent injunction. Usually, the plaintiff will apply to
the District Court for an interlocutory injunction until the main
proceedings can determine if and to what extent patent infringement
exists.
The controlling law in this area is found in the case
American Cyanamide vs. Hirshorn Gillerman
(C.A. 324/64, 19 P.D.(I) 62). In this decision,
the Supreme Court held that the requirements for interlocutory
injunctions for patent infringements are the same as those governing the
granting of interlocutory injunctions for all types of intellectual
property. In order for a plaintiff to obtain an interlocutory
injunction, he or she must show: 1) that the refusal to grant an
injunction may cause irreparable damage to the applicant; 2) that the
applicant has established a prima facie
case for ownership of the patent and
infringement of the patent by the defendant; and 3) that the balance of
convenience tilts in favour of the applicant. The Court added that in
most cases the balance of convenience will tilt in favour of the
applicant assuming that the plaintiff is able to establish both
prima facie
infringement and the possibility of resultant injury.
When seeking injunctive relief, the plaintiff must make a security
deposit in a sum to be determined by the court. This money will be
returned to the plaintiff only if the outcome of the main proceedings
are in his or her favour.
A defendant in infringement proceedings is permitted to raise any
defence that could have been submitted in opposing the original grant of
the patent. If the court accepts one such defence, the court has the
authority to order that patent to be fully or partially revoked. A
recent amendment to the Patents Law has made it clear that the defendant
is entitled to avail himself of such defences with no restriction as to
statute of limitation. In addition, standard affirmative defences are
available to a defendant in infringement proceedings, including the
plaintiff’s failure to file his infringement claim prior to the
expiration of the seven year statute of limitation, as well as laches
and unclean hands.
2.11.3 Alternative Remedies
In the event that a patent owner’s patent is invalidated, or the patent
owner otherwise lacks sufficient grounds to sue for infringement, the
patent owner may seek alternative relief under the Civil Wrongs
Ordinance (New Version) - 1968 on the basis of the tort of passing off
(see Section 5) or, possibly, under the Unjust Enrichment Law - 1979.
An additional remedy can be found in Israel’s customs law, which
provides for the detention of products that may infringe intellectual
property rights. This law is the equivalent of § 337 of the U.S.
Customs Law that allows patent owners to stop patent-infringing goods at
the border. Section 200 of Israel’s Customs Ordinance states that if
the customs director receives notification of apparently infringing
goods, he must order that they be held for 3 business days (under
special circumstances, they can be held for an additional 3 days). The
customs director must notify the owner of the goods of the detention.
The customs director must also notify the intellectual property rights
owner, and tell that person that he or she must post a bank guarantee
(in addition to the personal guarantee required by 7D of the Copyright
Ordinance or section 69A of the Trademarks Ordinance).
The detention of goods will be cancelled after 3 working days if the
guarantee is not posted, and after 10 working days if suit has not been
filed in court (under special circumstances, this latter period can be
extended by 10 more days). The bank guarantee must be enough to cover
the costs of the detention and of any damage caused as a result
thereof. The customs director must also provide the intellectual
property rights owner with samples of the detained goods so that
comparison assessments may be carried out at the expense of the rights
owner.
2.12
Recent Amendments
In early 1998, the Knesset passed an amendment to the Patents Law that
allowed patented inventions to be produced by non-patent owners on an
experimental basis in Israel before the patent for the original
invention had expired. The purpose of the amendment, initiated by the
Israeli pharmaceutical industry, was to streamline the transition from a
patented drug to a generic drug. The amendment stated that experimental
use by a third party of a patented invention will not constitute
“exploitation of an invention” and is thus not patent infringement, if
the third party is producing the drug as part of an attempt to obtain a
permit to market a product upon the expiration of the patent, if two
conditions are met: 1) the experimental use is for purposes of obtaining
a licence in either Israel or a country which permits such experimental
use for purposes of obtaining a permit before the expiration of a
patent; and 2) any product produced as part of the experimental use is
used only for the purpose of obtaining the permit. This latter
limitation also extends to the period after the patent expires, thus
preventing one from building stock in a patented drug under the guise of
experimental use only to release the stock in the generic drug
immediately upon expiration of the patent.
Due to the potential for watering down the rights of patent owners, the
amendment also provides for certain patents to have their terms extended
for up to five additional years. In order to qualify for this term
extension, the scope of a patent must be concerned with a pharmaceutical
preparation which is the subject of regulatory approval in Israel, and
an application must be made by the patentee or by an exclusive licensee
within sixty days of the date of the registration in Israel of the
pharmaceutical preparation in accordance with the Pharmacists’
Regulations.
The United States, the European Union, and major foreign pharmaceutical
companies opposed the amendment, claiming that it breached Israel’s
obligations under various international treaties. Israel responded by
stating that the “experimental use” falls within the “protected
exceptions” under the various treaties and therefore the amendment was
similar to existing law in the United States and Europe, and as such,
does not violate treaty obligations.
Therefore, Israel’s law remains that producing a patented drug will not
be patent infringement, if such production is solely for the purpose of
obtaining regulatory approval for the sale and/or use of the subject
matter of the patent after the expiry of the patent, whether in Israel
or in any other country having similar provisions.
Another recent amendment extends Israel’s implementation of the
international protection of a patent applicant’s priority rights when
filing under the Paris Convention for the Protection of Industrial
Property or under the Patent Cooperation Treaty, formerly available with
regard to applications filed in one of the Union countries also to those
filed in a country member of the World Trade Organization.
Finally, of direct relevance to Israel’s patent law and in particular to
the latest amendments dealing with the pharmaceuticals are the recent
changes to the Pharmacists Ordinance, 1981, which deal with the
registration, marketing, sale and parallel importation of
pharmaceuticals, as well as provision of requested information regarding
the manufacture, marketing and use of pharmaceuticals to governmental
officials of the Ministry of Health.
2.13
Parallel Imports
The Patent Law does not specifically deal with parallel imports of
patented products.
The difficulty in determining the law concerning parallel imports
derives from the implicit contradiction between the principle of the
protection of the rights of owners on the one hand, and the desire to
aid the consumer by promoting free competition on the other. This
latter desire has given rise to the “doctrine of exhaustion”, which
states that once a patented item is sold, the patent holder is no longer
entitled to block the item’s resale, it being deemed that the patentee’s
right is “exhausted” by such a sale.
The doctrine of exhaustion is thus a creature born of the clash of two
competing principles. Inherent in this clash is the question of the
extent to which one should be allowed to enjoy prevalence over the other
- in other words, to what extent the doctrine of exhaustion should be
applied.
There are two possibilities. The first is that the “market” should be
held to refer only to a particular domestic market, and that the first
sale by a patent owner of his product in that market should exhaust his
rights in relation to that market only. This is commonly referred to as
“domestic exhaustion”, and as such affords a higher level of protection
to the patent owner than the alternative formulation. This second
possibility is that the “market” should be taken to refer to the entire
world. Under such a doctrine, commonly known as “international
exhaustion”, a first sale anywhere in the world would exhaust the patent
owner’s rights over the product. Once the product would be placed on
the market by the owner, in whatever country, his patent rights would be
deemed to be exhausted, and he would be unable to prevent the re-sale of
the product by a purchaser, even into a different country.
The phenomenon of parallel importation is of course characterised by
precisely the latter situation – that a third party purchases the
owner’s product in one country (on the market of which it was placed by
or with the owner’s consent), and then places it on the market in
another without the owner’s consent, on the basis that the owner no
longer has any right to control the disposition of that particular
product. While this would be permissible under the “international”
formulation of the doctrine of exhaustion, this would not be so if the
doctrine were to be applied in its “domestic” form.
There had until recent years been no Israeli judicial pronouncement on
the question of the extent to which the doctrine should be applied.
Indeed, such rulings which had been made have tended in favour of the
consumer, the leading Israeli case in this area being
Ilan Lebowitz v. A. & Y. Eliyahu Ltd.,
44 (2) P.D. 309 (1989). This case suggested that the law in Israel
generally frowned upon limitations on parallel importation and the
granting of monopolistic powers or other restrictions on freedom of
competition.
However, a 1997 decision of the Tel Aviv District Court seemed to
indicate a new Israeli judicial direction in this area (though it should
be noted that, as a District Court decision only, the decision, even if
not appealed (and it was not), would, under Israeli law, be used for
guidance only, and would not be a binding precedent).
In
this case,
it was held that a party with an exclusive licence to exploit a patent
in Israel (whether as licensee or the owner of the patent), which is
duly registered at the Patent Registry, may, provided that it has not
done anything which would estop it from doing so, block the parallel
importation of the same product even when such product was purchased
outside Israel from a party legally entitled to sell it there.
The Lebowitz case, which concerns trademarks, was distinguished
on two grounds. The first, stated the judge in the case, is that there
are substantive public interest differences between patents and
trademarks.
She stated that the aim of a trademark is to protect the interest of the
public as consumers against deceit as to the product (such as an
inferior product bearing the trademark of a superior product). Under
trademark law, (see below) it is not a breach of a trademark owner’s
exclusive rights to sell an authentic product with an authentic
trademark, and there is nothing to prevent a trader from buying a
product from a manufacturer and selling it in competition, even into a
country where the manufacturer is an exclusive importer (Geigy –v-
Pazchem Ltd., CA 471/70).
By contrast, the aim of patent law is to grant a monopoly for a limited
time to the original inventor, in order to encourage technical
development and new products. “The law is based on a balance between
freedom of competition and other public interests, which under certain
circumstances are preferred over the freedom of competition principle.”
There is no justification in the area of trademark law for the
restriction of competition, given that even when a party who purchased
from a trademark holder is competing with that trademark holder, there
is no deceit of the public as to the source of the product.
The second ground for distinction was that the Lebowitz case
concerned the right of an exclusive distributor to prevent the parallel
importation into the territory for which it had the exclusive right of
the product for which it had the exclusive right. It was held there
that “an exclusive distribution right is a contractual right…not a
property right. It does not restrict everyone…its effect is only on
relations between the manufacturer and the distributor.”
This is not the case, stated the judge, with patent rights.
Registration in the Patent Registry creates a property right, as against
everyone, for the period of the patent.
Recently, though, this case, and a similar decision, were called into
question by a judgment of the High Court of Justice in
Bristol-Myers and others -v- The Ministers of Health
and Justice (HCJ 5379/00), handed down in
June 2001. The case concerned a petition by a number of major
pharmaceutical manufacturers against the legality of a 1999 amendment to
the Pharmacy Ordinance, which had the effect of, inter alia, increasing
the possibility of the parallel importation into Israel of
pharmaceutical products by certain bodies, thereby infringing upon the
intellectual property rights of registered importers and manufacturers.
The leading judgment noted the conflict of principles outlined above,
and that the question of whether parallel importation constituted a
breach of patent rights would depend on which formulation of the
doctrine of exhaustion was adopted. The judge noted further that the
current law in Israel was as stated in the two District Court decisions,
neither of which were appealed, namely that the “domestic” formulation
should prevail.
However, the judge quoted with approval from a recent decision of a
Swiss federal court, Kodak S.A. -v- Jumbo-Markt AG, in which it
had been stated, inter alia, that while the principle of patent
law may be to protect the patent-holder within the territory to which
the law applies, this principle in itself does not automatically lead to
the conclusion that one must follow the domestic doctrine of
exhaustion. The judge went on to note that the acts of the primary
legislator in making its amendments to the Pharmacy Ordinance might
indeed indicate a change of approach, and that “the current approach of
the legal system in Israel leans towards the international doctrine of
exhaustion.”
One should note that this could be seen as a somewhat odd approach –
while the point of the case was to examine the effectiveness of the
amendments in light of the existing body of patent law, the judge
reversed this approach and instead used the amendments to determine the
state of patent law, and even noted explicitly that he was doing so.
Nevertheless, and although the judge did say that for current purposes,
a final decision on the question of parallel imports and patents could
be left for another day, his opinion was to favour the international
doctrine of exhaustion. For this, and other reasons, the petition
against the amendments to the Pharmacy Ordinance was denied.
It is probably safe to say that in the wake of this decision, the law in
Israel as to parallel imports has been thrown back into a state of
flux. While Bristol-Myers has not entirely overruled the
previous District Court decisions, as it was not a decision of a
directly higher court (the Supreme Court was sitting as the High Court
of Justice, and not as the highest court of appeals), and moreover dealt
with the question only as part of its judgment of a larger issue, it
does, as noted by the leading judgment, potentially indicate a new
approach, and further clarification will have to await subsequent case
law.
2.14
Plant Breeders’
Rights
The
Plant Breeders’ Rights Law – 1973
gives plant breeders protection for the creation of new varieties of
plants. To a large extent, the Plant Breeders’ Rights Law follows the
provisions of the Patents Law.
In order to obtain protection, a plant breeder must apply for
registration in the Plant Breeders’ Register (which operates, unlike
other registers, under the auspices of the Ministry of Agriculture). A
plant variety is eligible for registration if it is new, sufficiently
uniform in its basic qualities, its basic qualities are stable, and its
description and characteristics remain unchanged after reproduction.
A plant variety is considered to be new if its multiplication material
was not exploited more than one year before the date the application was
filed, or if the plant variety was not published anywhere in the world
prior to the application date.
The law includes the details of the registration procedures, such as;
(filing an opposition and eligibility criteria), priority rules (first
to file), cancellation, the breeder’s rights (preventing others from
exploiting the registered plant of another), validity, compulsory
licences, plants bred during employment service, and infringement
proceedings (only the breeder may bring such proceedings and may be
entitled to an injunction and damages).
It is permissible for an Israeli resident or citizen to register a plant
that was bred outside of Israel. A breeder who has registered his or
her new variety of plant receives a breeder’s monopoly for 15 years.
2.15
Protection of
Integrated Circuits
The
Protection of Integrated Circuits Law – 1999
is the Israeli law that codifies the Treaty on Intellectual Property in
Respect of Integrated Circuits. The Protection of Integrated Circuits
Law, which came into effect on January 1, 2000, provides protection for
the topographical design of an integrated circuit produced by a citizen
or resident of Israel, or, by virtue of an order implementing TRIPS
agreement, of a WTO member country, or by an individual or corporation
maintaining an active business operation for such production in Israel
or in a WTO member country.
In order to obtain protection, the topography must be original, meaning
that it either was independently developed (and not commonly used at the
time by others) or the integrated circuit is made up of components and
connections that are commonly used, but the combination is itself
original. Other aspects of the Protection of Integrated Circuits Law
deal with infringement, period of protection (10 years from
commercialisation or 15 years from creation, whichever is earlier),
transfer and compulsory licences (which are issued by the Registrar of
Patents after viewing the integrated circuit as a patented invention for
purposes of determining whether a compulsory licence is warranted)
3) Copyright Law
3.1
Statutory Source
The area of copyright law in Israel is governed by two British
statutes, Copyright Act, 1911, as amended, and Copyright Ordinance,
1924, as amended, which were made applicable in 1924 during the period
of the British Mandatory Administration before the establishment of the
State of Israel in 1948. Both the Act and the Ordinance were
promulgated long before the major advance of the technology introduced
totally new media such as television, video and audio recordings and the
Internet. The statutory provisions have since been amended to reflect
the changing needs in the sphere of arts and entertainment industry, and
a comprehensive reform of copyright law is under discussion in the
Israeli legislative commission. In developing Israeli case law on
copyright, Israeli courts have extensively drawn on English case law and
are increasingly turning to developments in US case law.
Recent amendments to the copyright statutes strengthen the protection
of copyrighted works, in particular through imposing more stringent
penalties for infringement. Specific provisions have been added
regarding the copyright protection of computer software. Mere
possession of an infringing copy of a work has been made infringement.
Amendments to the copyright statutes and orders issued by the Minister
of Justice by virtue of his powers under these statutes implement
Israel’s obligations as a signatory to the international conventions on
copyright protection.
3.2
Copyright – What Work is Protected
Under the Copyright Act, copyright subsists in any original
literary, dramatic, musical and artistic work first published in Israel
or, if unpublished, created by a national or a resident of Israel. A
work concurrently published in Israel and other countries is deemed to
have been first published in Israel. For the purpose of determining the
date of the first publication, a work published in a number of countries
within 30 days of the first publication is deemed to have been published
concurrently.
Copyright is created automatically by the fact of publication or
creation of copyrightable work. Unlike patents which require
registration and unlike trade marks which, unless registered, are
entitled to a relatively limited protection, the copyright requires no
formal registration procedure in order to come into being and no formal
acts for its maintenance during its term. In the absence of a
registration procedure under Israeli law, it is a recommended procedure
for authors to document the date of their work. Certain organizations
in the entertainment industry maintain “unofficial” proceedings for
preserving a first copy of a work, e.g.,
a recording of a musical work, primarily for evidentiary purposes.
Copyright covers a broad range of works, such as manuals, textbooks,
lectures, telephone directories; functional products, such as clothing,
jewellery, furniture, are accorded very limited protection. If a work is
eligible for protection as industrial design, it is not copyrighted.
Works of architecture are accorded copyright protection only if they are
architectural “masterpieces”.
Computer software for copyright purposes is treated like a literary
work. The criminal offences and torts relating to the use of computer
software, in particular interference with computer material, have been
addressed in the Computers Law, 1995.
2.1
Foreign Work
As Israel is a signatory to the Brussels version of the Berne
Convention for the Protection of Literary and Artistic Works (the “Berne
Convention”) and has adopted its provisions into its domestic law,
Israeli law extends to any work first published in a state signatory to
the Berne Convention or to any unpublished work created by a national of
such a state, the same copyright protection as if it were first
published in Israel or created by a national of Israel.
Israel is also a signatory to the Universal Copyright Convention,
Geneva, 1952, and extends protection to works created in a foreign state
which is not a signatory to the Berne Convention but is a signatory to
the Universal Copyright Convention. Unlike the Berne Convention, the
Universal Copyright Convention requires that a work, in order to qualify
for copyright protection, bear a © sign.
Israel is a signatory to the Convention for the Protection of Producers
of Phonograms against Unauthorized Duplication of their Phonograms,
1971, and extends protection to foreign sound recordings made in a
foreign state which is a signatory to the Convention.
3.3
Copyright Owner’s
Rights
3.3.1
Economic Rights
The copyright confers on its owner the exclusive right to produce or
reproduce the work in any material form, to publish and distribute the
work, to lease it, publicly to perform the work, to prepare derivative
work and to convert the work from one form to another (e.g.,
translation, novelisation of non-literary work, dramatization of
non-dramatic work).
3.3.2
Moral Rights
The author of a work enjoys certain “moral rights”: he is entitled that
his work shall bear his name; he is entitled not to have his work
distorted, mutilated or altered, or to be subject to other derogatory
action likely to harm his reputation, his honour or the value of the
work.
An author’s moral rights are separate from the economic rights in the
work, and the author retains moral rights in the work when the economic
rights in the work belong to another person or are transferred to
another person, in whole or in part.
3.4
Term of Copyright
Protection
The term of copyright under Israeli law is the lifetime of the author
plus 70 years. In cases of co-authorship, the period of 70 years begins
to run upon the death of the last surviving author.
Since there is no special statutory provisions with regard to the term
of protection for motion pictures and television programs, such works
will be treated, for the purposes of determining the term of protection,
as collective works.
The term of copyright of governmental publications is 50 years from the
date of the first publication.
3.4.1
Foreign Work
The term of protection granted to a foreign work in accordance with the
Berne Convention will not exceed the term of protection granted to such
work under the laws of the foreign state where it was published or
created.
Foreign sound recordings made in a foreign state which is signatories
to the Convention for the Protection of Producers of Phonograms against
Unauthorized Duplication of their Phonograms, 1971, are protected, if
published, for the same term as Israeli sound recordings, i.e., fifty
years from the date of the making of a master recording, and, if
unpublished, in accordance with the law of the state of nationality of
the author.
3.5
Ownership
3.5.1
Author the First
Owner
The first owner of the copyright is the author of the work. Since
there is no copyright in ideas, the person who proposes a subject or an
idea for a work is not the copyright owner.
Since Israeli law does not specifically address the ownership of
copyright in motion pictures and there is no statutory presumption of
ownership of a motion picture by the executive producer, absent a
contractual stipulation to the contrary, a motion picture will be deemed
a joint work of its various creators.
3.5.2
Commissioned Work
The person who orders or commissions a work is not the copyright owner,
with the exception of the case where the work ordered in return for
consideration, constitutes an engraving, a photograph, or a portrait, in
which case the person who commissioned the work would be its owner, in
the absence of a contractual stipulation to the contrary. With respect
to photographs, the owner of the negative at the time of making the
photograph is the owner of the work and its copyright.
Absent a contractual stipulation to the contrary, the rights of a
person who commissioned a work will be limited to a license to make such
use of the work as is necessary for the purpose from which the work was
originally commissioned.
3.5.3
Work by Employee
The copyright in a work created by an employee created during and as a
result of his employment belongs to the employer, absent a contractual
stipulation to the contrary or the employer’s waiver of his rights.
Original works done by or under the directions of the government are
the government’s property.
3.6
Assignment and
Licensing of Copyright
The owner of a copyright may assign all or some of his rights (for
example, the right to convert into another form or to translate) or may
grant an exclusive or non-exclusive license to use all or some of his
rights. An assignment may be made, or a license granted, for a certain
country or venue, or for a certain period of time.
An assignment of a copyright in the work or the grant of a license to
exploit a copyright must be in writing and signed by the owner of the
right or his duly authorized agent, but no further formalities are
required.
3.7
Infringement
3.7.1
What Constitutes Infringement
Infringement of copyright in a work occurs whenever a third party
performs without the copyright owner’s permission any action which the
owner of the copyright had the exclusive right to perform. There is no
requirement that the owner’s permission be in writing.
The infringement must relate to a substantial part of the copyrighted
work, that is, to a significant part of the work, which needs not be
large. In proving that a later work infringes on the protected
elements of an earlier work, the court will decide, as a question of
fact, whether in the light of all circumstances of the case the
similarity between the allegedly infringing work and the protected work
is substantial enough to warrant a conclusion of infringement.
3.7.2
Exceptions to
Infringement: Fair Dealing
Exceptions which do not constitute infringement include fair dealing
with the work for private study, research critique, review or newspaper
summary, publication of short passages from literary works in a
collection intended for teaching purposes at schools, and publication in
a newspaper of a report of a lecture or political address.
Recording
and copying a work for non-commercial private or home use does not
constitute infringement of either copyright or performers’ rights. The
government compensates the owners of copyrights and performance rights
for the loss of income caused by such recording and copying for private
and home use through the payment of royalties to the representative
royalties companies which represent the majority of the owners of
copyrights and performance rights.
Where a third party has unintentionally created a work identical or
similar to a copyrighted work, such act will not constitute an
infringement since, contrary to patent law principles, copyright
infringement does not occur unless the infringing party
knowingly imitated a
protected work. Therefore, the plaintiff will not be entitled to any
remedy other than an injunction.
3.8
Infringement Proceedings
In a civil action for the infringement of copyright, the work will be
presumed to be protected by copyright and the plaintiff will be presumed
to be the owner of the copyright, unless the defendant raises the issue
of the existence of copyright or the plaintiff’s title. For evidentiary
purposes, a rebuttable presumption of authorship holds that the author
is the person whose name is indicated as the author.
Only the owner of copyrights – and not the author of the copyrighted
work - may initiate infringement proceedings. Thus, where a copyright
has been assigned, the assignee is the one entitled to bring
infringement proceedings. A co-owner of copyrights may bring a suit
without the need to join the other co-owners. Infringement proceedings
can be brought against anyone who directly or indirectly breached or
authorized the breach of copyrights.
3.9
Remedies for Infringement
An owner of the copyright who has been injured by the copyright
infringement is entitled to all civil remedies available, such as an
injunction, damages, and accounting for profits. The statute of
limitations period for infringement proceedings to be initiated is three
years from the date of the infringement.
3.9.1
Damages
A copyright owner will recover damages which represent his proven
losses. Absent proof of the losses caused by the infringement, the
owner of copyright may be awarded statutory compensation in the sum of
$2,500 to $5,000 for each case of infringement (not each infringing
copy).
For the infringement of moral rights, the court may award damages at
its discretion, even absent a showing of any pecuniary loss.
3.9.2 Injunctions
The owner of the copyright may obtain temporary and subsequently
permanent injunctions against the infringing party, in addition to
damages. There is no need to prove losses in order to obtain an
injunction. The court may grant an injunction or refuse to do so, in
its discretion. With respect to temporary injunctions, the court will
be guided by the same principles that govern the granting of injunctions
under general law, including the test of the balance of damage to the
plaintiff and inconvenience to the defendant.
3.9.3 Accounting
A plaintiff may call the infringing defendant to account for the
profits resulting from the infringement. Such remedy may not be granted
in addition to damages.
3.9.4
Recovery or
Destruction of Infringing Copies
All infringing copies of any work in which copyrights subsist and all
plates used or intended to be used for the production of such infringing
copies, are deemed to be the property of the owner. He may initiate
proceedings to recover them, have them seized or destroyed, and/or
excluded from importation. The court may direct at the end of the
proceeding that assets produced as the result of an infringement of
copyright or used in the process of infringement be destroyed.
3.9.5
Limitation of Remedies in Respect of Works of Architecture
With regard to infringing works of architecture, the court will not
issue an injunction against the continuation of construction of such
work, nor order the destruction thereof. The plaintiff may not recover
the property in such infringing work. The only remedy available to a
plaintiff in respect of a work of architecture is damages.
3.9.6
Declaratory Judgment Regarding Infringement
Any person may request the court to issue a declaration stating that a
given action is or is not an infringement of copyright.
3.9.7
Limitation of Remedies Against an Innocent
Infringer
In case where the defendant proves that that at the time of the
infringement he did not know and had no reason to suspect that the work
was protected by copyright, the court will not grant any remedies except
for an injunction.
Anyone who knowingly makes, sells, leases, offers for sale or lease,
distributes, publicly exhibits, imports, or makes any plate for making
infringing copies of a protected work, or causes the public presentation
of a protected work, for commercial purposes, commits an offence
punishable by imprisonment of up to three years and substantial fines.
4) The Rights of Performers and Broadcasters
4.1
Performers’ Economic Rights
The
Performers’ and Broadcasters’ Rights Law, 1984
grants any performer the right to prevent others from recording his
performance in any manner, from making copies of a recording of such
performance, from broadcasting it in any form and from selling, leasing,
distributing, importing and holding copies of a recording of his
performance for commercial purposes, without his authorization. No
authorization is required for fair use for purposes of private study,
non-profit instruction, research, criticism or newspaper summary. The
performer’s own right to do any of such acts is subject to third
parties’ copyrights in the work performed and co-performers’ rights in
the performance.
A performer is entitled to adequate royalties in respect of playing or
presenting his performance, payable to a royalties organization which
represents the largest number of performers in the country.
There
is no restriction in Israeli law limiting the assignability of
performers’ rights.
4.2
Performers’ Moral Rights
A
performer enjoys certain moral rights, such as the right to have his
name stated with every performance and on every recording of his
performance or copy thereof and to have the integrity of his performance
or to any recording of his performance or copy thereof preserved.
4.3
Application
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