Securing Patent Value for Israeli Medical Technology Companies

by White & Case LLP
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Israel is a leader in medical technology and life sciences innovation. Though the life sciences industry in Israel is young, it is growing fast: in the last 15 years the industry has expanded from just over 180 life sciences companies in 1996 to over 1,000 by 2010.[1] With over half of these companies located in the medical device sector, Israel leads as the number one country for medical device patents per capita.[2]

Small- and medium-sized medical technology companies in Israel looking to capitalize on growth opportunities need to ensure that their technologies are protected in the global marketplace. This requires diligent attention to patent prosecution and enforcement in the US, especially with the recent patent law changes brought on by the America Invents Act (AIA), in force as of March 16, 2013.[3]

Engage in early patent planning and careful patent enforcement strategy.

Recently announced large-scale acquisitions of Israeli technology companies have had an energizing effect on the technology sector in the country and have underlined the importance of a company's patent portfolio to its acquisition, investment, and business expansion prospects.[4] For those Israeli medical technology companies with an eye toward acquisition by a US-based company, or for those companies seeking to conduct business in the US, early patent planning is crucial. By obtaining and then enforcing patent rights in the US, a company is securing its future value for potential buyers, founders, investors and employees. Without careful patent planning, companies run the risk of inadvertently creating invalidating prior art.

In May 2013, a federal judge in New York overturned a jury verdict in favor of Medisim, an Israeli medical device company producing non-invasive thermometers. Medisim had brought a patent infringement suit against its former US distributor, Colorado-based BestMed.[5] In overturning the verdict, not only did the court reverse an over three million dollar judgment in favor of Medisim, but it found evidence that Medisim's previous thermometer model, the FHT-1 under US Patent No. 6,280,397, qualified as prior art and anticipated its own later model, the FHT-1A under US Patent No. 7,597,668.[6] In holding the later '668 patent invalid, the court relied on the similarity of the two products, as described in both oral testimony and in the company's own documents.[7] Attentiveness to prior art in the patent prosecution process and careful planning of patent enforcement strategies may help diminish these types of outcomes. Especially when engaged in business in the US, whether through suppliers, distributors or other arrangements, diligent attention should be paid to safeguarding US patent rights.

Consider adopting policies and procedures to prevent leaks of sensitive information.

Under changes brought on by AIA, small entities may be disadvantaged if they do not have the resources to immediately file under the new first-to-file system. Because of this, emerging medical technology companies should consider adopting policies and procedures preventing the leak of confidential information to potential collaborators in the R&D process. This is especially important for Israeli medical technology companies as they increase their reach into the US and experience a corresponding increase in exposure for their technologies under R&D partnership programs, such as those made bilaterally between Israel and the states of New York, Massachusetts and, most recently, South Carolina.[8] Policies and procedures controlling the flow of sensitive information can prevent a race-to-file by a competitor or collaborator. Additionally, companies should engage with counsel to deploy necessary confidentiality or non-compete agreements with employees or partners, and should ensure that human resources and external relations staff are properly trained to prevent the flow of sensitive information to those outside the company.

Be aware of non-US activities.

With the expanded definition of prior art under AIA, companies must be cognizant of not only existing patents or publications outside the US, but also of any item outside the US that is in public use.[9] Specifically, a medical technology company's presentation at a trade show, a medical device manufacturer's road show, or a publicly made investor pitch occurring outside US soil are all activities that may now be interpreted as potentially invalidating prior art. While the one-year grace period under AIA still stands, any public exhibition or sale of a medical device by a company—in Israel or elsewhere outside the US—falling beyond the one-year grace period could be an impediment to patentability.


[1]—STATE OF ISRAEL MINISTRY OF INDUSTRY, TRADE, AND LABOR, LIFE SCIENCES IN ISRAEL 3 (2011).
[2]—Id. at 4.
[3]—Leahy-Smith America Invents Act of 2011, 35 U.S.C. §102 (2011).
[4]—For example, the announcement of Google's acquisition of Waze, an Israeli social mapping and location data company, for a reported sum of over $1 billion, has emphasized the value of a company's technology and patent portfolio. Waze Could Lead Way to Israeli Internet Growth, USA TODAY (Jul. 4, 2013, 10:34 AM):
http://www.usatoday.com/story/tech/2013/07/04/waze-could-lead-way-to-israeli-internet-growth/2489377.
[5]—Medisim Ltd v BestMed, LLC, No. 10 Civ. 2463 (SAS), 2013 BL 129139 (S.D.N.Y. May 15, 2013).
[6]—Id. at 77.
[7]—Id. at 38, 51.
[8]—South Carolina-Israel Agreement Announced, THE WALL ST. J., May 8, 2013, http://online.wsj.com/article/PR-CO-20130508-914879.html.
[9]—Leahy-Smith America Invents Act of 2011, 35 U.S.C. §102 (2011).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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