News from Abroad: Recent Amendments to the Israel Patent Statute

by McDonnell Boehnen Hulbert & Berghoff LLP

Pulling the Pace of Prosecution from the Purview of the Applicant

[author: Daniel Feigelson]

Israel FlagMost readers of this blog are familiar with the situation in which you or your client files a patent application before the invention is ready for commercialization, e.g., the chemical process described therein is still being optimized, or FDA approval will only occur in the (distant) future, or there's not enough investment capital yet to develop the product to a stage ready for launch.  If you're only filing in the USA, you can request that the application not be published, and thus preserve some of your competitive advantage; but let's suppose that that’s not an option here.  So at 18 months from priority, your application publishes.

Now suppose that a competitor sees your published application and submits prior art to the patent office, with comments explaining the relevance of the prior art.  This hasn't been possible in the USA until now, but in accordance with the AIA and the new rules just published by the USPTO, it will become a possibility as of September 16; and for many years it has been possible to make such submissions before the EPO, anonymously.  So although you're not thrilled with the idea of third party participation in the prosecution of your patent application, it's not the end of the world either.

Let's further suppose that the examiner relies on some of the arguments submitted by your competitor and issues an OA in which he says the claimed invention is obvious.  Now let's throw a wrench or two into the works.  First, let's take away your ability to obtain extensions to respond.  If the applicant wants to present evidence of non-obviousness, for example comparative test results, the lack of extensions may put a crimp in those plans, necessitating the premature filing of less-than-ideal responses and ultimately the filing of continuations.  But let's complicate things more:  let's say that instead of the application having waited around the USPTO until its turn for examination arrived -- normally a period of a year or more, time that you could have put to use commercializing the invention -- the examiner picked it up for examination almost immediately after publication.

Moreover, when, several years and several continuation filings later, you finally get a Notice of Allowance and pay the issue fee, a new type of pre-grant inter partes proceeding has been enacted:  the pre-grant opposition.  So the same competitor who (anonymously) submitted prior art now opposes the grant of the patent, during which time you don't have a patent with which to obtain injunctions.  Years later, after the PTO sides with you and all appeals have been exhausted, the patent finally issues -- but there's no provision in the statute to adjust the term of the patent for the delay during the pre-grant opposition period.

The enactment of the AIA notwithstanding, the situation in the USA isn't as bad for patent applicants as the one described above.  But the foregoing scenario encapsulates the current situation in Israel following the adoption on July 9 of a set of amendments to the Israel patent statute.  Pre-grant oppositions, and lack of patent term adjustment to compensate for reduction in the 20-years-from-filing patent term due to patent office delays or delays in grant due to oppositions, have been a part of the patent scene in Israel since the current statute was enacted in 1967.  The principal changes wrought by the current batch of amendments are (a) 18-month publication, (b) submission of prior art by third parties, and (c) third party requests for expedited examination of patent applications.  Taken together with the existing pre-grant opposition procedure, these changes, especially the last one, will make Israel an excellent forum in which to experiment with competitors' patent applications, particularly in the pharmaceutical field.

The provisions for 18-month publication are uncontroversial; as Israel has been a member of the PCT since 1996, early publication of locally filed applications has been long overdue.  18-month publication is accompanied by a provision similar to that in US law, namely that to the extent a granted claim is substantially the same as a claim published at 18 months, after grant of the patent the patentee may sue for infringement retroactively to the date of the publication and recover a reasonable royalty for infringement that occurred between publication and grant.  This represents a change from the law in Israel until now, in which the patent statute provided no recourse for infringing activities that occurred prior to grant of the patent.  PCT applications that enter the national phase are to be published within 45 days of national phase entry, and although strictly speaking this should apply to applications that enter the national phase before the 18-month period has passed, in a recent announcement the ILPTO indicated that it would only publish national phase applications after the PCT application itself is published, i.e., after 18 months from the earliest priority date.

The provisions for submission of prior art by third parties were added to the bill primarily as a result of lobbying by the Israeli generic drug industry, which includes both companies that sell only locally as well as companies with a global reach.  However, due to opposition by the Israel PTO, which did not want to be inundated with third-party comments on prior art, the window for submitting such art is fairly narrow:  such requests may only be filed within two months from the date on which the applicant replies to the ILPTO’s initial request for publications cited in corresponding applications.

The real mischief in the amendments comes with the third party requests for expedited examination of patent applications (TPREEs).  Israel already had a mechanism for applicants to expedite examination of their applications (for example due to the inventor/applicant's age or poor health, infringement of the invention or the applicant's imminent launch of a product).  The idea to extend the ability to make such requests to third parties was the brainchild of the generic pharmaceutical lobby, which asserted that with the adoption of 18-month publication, its members would be left in legal limbo, knowing what the application claimed and possibly being on the hook for infringement of those claims, but not knowing what claims would eventually be granted (and thus what activities would be precluded).  By enabling TPREEs -- so went the proponents' reasoning -- third parties likely to be affected by the patent can ascertain earlier than they otherwise would the activities in which they may and may not engage.

And so was born a new section of the statute (19A(c)) that in unofficial translation reads as follows:

(c)    A person who is not the applicant, is not connected to the applicant does not act on his behalf, may submit to the Registrar a reasoned request, accompanied by a declaration to support the facts, for expedited examination of an application that has been published under section 16A [i.e. 18-month publication – DJF], if one of the following conditions is fulfilled:

(1)    There is a basis for a suspicion that examination of the patent application in accordance with the order in which it was filed will cause the applicant for expedited examination in accordance with this sub-section, who deals in the field of the invention, to defer development or production of a product or process that is claimed in the patent application;

(2)    the time that has passed since the submission of the patent application to the PTO under section 15 or its entry into the national phase under section 48D is unreasonably long, and included in this, is significantly longer in comparison to the time that has transpired until the commencement of examination of other applications of the same class;

(3)    the public good;

(4)    there are special circumstances that justify it.

Even upon first reading, many readers will no doubt have questions regarding the exact meaning and scope of some of the wording of 19A(c), e.g., what does it mean that a party is "not connected to the applicant."  Nevertheless, since the whole point of a patent is to be able to exclude others from making or using the claimed invention, it's clear that almost anyone who competes with the applicant will have standing to file a TPREE, since that third party will be able to say with a straight face that it has to defer the development or production of a product or process while the application is being examined.  The upshot is that if you have a competitor in Israel -- and why would you file a patent application in Israel if you didn't have a competitor here? -- that competitor will probably be able to request that your application be examined immediately.

Moreover, if the PTO has granted the TPREE, new section 19A(e) says that no extensions will be given to the applicant to respond to OAs and the like, "unless the Registrar found that the extension was necessary for reasons that neither the applicant nor his attorney had control over or the ability to prevent."  This is in contrast to the present situation, in which up to 15 months of extensions may be obtained during ex parte prosecution without a show of cause.

So now patent applicants in Israel may be at the mercy of their competitors when it comes to controlling the timing of patent prosecution.  That may force applicants to spend resources on patent prosecution in a manner different than they had planned to, and possibly to disclose information earlier than they would like to (or even to disclose information that they had planned to keep secret altogether).

Where things have the potential to move from mischievous to insidious is when the TPREE is combined with a pre-grant opposition.  Unlike the poorly-named "inter partes reexamination" in the USA, in which the requestor's participation is limited, and in contrast to post-grant oppositions at the EPO in which there is almost never live testimony, pre-grant patent oppositions in Israel are full-blown inter partes proceedings, in which direct evidence is offered by way of affidavit or expert opinion, with the affiant or expert being subject to cross-examination in a hearing at the ILPTO.  The real utility of TPREEs is thus not to facilitate the speedy grant of a patent, but to enable the opposition to begin earlier.  For Israeli companies that operate globally, this will provide an opportunity for a sneak peak at the patentee's arguments and data, in a relatively low-cost manner (discovery in oppositions is far more circumscribed than in court proceedings in the USA) so that when the time comes to do battle in the jurisdictions that matter -- the USA and the EU -- the Israeli companies will be better prepared.

Unlike the other amendments, the provisions for TPREEs will not take effect until January 12, 2013, and the statute does allow for a fee to be set for a TPREE.  However, even if the fee is set relatively high by local standards -- say on the order of $10,000 -- it is expected that many, if not most, applications filed by innovator pharma and biotech companies will be subject to such requests.

However, it is also expected that the TPREE provisions will be subject to legal challenge.  To give one example, Israel's Supreme Court, acting in its capacity as High Court of Justice (a court of first instance set up by the British to deal with administrative law in Mandatory Palestine, now perpetuated in the form of the Israel Supreme Court which also sits as the HCJ) has determined that the right to property is a fundamental right.  A challenge to the TPREE may therefore be advanced on the grounds that the ability to control the rate of prosecution of one's patent application is such a property right, since patent prosecution involves the allocation of capital and resources.  Another example of a likely legal challenge arises from the fact that nothing in the amendments explicitly requires the third party requestor or the ILPTO to notify the applicant that a TPREE has been filed, let alone to give the applicant an opportunity to respond to the request.  There is another section of the statute, section 159, that could be read as giving the applicant the right to respond, but if the ILPTO decides that that section doesn't apply here, the TPREE amendment is likely to be challenged as denying due process.  (If the ILPTO decides that section 159 does apply, look for a third party requestor to challenge the ILPTO's interpretation.)

Even if the TPREE provisions withstand Supreme Court scrutiny, there are steps that applicants may take to minimize the likelihood that their applications will be subjected to a TPREE.  To mention an obvious one, an applicant could file an application in Israel with a set of claims that are fully supported by the specification, but concomitantly file a preliminary amendment that reduces the number of claims to one very narrow claim.  This would limit the ability of third parties to file TPREEs on the grounds that examination of the application will "defer development or production of a product or process that is claimed in the patent application."  While it wouldn't eliminate the other three grounds for making a TPREE, those grounds will likely be more difficult to demonstrate.  The applicant would then be able to re-introduce the canceled claims later, once substantive examination has commenced.

Experienced patent prosecution practitioners will no doubt appreciate other ways, short of abstaining from filing in Israel, to lessen the likelihood of a TPREE being filed or granted.  That's important, because the antipathy to patents that seems to be increasingly fashionable in the USA hasn't yet taken root in Israel.  Although the present amendments raise the risks to the applicant during the patent procurement process, they don't lessen the value of an issued Israel patent:  once parties have patents in hand, Israeli courts are still willing to enforce them.

It is unfortunate that during adoption of the TPREE provisions, the discussion in the Knesset committee focused solely on the pharmaceutical industry, as if there are no other industries that could be adversely affected by the TPREE provisions, which appear to be a uniquely Israeli invention.  While Israel has produced only a handful of new drugs of its own but is home to a thriving generic drug industry that will not be harmed by the TPREE provisions (and only stands to benefit from these in combination with pre-grant oppositions), Israel is also home to many start-ups and many high-tech companies, a reflection of the creativity and smarts that abound in Israel.  Enabling competitors to speed up the rate of prosecution of those companies' patent applications may lead to sub-optimal or even no patent protection for those companies' innovations, ultimately resulting in less innovation, non-growth and non-creation of jobs, and lower tax revenues than the state would otherwise have had.

Mr. Feigelson is a practitioner with 4th Dimension IP and the author of the America-Israel Patent Law blog.


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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