1 February 2012Jurisdiction reportsNahum Gabrieli

Unjust enrichment: a knotty problem

Patents and unjust enrichment

Merck & Co sued Teva Pharmaceutical Industries in the Tel Aviv District Court, alleging that the defendant exploits its Fosalan medicine for the treatment of osteoporosis, which is subject matter of an Israeli pending patent application. The suit alleges that Teva is manufacturing and distributing medicine which constitutes an absolute imitation of Fosalan.

The application was examined, accepted by the Israeli Patent Office and published for opposition. The defendant lodged oppositions against the application and the opposition proceedings are pending.

In view of the fact that a patent application cannot be ‘infringed’, the plaintiff based its action on the grounds of unjust enrichment, contending that the defendant is unjustly enriched by the manufacture and distribution of its generic imitation of Fosalan.

Within the framework of the action, the plaintiff requested the District Court to issue interlocutory injunctions against the defendant, with a view to stopping the exploitation of the invention. The District Court dismissed the interlocutory applications and the plaintiff filed an application for leave to appeal to the Supreme Court, which decided to treat the application as an appeal.

The question which had to be decided was whether an applicant for a patent may stop the exploitation of his alleged invention during the interim period between the publication of the application and the grant of the patent. Th e Patents Act provides that an action for infringement may be fi led only aft er a patent has been granted and, further, that the patentee is entitled, once the patent has been granted, to damages in respect of the infringement retroactively from the date of the publication of the acceptance of the application.

In prior decisions of the Supreme Court, it was ruled that as a matter of principle, a relief under the Unjust Enrichment Law may be granted also in cases of intellectual property (IP) where the legislation relating to IP does not provide for a remedy against an alleged infringer.

However, the Law of Unjust Enrichment provides that no relief may be granted where another act includes provisions covering the subject matter. Further, it was decided that relief granted under the unjust enrichment cause of action should not create monopolistic rights.

Analysing the matter, from the point of view of both the Patents Act and of the Law of Unjust Enrichment, the Supreme Court came to the conclusion that the Patents Act provisions quoted above constitute a conclusive arrangement balancing the interest of encouraging inventors on the one hand, and the public interest of free competition on the other hand, specifically where the interest of the public is to receive generic medicine which is much cheaper than the patented alternative.

In accordance with this balance, no injunctive relief against the exploitation of an alleged invention during the period between the publication of the application and the grant of the patent may be granted. Further, since the application is under opposition, it is not certain that the patent will be granted, so it cannot be said that the defendant benefits from an ‘asset’ owned by the plaintiff, as required by the Law of Unjust Enrichment.

The remedy for the applicant is that if a patent is granted, it may obtain an award of damages retroactively from the date of publication.

This decision finally settles a question that was debated in Israel for more than a decade: whether, and to what extent, an invention may be protected by remedies under the Law of Unjust Enrichment.

The decision answers this question loudly and clearly. The only means to prevent unauthorised use of an invention is a granted patent. An inventor may of course try to protect his invention as a trade secret, with all the risks involved in such a course of action.

Contributory infringement in copyright

The Supreme Court decided an appeal made by the Hebrew University in Jerusalem against a book publisher and others, setting a precedent regarding the liability of parties who do not directly infringe copyright, but are indirectly involved in such infringement.

The book publisher published a book which was copied in full and duplicated by one of the defendants as a part of a reference book for students and sold by him on university premises. The publisher sued the defendant who had copied and duplicated the book for direct infringement, and the university for contributory infringement.

The District Court accepted the publisher’s lawsuit, determining that copying and duplicating the book was a direct infringement of the publisher’s copyright. It further ruled that the university is liable for contributory infringement of the publisher’s copyright and should pay 30 percent of the damages awarded to the publisher.

This judgment is the first time liability contributory infringement of copyright has been recognised, and the principles it sets out could result in many more lawsuits trying to attribute the contributory liability to the university for direct copyright infringements carried out on its premises. Therefore the university appealed.

In its precedent-setting judgment, the Supreme Court decided that the doctrine of contributory infringement should be recognised in the field of copyright, as it has been in relation to patents. The court decided that while patent law is not identical with copyright law, they are branches of the same family and it is possible that one of them would affect the other, carefully taking into consideration the differences between them.

"THE IMPLEMENTATION OF THE MADRID PROTOCOL SYSTEM INTRODUCED THE MULTI-CLASS APPLICATION INTO THE ISRAELI SYSTEM, ALLOWING APPLICANTS TO INCLUDE ANY NUMBER OF CLASSES IN ONE APPLICATION."

The court weighed the considerations involved in this field and tried to balance between the public interest of promoting collective knowledge and not restricting the access of the public to copyrighted works on the one hand, and on the other hand the private interests of the author and the idea that authors should be rewarded for the efforts and resources invested in producing the work.

After weighing the above considerations, the court concluded that it is inappropriate for a party that contributed substantially to the infringing acts and possibly benefited from them, to escape liability for the infringement.

Therefore the court decided that the doctrine of contributory infringement should be applied in Israeli copyright law.

There are three cumulative conditions for the existence of contributory infringement: first, the actual existence of direct infringement of copyright; second, the contributory infringer’s knowledge of the direct infringement; and third, an actual and substantial contribution to the act of infringement.

In this specific case, the Supreme Court found that while the first two conditions may have been proved before the District Court, the third condition was not fulfilled.

Regarding the third condition, the court found that the university did not promote the infringement, it did not solicit students to commit such acts of infringement and did not encourage them to do so. Its only contribution to the act was that it did not prevent the infringement nor actively stop the infringement which took place on its premises.

The court found that such an omission does not constitute liability for infringement, saying that it is doubtful whether the university can effectively control the actions of the students on its premises and that imposing such a liability is impossible and would burden the university with absurd costs.

This judgment of the Supreme Court is a very important one and although the university was found not to contribute to the infringement in this case, applying the doctrine in copyright law would make it possible to impose liability for contributory infringement on other parties in appropriate cases and obtain a more efficient enforcement of copyright against infringers.

The Madrid Protocol

Israel decided to join the Madrid Protocol a decade ago and enacted the necessary amendment to its Trademark Ordinance as early as 2003. The amendments did not come into force until September 2010, when a notice was issued by the Minister of Justice. Of more than 80 members of the Madrid Protocol, only seven countries operate a paperless system and the Israeli Trademark Office’s (ILPTO’s) insistence on making all the necessary preparations for developing such a system caused most of the delay.

Now that the system has been up and running for more than a year, senior officials at the ILPTO report that it is a big success, while the paperless system operates smoothly and allows the office to handle a large number of international trademark applications designating Israel.

According to data supplied by the ILPTO, around 40 percent of the total number of trademark applications handled by the ILPTO are international applications filed by foreign applicants through the World Intellectual Property Organization, designating Israel. This is a very high percentage achieved in a very short time.

This means that a large portion of the foreign applicants who filed national applications in Israel in the past are now using the Madrid Protocol system instead.

The implementation of the Madrid Protocol system introduced the multiclass application into the Israeli system, allowing applicants to include any number of classes in one application. As a result of the multi-class system, there are fewer applications, but the ILPTO reports a substantial increase in the total number of classes included in the applications filed since the implementation of the Madrid Protocol system.

The ILPTO reports an increase in its workload, but presently applications are being examined on average within 12 months of filing.

Slogans

The former registrar of trademarks formed a very strict approach to whether a slogan is eligible for registration as a trademark. He refused the registration of many slogans and even issued a circular practice letter in which he ruled that, in general, a slogan is to be considered to lack distinctive character and will be eligible for registration only if it acquired distinctiveness as a result of use.

In December 2011, the Tel Aviv District Court ruled in an appeal against the registrar’s refusal to accept a slogan for registration, that the eligibility of a slogan should be examined in the same manner that any other mark is examined, without any a priori assumption regarding its basic lack of distinctive character.

Following this decision, the new registrar issued a circular practice letter ordering the previous policy to be cancelled in view of the District Court ruling. This may have an influence on the chances of obtaining a registration for slogans in Israel, which was almost impossible under the previous registrar.

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