Sanford T. Colb & Co.

link to original article: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3778476

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Mordechay (Moti) Sorek, Attorney

Principal Litigator

Sanford T. Colb & Co.

Summary of the Judgment

In a July 12, 2021 decision (Civil Appeal 2167/16 Sanofi v. Unipharm), the Israel Supreme Court (in a three-judge panel) ruled, on the basis of a doctrine of unjust enrichment, that a patent applicant who is found to have intentionally misled the Israel Patent Office by failing to disclose relevant information to the Israel Patent Office may be required to disgorge its resulting illegitimate profits.

The case concerned a new crystalline form of the substance Clopidogrel (marketed by Sanofi-Aventis under the brand name Plavix).  At first instance, the Central District Court ruled that Sanofi-Aventis misled the Israel Patent Office by including in its patent application an inaccurate description of a process for creating the new crystalline form and by failing to disclose that it was impossible to create an ‘old’ polymorph (Form I) of Clopidogrel when the ‘new’ crystalline form (Form II) was present.

Unipharm, an Israel generic pharmaceutical company, sued Sanofi-Aventis arguing that had Sanofi-Aventis not misled the Israel Patent Office, Sanofi-Aventis’ patent application would have been rejected much more quickly and Unipharm would have been able to launch its competing generic product more promptly.  Unipharm asserted that it should be compensated for the ‘lost time’ for the potential sale of the drug. This claim for damages was advanced even though Unipharm was unable to quantify the actual harm that Unipharm alleged to have incurred.  After the Central District Court ruled in Unipharm’s favor, Sanofi-Aventis appealed the decision to the Israel Supreme Court.

The Israel Supreme Court upheld the decision of the Central District Court, ruling that unjust enrichment law may serve as a basis for disgorgement claims based on inequitable conduct.

The Israel Supreme Court also held that unfair competitive practices may serve as a basis for an unjust enrichment claim even if there is no cause of action in antitrust law.

This Supreme Court judgment has several important implications:

First, a competitor may theoretically initiate an unjust enrichment lawsuit even if the patent applicant did not actually acquire a monopoly in the relevant market, i.e. if there existed a competing equivalent for the patented product or if the patent was not yet granted or enforced, as in this case.

Second, the adjudicated remedy is based on an assessment on the profits of the defendant rather than on actual damages incurred by a plaintiff as in antitrust claims (e.g. a Walker Process claim in the US).  Even if a competitor is not able to demonstrate actual harm, the competitor may prevail in a claim where inequitable conduct has occurred.

Third, the Israel Supreme Court ruled that Israel Courts may employ flexible standards in the determination of required causation with respect to inequitable conduct and the profits of the patentee.

Notably, in a dissent, Justice Karra stated that the requirement to prove causation should be more stringent but he did not eliminate legal adjudication for all lawsuits that claim unjust enrichment.  He contended that a plaintiff should be required to show causation between the inequitable conduct and the delay in launching a competing product.

Comment

The decision of the Israel Supreme Court appears to be the first of its kind anywhere.

In this writer’s review of similar cases elsewhere, no other rulings allowing such disgorgement claims were discovered.  The decision is particularly significant due to the fact that the Israel Patents Law does not provide for sanctions other than invalidation of a patent as a penalty for failure to disclose material information.  

It appears, prima facie, that the immediate and most significant implication for patentees in Israel is that patentees must disclose all relevant information known to them in a timely manner.

Sanofi-Aventis has given notice to the Supreme Court that it intends to file a motion for an en-banc rehearing in the Israel Supreme Court.  

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On January 1, 2021, the Israel Civil Court system implemented new Civil Procedure Regulations.

These regulations apply to all civil lawsuits in all civil courts in Israel.

There are four significant aspects to the new regulations which will have an impact on lawsuits filed by our clients:

1. Court documents such as petitions, Statements of Claim and Statements of Defense must adhere to a prescribed format and page number limits.
2. In most cases, oral hearings and oral summations will be preferred over submission of written affidavits and written summations.
3. Preliminary proceedings to resolve litigation efficiently will be prioritized during which time the scope of cases that proceed to litigation will be clearly defined.
4. The parties to a lawsuit will be required to meet, in person or via teleconference, before the first Court hearing, in an attempt to clearly define their dispute. Following the meeting, the parties will be required to report to the Court on the outcome of the meeting.

We are optimistic that these modifications will improve the efficiency and efficacy of litigation in the Israel Civil Courts.

We anticipate that the emphasis on preliminary activities and proceedings will alter the timeline of costs incurred to our clients.

The STC firm applauds the courage and dedication of longtime STC  patent attorney, Dr. Moshe Greenberger, whose parallel career as a physician has placed him on the frontlines of Covid-19 patient care in a Jerusalem hospital.  His clients, colleagues, family and patients benefit from his multifaceted expertise and his humanity.  We are so proud of him.