We have previously commented on the broad intellectual property rights held by Israeli government funded hospitals (each, a "Government Hospital") in technology developed by their employees. A recent claim brought by the Israeli State Attorney's office against a senior plastic surgeon at Hillel Yaffe Medical Center offers a stark reminder to companies and investors that work with or acquire technology from doctors employed by Government Hospitals of the importance of conducting comprehensive diligence checks to confirm the status of intellectual property.

Background

Under Israeli law, ownership rights to intellectual property created by an employee of a Government Hospital as a result of or during the term of his or her employment or 18 months thereafter automatically vest in the Israeli government. This legal reality is a result of three distinct legal mechanisms. Section 132 of the Patent Law- 1967 ("Patent Law") provides that any "invention of an employee, created as a result of and during his employment shall...be the property of the employer." This provision of the Patent Law applies to all employee-employer relationships. In addition, a directive released by the Israeli Ministries of Finance and of Health deals specifically with the management and commercialization of intellectual property created in Government Hospitals (the "Directive") and, among other things, affords such hospitals broader rights over employee generated intellectual property than what is provided for in the Patent Law. In addition to the Patent Law and the Directive, most Israeli hospitals have their own policies governing employee-created intellectual property (each, an "IP Policy"), which IP Policy has the status of a binding contract between a hospital and its employees. These IP Policies may afford hospitals intellectual property rights that are even broader than those afforded by the Patent Law or the Directive. To determine the legal status of intellectual property developed by an employee or former employee of a Government Hospital, the Patent Law, the Directive and the relevant IP Policy must all be analyzed in unison.

Recent Demand

While intellectual property claims by the State of Israel against individual doctors have, historically, been rare, recent events confirm that the state is aware of its extensive intellectual property rights in inventions created by government hospital personnel and is willing to take legal action when it deems such action worthwhile.

This month, the Israeli press reported that the Israeli government, through the State Attorney's office, has demanded that Dr. Moris Topaz, a senior plastic surgeon at Hillel Yaffe Medical Center (the "Hospital"), transfer all rights to a patent which Dr. Topaz has been commercializing for years (the "Patent"), to the State of Israel. According to the allegation, Dr. Topaz developed the technology that is the subject of the Patent in 2010 while serving as the director of the Hospital's plastic surgery department and rights to the technology thus belong to the State of Israel. The State of Israel is demanding both rights to the Patent and compensation for revenues already generated by the Patent, all this despite Dr. Topaz's insistence that Prof. Meir Oren, former Director of the Hospital, had affirmed that the patented technology was not developed in the scope of Dr. Topaz's work in the hospital and that the Patent is the private property of Dr. Topaz.

Recommendations

While the events described above do not reflect any change in the legal framework per se, they do indicate the Israeli government's readiness to take action against individual doctors to assert the state's extensive rights in inventions created by employees in hospitals affiliated with the Israeli government. In light of this, companies that are engaged in commercializing intellectual property developed in whole or in part by doctors in government-funded hospitals, and investors in these companies, are reminded and strongly advised to investigate potential government claims and to address any title issues which may arise from such relationships.