Was one of Israel's leading biotech entrepreneurs complicit in the theft of valuable technological secrets from the state? Today, the State of Israel filed a NIS 40 million lawsuit in the Tel Aviv District Court against Prof. Shlomo Ben-Haim, one of the wealthiest and most prominent entrepreneurs in biotech in Israel, and against his business partner, Dr. Amir Arav, who was formerly a scientist at the Agricultural Research Organization (ARO) - the Volcani Center. The claim is that the pair stole from the state valuable technologies related to freezing cells, tissues, and entire organs, developed by Dr. Arav in the course of his work at the Volcani Center.
In addition to Prof. Ben-Haim and Dr. Arav, Core Dynamics and IMT, companies which they own, and which deal in preservation of biological tissues through freezing, are also being sued. The suit claims that, through these companies, the defendants stole the technology and registered in their names patents belonging to the state. Udi Damari, who was Dr. Arav's business partner, and Yehudit Natan, who was a research assistant to Dr. Arav during the relevant period, are also being sued.
In its statement of claim, the state details how, in the course of his work at the Volcani Center, Dr. Arav developed devices and methods for freezing biological samples that have important medical applications. According to the state, Dr. Arav in effect led a double life for several years. "At the same time as his work as a researcher at the Volcani Center, Arav promoted and founded companies based on the technology developed in the course of his work, and served as chief scientist of these companies in their various incarnations," the claim states.
The state claims that, in 2004, Prof. Ben-Haim joined Dr. Arav as an investor, knowing that the technologies in question were stolen by Dr. Arav from the Volcani Center. According to the claim, Ben-Haim, who invested $17 million, through an investment fund he owned, in IMT and Core Dynamics, took part in the acts described in the claim and even initiated some of them.
"Prof. Ben-Haim joined the venture owned by Dr. Arav knowing that these were companies based on technology and patents stolen from the state. Among other things, any due diligence procedure, even the most minimal, that an experienced entrepreneur like Prof. Ben-Haim must certainly have carried out, would have discovered that Dr. Arav was a state employee employed as a senior researcher at the Volcani Center, and that IMT dealt in those very same fields in which Dr. Arav worked, and was based on the results of his research at the Center," the statement of claim says. "From the time that he joined Dr. Arav's venture, Prof. Ben-Haim was directly complicit in those acts," it stresses.
Deceit and fraud
The state points out that the companies owned by Arav and Ben-Haim filed many applications to register patents on investions that Dr. Arav developed in the course of his work at the Volcani Center, based on the research platform that the Center provided for him. The patent applications were filed in the name of IMT. Later, most of the applications were transferred to Core Dynamics. Some of them have already been registered as patents.
The state claims that "it took a huge effort to unravel the spider's web woven by the respondents with the aim of concealing the theft of the technology and the smuggling of it into the companies set up by Dr. Arav and Prof. Ben-Haim." Among other things, it is alleged that Dr. Arav submitted false declarations concerning the substance of his connections and involvement in the companies he founded. Dr. Arav was found guilty in a disciplinary proceeding for breach of his fiduciary duty as a public servant.
The statement of claim alleges that the respondents exploited the trust place in them by the Volcani Center to obtain, fraudulently, the Center's signature on scientific cooperation agreements, concealing Dr. Arav's conflict of interests.
The state says that, before filing its claim, it approached the respondents and demanded compensation for the theft of technology and the damage it had incurred, but that these approaches went unanswered.
The claim against Prof. Ben-Haim and Dr. Arav and the other respondents was filed as part of a joint move by the Accountant General and the State Prosecutor's Office to restore intellectual property to the state, and as part of a strategy of the State Prosecutor's Office to deal with damage to state assets and to the rule of law by instituting civil proceedings.
Sources close to Core Dynamics said that IMT, which sold its technology to Core Dynamics, had signed several agreements with the state concerning the technology. They said that it had signed an agreement with the Volcani Center regularizing the rights on the technology, and also an agreement with the Chief Scientist on exporting the technology from Israel.
The sources also claim that Core Dynamics has no current activity based on the technology in dispute, and that it had even offered to return the patents to the state, on condition that it received the amount it paid for them.
According to the sources, "Core Dynamics is currently examining its future, but it is not at the moment considered one of the more successful companies in Ben-Haim's portfolio, so that even if the state proves its rights in it, it is not certain that there is anything to take from it."
Adv. Richard Luthi, who acts for Core Dynamics, said, "This claim is scandalous. It is somewhere between Chelm and Kafka, it's hard to decide which it resembles more. The company will not remain silent in the face of this lawsuit."
Series of claims
This is not the only outstanding claim against Prof. Ben-Haim. In January this year, a NIS 250 million suit was filed alleging that he was holding hostage shares belonging to his former business partner, medical technology investor Lewis Pell, in US giant Johnson & Johnson, and also millions of dollars due to Pell from dividends distributed by the company.
In October 2010, another claim was filed against Ben-Haim, in the Petah Tikva District Court, by the entrepreneurs behind RF Dynamics, Eran Ben-Shmuel and Alex Bilchinsky, alleging that Ben-Haim used deceit and fraud to oust them from the company, which was worth $311 million. Ben-Haim's behavior, it was alleged, led to the claimants "being deprived of any share in the invention through deceitful and fraudulent acts by a powerful and wealthy person." Ben-Haim denied the allegations.
Published by Globes [online], Israel business news - www.globes-online.com - on October 2, 2012
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