Medical Device Daily Israel Correspondent

ZICHRON YA'AKOV, Israel — In a 'Who's the fairest of them all? battle between two Israeli aesthetic surgical and diagnostic device companies, Lumenis (Yokneam, Israel) has again sued Alma Lasers (Caesaria, Israel) for patent and trade secret violations (Medical Device Daily, March 27, 2008) and, at the same time, Alma reported that earlier litigation brought by Lumenis in the U.S. Courts had been stayed, pending reexamination of the Lumenis patents.

The publicly-traded but still de-listed Lumenis, sued Alma and its four founders, Ziv Karni, Yoav Avni, Nadav Bayer and Ivgeni Kodritzki, for NIS 200 million in the Tel Aviv District Court, claiming patent infringement, unjust enrichment and misappropriation of Lumenis trade secrets and technology to build its Harmony laser product line. The Harmony line allegedly includes components "nearly identical to those of Lumenis products.''

The amount sought considers the $90 million that TA Associates (Boston, Massachusetts) paid the founders for 65% of Alma's shares in April 2006, which Lumenis claims came from value unfairly obtained. In the earlier June 2007 action, Lumenis, filed an infringement suit against Alma in the U.S. District Court in Chicago concerning seven patents that it claims Alma's Harmony line infringes.

Alma retorted last December by submitting 22 prior art references to the U.S. Patent and Trademark Office, claiming that the patents are invalidated as lacking novelty and or inventability, and that Lumenis had engaged in inequitable conduct by failing to disclose material prior art to the USPTO.

Lumenis denied the allegations.

Alma reported in March that in the previous month the USPTO had found a "substantial new question of patentability" regarding one of the seven patents, and the District Court ordered the litigation stayed pending full reexamination by the USPTO.

Lumenis said that this was standard, but that it was going to bring further allegations against Alma.

Ziv Karni, president/CEO of Alma Lasers Israel, told MDD, "We left Lumenis about eight years ago, when ESC was taken over" — while Lumenis was created April 2001.

The non-competition agreement signed was for two years. Alma was founded two years later in October 2005, as a joint venture of MSQ, founded by Karni, a laser physicist, and Orion Lasers (formerly of Fort Lauderdale, Florida).

"Our hard work brought us success, while they lose $25 million every year," Karni said. "So instead of working on themselves, they try to claim what is ours."

Lumenis management and investors "are very powerful business people," Karni said. "About six years ago, they tried to sue Syneron Medical [Yokneam, Israel] — created by Shimon Eckhouse, the founder of ESC, after he left in the wake of the takeover – "but came to a settlement a couple of years later," in January 2004.

Syneron counter-sued Lumenis for trade disparagement, intentional interference with prospective economic advantage, and unfair competition.

A U.S. federal district judge questioned the validity of a Lumenis patent claim in a published opinion. Ultimately Lumenis and Syneron settled the case before going to trial.

Karni said his company offered the same cash payment and license agreement settlement to Lumenis, "instead of wasting all this time, money [and] giving Israel and aesthetic medicine a bad name, but, they told us, 'You will pay, or we will destroy your name.'" He characterized this as "extortion."

"They know who we are," he said. "They know that we did not violate any patents. We tried our best to avoid this because it hurts everyone. It discourages investment. We warned them five times not to sue us in the U.S. because once you ask the patent office to review the patents, you cannot back down. We showed them all our arguments about the prior art. They refused to show us a single document. Playing poker!"

He added: "They claim we are using their core technology. So why is Lumenis losing the market and money? It means that either it is not the core technology that is important or you need something else to be successful."

Michael Factor, Israeli patent attorney and managing partner of Factor - Patent Attorneys, said, " I have not examined the claims and arguments in this particular case, but very often infringement suits are filed, not because there is a prima facie case of infringement but because of business competition."

He added that this type of suit can be used as leverage in negotiating a settlement.

OrNim device lights the way

OrNim Medical (Lod, Israel) has received FDA 510(k) clearance for its CerOx device, making a giant step closer to bringing non-invasive, real-time, dynamic monitoring of oxygen levels in the brain into the medical toolkit.
A start-up, OrNim says CerOx is its flagship device, describing it as "simple and user friendly."

The device's sensors adhere to the skin of the forehead with a single-use adhesive, then attached by electro-optic cables to a stand-alone bedside monitor that displays current and historical patient data from two fields simultaneously as a percent of oxygenation in the area of focus.
Using Ornim's Ultrasound Tagged Light technology ultrasound demarcates the area being monitored, enabling localized measurement of average oxygenated and deoxygenated hemoglobin absorption.

Revital Shechter, president, VP of R&D and a company co-founder with CEO and chief technology officer Michal Balberg, said "Our 'targeted oximetry' is far more safe and less expensive than current devices on the market."

Static measuring methods require drilling through the skull to insert electrodes into the cranial vascular bed, or taking blood samples from the jugular vein bulb, draining venous blood for laboratory analysis.

"We can get accurate, repeatable, and ongoing results in patients who need it most: unconscious, after head trauma, or during general anesthesia," Shechter said, adding that the company's first market target will be for trauma and emergency medicine units, in hospital and in the field "where the need for a direct, absolute measurement of oxygen saturation in tissues and continuous monitoring is most urgent." Other applications of the Ornim's targeted oximetry include muscle, kidneys, sepsis, peripheral vascular disease, ischemic wounds and – the company's initial application effort, fetal distress.

Since OrNim's founding in 2004, it has raised $3 million from Gilo Ventures (Los Gatos, California), headed by Israeli David Gilo and Gil Perez. Balberg said, "We are now entering a $7 million round, with $2 million secured from Gilo Ventures and private investors.

This is Gilo Ventures' second medical company investment, following $20 million placed in 2000 in Stentor (San Francisco, California), a leader in PACS development for managing CT, X-ray, and digitized images.

In 2005, Stentor was sold to Royal Philips Electronics' division Philips Medical Systems (Amsterdam, the Netherlands) for $280 million — still a small focus for this venture capital fund.

Initial marketing of the CerOx is planned to begin in 2009, with CE-mark certification and FDA clearance, after conducting clinical trials on head trauma patients in Israel and San Francisco.