They need some distance in order to activate, and also multiple shots can override the system. The one who placed the grenade wouldn't activate because the heat isn't present until there is an explosion, the heat the system detects is the one used from the propulsion of the rocket. Still, again it raises the question of how efective it is since most attacks in urban guerrilla will be carried out in short distances.

It has a lot of issues, it is basically effective against long-range explosive anti-tank weaponry. It is ineffective against anything close range, in large volumes, without a heat signature, etc. It also adds something like a million dollars to the cost of every tank you outfit with it.

If you were deploying tanks in a more traditional battlefield environment, it is honestly a pretty effective (albeit expensive) system. If you are deploying heavy tanks for urban warfare scenarios, you are an idiot to begin with, but it is also going to be a lot less useful.