The Israel innovation authority (the “IIA”), a government agency which awards grants to Israeli companies (the “Grants”) for the encouragement of research and development in industry with the aim of creating local infrastructure and employment, has recently made known that it is poised to shift its long standing policy towards collaborations between recipients of the Grants (“Grantees”) and research institutions (“Institutions”), by allowing the retention by research institutions of ownership in the results of sponsored research carried out with the use of the Grants.

The IIA was established on January 1, 2016 pursuant to a major amendment in The Law for the Encouragement of Industrial Research and Development 5744-1984 (the “R&D Law”). The IIA is the successor of what was known as the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade.

The R&D Law lays down various restrictions in relation to the funding, ownership and use of the technology generated through the Grants. In keeping with such restrictions, the traditional approach has been that funded research results, must be the sole property of the Grantee from inception, unless the transfer of such technology is approved in accordance with the provisions of the R&D Law.

This resulted in a direct clash between the IP policies of the various Institutions and the IIA. A common business model is Israel is to found start-up companies based upon inventions licensed-in from Institutions, and to continue at least initial development of such inventions through sponsored research under the supervision of the original inventor at the Institution. The Institutions usually demand to retain ownership of the research results, with the same being automatically included within the scope of the technology licensed to the start-up. Thus, in cases where Institutions were not prepared to waive ownership rights, the start-ups were usually barred from applying for Grants.

The State of Israel has recognized that while its position was meant to protect start-ups from the dominance of the Institutions, this approach was a major obstacle against the commercialization of more inventions and was ultimately interfering with its own objectives. Thus, the IIA has recently announced, that in 2020, it intends to allow more freedom of negotiation and to adopt rules which allow Institutions to retain ownership of technology developed at Institutions with the use of Grants and licensed to Grantees, under certain circumstances. The full details of the criteria have yet to be divulged.