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Inside Israel: Should the IDF Cash In?

Tzippy Yarom

Many of Israel’s high-tech billionaires and multimillionaires owe their success to their IDF training. Should the IDF get a cut of the profits?

Wednesday, October 18, 2017

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M any of Israel’s high-tech billionaires and multimillionaires owe their success to the knowledge, tools, and training they received in the IDF. When these tycoons cash in by selling their companies, should the IDF get a cut of the profits, reducing the taxpayer’s share of Israel’s defense burden? And should the government pass a tougher law protecting IDF intellectual property (IP) from being misused?

These questions arise periodically where entrepreneurs who cut their teeth in the IDF’s prestigious 8200 intelligence unit commercialize their intellectual property, export their products and technology, and then reap a bonanza when they “exit,” selling their firm for mega-millions. Prime examples of companies whose top execs trained in Unit 8200 are Checkpoint, Verint Systems, and Nice Systems, with market values on NASDAQ of $18.3 billion, $2.59 billion, and $4.84 billion respectively.

By law, the IDF retains rights to all intellectual property its soldiers develop while in the service, and requires soldiers to sign nondisclosure agreements. The gray areas occur mainly in the cybersecurity and software fields, when a former soldier doesn’t exactly plagiarize his knowledge but “adapts” it for the commercial market.

The September 25 acquisition of Israeli start-up Gigya by German software giant SAP catapulted this issue back into the public discourse, with pundits and academics weighing in on whether the army has rights on the intellectual property (IP) developed under its auspices.

The Pros

“Israel has some compelling reasons to exert [more] control and oversight of its IP,” said Dr. Shmuel Even, a military and strategic affairs analyst at the Institute for National Security Studies, who investigated the subject in collaboration with Professor Yesha Sivan.

Even says the strategic importance of managing IP cannot be overstated, and that the IDF must keep tighter control of what’s being done with its IP, by whom, and under what conditions. “Military IP can be used for civilian needs and then converted back to military use and fall into the wrong hands,” Even warns.

Managing military IP would necessitate adoption of a model similar to that used by universities, which own all rights to IP and have patent and copyright policies to codify their IP management. For example, Yissum, the technology transfer company formed by Hebrew University, earn as much as $60 million per year from royalties from more than 80 start-up companies it has spun off.

The Cons

Even and Yesha acknowledge that a new law with tighter bureaucratic regulations on IP would dampen innovation, discouraging would-be entrepreneurs and investors from creating start-ups in the fields of research and development (R&D) and security. They admit that if tougher laws were already in place, Israel’s high tech might not have developed to where it is today.

Tougher laws could also increase unemployment. One of every ten Israeli workers is employed in high tech or research and development jobs. The IDF is the hand that feeds this crucial component of the Israeli economy. “The army is proud of the role it plays in Israel’s economy,” Even asserts. (Excerpted from Mishpacha, Issue 681)

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