Israeli Intellectual Property Law Updates
New Office of Chief Scientist Instructions for Special Applications and Approvals in the Frame of the R&D Law
Under the Law for the Encouragement of Industrial Research and Development Law, 5744-1984 (the "R&D Law"), research and development programs which meet specified criteria and are approved by a governmental research committee of the Office of Chief Scientist ("OCS") are eligible for grants to cover a portion of a projected R&D espenditure, as determined by the research committee, in exchange for the payment of royalties. The R&D Law provides that "[a]ny change in an Approved Plan [of the OCS] with respect to the content of the Research and Development, or . . . with respect to the requirement for the manufacturing of the Product in Israel, or in any other respect, shall require the approval of the Research Committee." Sec. 19 of the R&D Law required that any transfer of manufacture or know-how abroad must be approved by the OCS.
Effective as of December, 2008, new OCS Instructions for Special Applications and Approvals in the Frame of the R&D Law (the "OCS Instructions") are in place that create, for the first time, a uniform standard for special applications for transfer of rights and obligations and change of control in a company that has received from the OCS an approval to a Plan ("Approval Recipient"). The requirement for such approval often arises in the context of an acquisition of a company that has received funding from the OCS under the R&D Law.
The OCS Instructions contain guidelines relating to (i) transfer of rights and obligations inside Israel; (ii) transfer of manufacturing activities abroad; (iii) transfer of manufacturing rights abroad; (iv) transfer of know-how abroad; and (v) change in the control or in the holding of the means of control in the Approval Recipient.
The OCS Instructions now include:
- a detailed list of all documents and other information that must be provided with requests;
- a list of matters that the OCS will examine in reviewing applications;
- OCS procedures regarding such applications; and
- further clarifications with respect to scenarios in which such applications can be submitted.
Many issues, such as the definition of "transfer of know-how" and clarifications regarding the formula for calculating the repayment rate to the OCS, remained unclear and are not addressed by the OCS Instructions.
Furthermore, it is important to note that the binding effect of these OCS Instructions is unclear in case of contradiction between them and any contractual agreement between the OCS funded company and the OCS (such as an Approved Plan) and should be examined on a case by case basis.
