The Export and Licensing of Defense Technologies – Part I

 Tal Karplus is a Partner & Head of the IP Practice  at Shibolet & Co.

According to foreign sources, Israel is ranked among the world’s ten largest defense exporters. According to the current Defense Minister, Moshe (Bogie) Ya’alon, defense exports for 2014 will amount to US$ 7.5 billion, representing an increase of approximately 15% over 2013.

Israel’s defense exports include the export of equipment, services and know-how, and are subject to controls in Israel, as is the case in most countries in the world, primarily for reasons of national security, foreign policy, and in honor of international treaties and resolutions.

The purpose of the first part of this summary is to provide a general review of two major arrangements in Israeli law relating to the export (to non-enemy countries) of technologies of a defensive nature from Israel – the Defense Export Control Law, 5767-2007, and Section 98 of the Patent Law 5727-1967.

The Defense Export Control Law, 5767-2007 (the “Control Law”)

Most of the controls over defense exports from the State of Israel are based on the Control Law and the regulations and orders thereunder. The Control Law took effect on 31 December 2007 and applies to exports of defense equipment, know-how and services.

Provisions of the Control Law include, inter alia, provisions regarding management of the Defense Exports Registry, the regulation of export licenses, reporting duties, penalties and the authorization of the Director General of the Ministry of Defense and the Head of the Defense Export Control Agency (DECA) as the competent authority in charge of controlling defense exports.

The purpose of the Control Law, as described therein, is, among others, to regulate the supervision of the State of Israel over the export of defense equipment, the transfer of defense know-how and the provision of a defense service, for the protection of national security, Israel’s foreign relations and its international obligations, as well as protection of other vital interests of the State of Israel. In other words, the Control Law is intended to regulate Israel’s control over the extraction of defense know-how, equipment or services subject to supervision under the provisions of the Law, before they leave the State of Israel.

Article 2 of the Control Law details the actions which require a license from the Ministry of Defense, the body responsible for implementation and enforcement of the Law, including defense marketing activities (as well as actions with the objective of promoting an export deal, including brokering and negotiations), the export of defense  equipment, the transfer of defense know-how in any way, and the provision of a defense service (including planning, development, manufacture, assembly, maintenance and training, as well as any service pertaining to defense know-how).

The term “defense know-how” is very broadly defined in the Control Law, and includes, inter alia, information (including technical data or technical support) required to develop, manufacture or use defense equipment; information that relates to the planning of assembly, testing, enhancing, modifying, training, maintenance, operation or repair of defense equipment, or its upkeep. It also includes know-how concerning defense forces, including information regarding their organization, structure and operation, combat doctrine, training methods and combat drills, as well as knowledge about defense policy, counter-terrorism and security methods.

According to the Control Law, it is prohibited to transfer defense know-how without receipt of a defense export license – i.e., a license from the Director General of the Ministry of Defense or the Head of the DECA. The Control Law further prohibits transfer of such defense know-how from Israel to any place outside of the country, or in Israel to anyone who is not a citizen or resident of Israel, or to a foreign corporation, by any means whatsoever (including orally). A license to transfer defense know-how will generally be for a period of three years.

Alongside the long list of defense equipment, listed in the export control regulation, which include combat equipment, missile equipment and dual-use equipment in the definition of defense equipment, the export control regulation also contains provisions regarding exemption from the need to obtain an export license, subject to the conditions listed therein.

It is worth noting that the provisions of the Control Law determine that the transfer of “defense know-how” which requires a license includes transfer of know-how done within Israel (i.e. no “actual” export), if such is transferred to a foreign or a non-Israeli company.

For the avoidance of doubt, a transfer of defense know-how, which according to the Control Law requires an appropriate license, can occur even with respect to information and/or know-how which is in the public domain. In other words, the publicity of such information does not exempt anyone wishing to transfer it from the need to obtain the appropriate license.

Consequently, transferring defense know-how, including to a foreign resident who visits a factory or site of the information holder, and is exposed to controlled defense know-how (even if inadvertently), without the appropriate license having been obtained, is a criminal offence under the Control Law.

Section 98 of the Patent Law

Another mechanism intended to allow Israel the supervision over defense technology export, and which is less known to those who do not engage in patent filing, is found in Section 98 of the Patent Law. According to the provisions of Section 98 of the Patent Law, an Israeli citizen, a permanent resident in Israel, or any other person who owes allegiance to the State, may not file abroad any patent application for an invention the subject of which is weaponry or ammunition, or which is otherwise of military value. This prohibition applies to any invention that the Minister of Defense or the Registrar of Patents, as applicable, consider to be related to the defense of Israel, or as containing a defense secret, unless the applicant either: (i) obtains the prior written permission of the Minister of Defense, or (ii) files an application in Israel, and within six months from the date of filing, the Minister of Defense did not  order the Registrar of Patents to refrain from registering the patent, or to postpone registration of the patent, in Israel, all in accordance with Section 94 of the Patent Law .

Section 94 of the Patent Law gives the Minister of Defense authority, where he/she deems it necessary in the interests of national security, including the protection of its defense secrets, and following consultation with the Minister of Justice, to make an order instructing the Registrar of Patents to refrain from performing any act which he is required or permitted to do under this Law with respect to a certain application, or to postpone its performance, or prohibit or restrict its publication, or the release of information about it, or in connection with information it contains.

The difficulty in the implementation of Section 98 arises in the case of dual-use inventions, which may have both defense and civilian applications. While it is clear that restriction regarding the filing of a patent application outside of Israel shall apply to an invention relating to weaponry or ammunition, the applicability of such restriction is not self-evident for instance in the case of a laser-based distance measurement device, or a communication system. However, and with the exception of extraordinary circumstances, the requirement to first file a patent application in Israel does not in itself represent any major disadvantage for the inventor, seeing as how the State of Israel is a member of various treaties relating to patent protection, which act in protection of the inventor’s rights, including priority dates.

Nevertheless, there may be an exception to the “no major disadvantage” assertion, when it comes to inventors for whom Israeli citizenship serves as the sole or main connection between them and the State of Israel, such as for example, inventors who have dual citizenships and whose place of residence and life center is outside of Israel, or Israeli citizens who are employed outside of Israel by non-Israeli corporations. Such inventors may find themselves subject to criminal charges if they file an application outside of Israel for a patent on an invention, the subject of which is weaponry, ammunition, or which is otherwise of military value, etc.

It is appropriate to note in this context that similar arrangements may be found in the patent laws of various jurisdictions that require receipt of approval from the authority appointed for this purpose, prior to filing patent applications outside their borders. Although there are countries that do not require receipt of domestic approval before filing an application in a foreign country (as, for example, Australia and Japan), other countries, such as the United States of America, France, Germany, and others, prohibit filing patent applications covering military, weaponry and other similar inventions in a foreign country prior to fulfilling certain conditions, such as a waiting period of several weeks and even months from the date of filing the patent application in that country, receipt of an export license etc. Moreover, in certain countries, including India, it is prohibited to file foreign patent applications before complying with the conditions required under the applicable law, regardless of the field to which the invention relates.

The above discussion clearly indicates that regardless of the field of endeavor, one cannot overstate the importance of acquaintance with the provisions of applicable laws, both domestic and foreign, relevant to anyone wishing to file a patent application in a country which differs from the inventor’s (or inventors’) country of citizenship, residency, or existing duty of allegiance.

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