Who Makes Millions Off Israel’s Top Cyber-Spy Agency?
Ruti Levy, Haaretz, Apr 21 2017
Check Point Software Technologies is one of Israel’s biggest high-tech success stories. Founded nearly a quarter of a century ago, it pioneered computer firewalls, today employs more than 3,000 people and has a market cap of some $18b. What’s less known is that Gil Shwed, the company’s co-founder and CEO, learned the ins and outs of network security while serving in Unit 8200. But the army, and the Israeli taxpayer who paid for Shwed’s education, has never received a share of the profits. In fact, a good part of the tens of billions of dollars of intellectual property that Israel’s high-tech sector has generated over the years came in the areas where Unit 8200 specializes: telecommunications and cyber-security. No less than nine committees over the last decade have looked into how the IDF could be retaining rights to intellectual property developed and share in profits, but they have been confounded by questions about how to map the progress of an idea to a commercial product, how to share any profits, and about who should benefit. The high-tech industry thinks it would be a mistake to try, of course. They say that creating a government administration to monitor intellectual property and collect royalties would cause investors and even engineers to flee. Arik Kleinstein of Glilot Capital says:
It would be a death blow to the industry! Investors would be afraid to invest in start-ups founded by Unit 8200 veterans. High-tech is a competitive industry, and we’re on the same level as Pindosi start-ups that don’t need to get approvals from the Pentagon. No-one who understands the industry and lives in it could ever support the idea!
Many in the industry downplay the contribution of military technology altogether. Ronen Nir, a partner at Carmel Ventures, who served 13 years in 8200, says:
It’s exaggerated. A start-up is like a marathon running for years with ups and downs. Combat experience with its focus on goals, leadership and teamwork is no less critical for success than the technology edge.
Yet the fact is Unit 8200 and the IDF’s other technology units have been the classrooms for large numbers of Israel’s top tech leaders. They include people like Adam Singolda, the founder and CEO of Taboola; the five founders of Nice Systems; Zohar Zisapel, the serial entrepreneur and head of Rad-Binet Group; Avishai Abrahami, the cofounder and CEO of Wix; and Nir Zuk, the founder of Palo Alto Networks, to name a few. Etai Shai, a Tel Aviv attorney, distinguishes between the training the army gives its tech recruits and any technology they develop while on the job. He says:
A software course, for instance, is not IP that belongs to the army. The legal framework of IP doesn’t prove an answer to commercializing the tools the army provides soldiers, which they can take with them.
But one entrepreneur who served in Unit 8200 says the distinction isn’t so simple. He says:
The most valuable asset tech people take from their service is great knowledge about technology problems and their solutions, and the ability not to repeat mistakes when they’re developing a specific technology. These are commercial secrets. It’s not for no reason that cyber-security companies love to recruit only Unit 8200 vets.
The government’s right to intellectual property developed by soldiers or civilians working in the defense sector is anchored in a 1969 patent law and a 1992 directive by the Defense Ministry. It requires them to appeal to a committee to decide what rights accrue to the state. However, no one was appointed to the panel until 2012, and since then it has met just three times, to discuss five applications. In each case, the committee decided that the intellectual property was developed outside of service and the state had no rights to it. As to private businesses that took the army’s intellectual property, the Defense Ministry says that in 2015 it opposed one patent that was being registered and reached a compromise with the other side. It currently has two others being adjudicated. Several years ago, the government cracked down on doctors in government hospitals developing products and selling the commercial rights, after the giant Pindo firm Medtronic acquired the Israeli start-up Ventor Technologies for $325m. The problem was Ventor’s intellectual property was developed by Dr Ehud Shvemental, who worked at Sheba Medical Center Tel Hashomer. The government entered into intense negotiations and eventually settled for 30% of the pretax profits. Since then, the Knesset has regularized the rules. Nava Swersky Sofer, who was formerly head of a company called Yissum which handled commercialization of intellectual property for HUJI, says:
Tzahal should follow the lead of the universities. There they distinguish between learning and investing, so that academic institutions only demand rights to intellectual property developed by those getting master’s degrees or higher. We assume that those getting bachelor’s degrees are at the training stage. You could do the same things vis-a-vis soldiers, by distinguishing between enlistees and those in the professional army.