by Jeremy Ben-DavidManaging Partner, JMB Davis Ben-David

Spending resources, such as time, money and effort on patenting in any country, must be considered an investment, i.e. the resources spent must have a good chance of a worthwhile financial return. Large corporations normally have a pretty good idea as to where their business interests lie, and on the whole, will have a fairly standard group of countries in which they register their patents.

For smaller companies and lone inventors, however, the decision to register patents in various countries is a difficult one, and is often based on market size i.e. ‘where can I sell my patented product’? Thus, for example, for many, the US and Europe, and to a certain extent China, are considered to be automatic choices. A decision to file in other jurisdictions is often based on instinct or ‘gut’ feeling, factoring in physical proximity, language, culture and other things such as personal connections or things that ‘we have heard’.  But what are the factors that should really inform a decision?  

Before I continue, I would like to make it clear that I don’t claim to have the unique formula that will remove the guesswork. Having said that though, I am often asked ‘why file in Israel’? While claiming to have the definitive answer for almost anything is risky, there are clearly a number of factors that should be taken into account, weighed against other factors, and then compared with similar weighted factors for other countries. 

What are the main reasons to have a Patent in Israel?

Before discussing Israel as a filing venue, let’s just remind ourselves of the reasons that we file patent applications, in addition to the market potential of sale of products. Because the question is ‘why file in Israel’, the reasons below will be couched in an Israel-centric context. So, Israel should be considered as a patenting venue if any if the following applies:

  1. Manufacture: Israeli companies are known to manufacture products covered by my patent, for example, in agriculture, water technology, telecom, pharma, or defense.  
  2. Research & Development: My invention is in a field where there is extensive R&D activity in Israel. This would not only potentially curtail competing market activities, but it would also position me for potential partnership opportunities with companies undertaking such R&D activity (see #3).
  3. Partnership Opportunities: Following on from #2, patents are a double-edged sword. My ownership of a patent can be used as a device to prevent use of my invention by a third party. However, offering use of my patent, as by licensing, to an Israeli company that is active in the field of my invention, could enable me to license my patent to them, so as to generate an additional income stream for me. Furthermore, depending on the terms of the license, I may also benefit from a partial share in future, related technologies.
  4. Exposure to additional markets: Israel is home to over 450 incubators and accelerators (as per IVC Online). Many of these are owned, at least in part, by corporations from the world over, including the US, Europe, China and Japan, and most of the VC investment also comes from outside of Israel. Joint ventures of one sort or another with an Israeli company can often mean exposure to additional markets that you would otherwise not have thought possible.

The conclusion is that Israel is a great business destination for many different types of venture. But don’t take my word for it. 

Below are some interesting facts extracted from the Global Innovation Index 2023 published by WIPO.

 

The Global Innovation Index

The 2023 edition is the 16th such annual report. It gives a good idea as to the business and innovation environment in each of 132 countries worldwide. While I would advise against using any single source on which to base decision making, this report is definitely a good place to start.

General Background on Israel

Most readers will probably know that Israel is small country. But just how small is that?

With a population of somewhat over 9 million people, Israel is the 98th largest country in the world. It is  known to be in a challenging region of the world, i.e. the Middle East, and is also known for its bureaucracy, which is not always the easiest to deal with. 

However, while Israel is one of the smallest countries in the World, according to www.macrotrends.net, Israel’s nominal Gross Domestic Product (GDP) places it among the top economies globally. 

Israel’s nominal GDP for 2022 was $525 billion, reflecting a 7.47% increase from the previous year. In 2021, Israel’s GDP stood at $488.53 billion, marking an 18.21% increase from 2020.

And Israel’s per capita GDP, as per www.forbes.co.il, is equally impressive. It ranks 19th in the world, with a per capita GDP of $43.7 thousand (USD) for the past year. This places Israel in an enviable position among global economies. 

In GDP per capita terms, Israel surpasses some of the world’s strongest economies, including UK, Japan and France.

The Innovation Index

But let’s get back to the Innovation Index. The bottom line, is that Israel’s total score places it in 14th place in the World, as per the partial table below:

If you consider the fact that 6 of the countries listed above Israel in the top 13 are part of the European market, in terms of markets, Israel’s score places it 8th.

What Factors Affect Israel’s High Score?

Income levels: Israel is included in the high-income group, together with Switzerland, US, UK, Germany, Korea and Japan, among others, all of these countries performing “above expectation for level of development”.

GII Innovation Indicators – 2023 Trailblazers: As detailed in the Report (page 52): “The United States continues to lead in terms of number of GII innovation indicators for which it ranks top globally, ranking 1st in the world on 13 out of 80 indicators in 2023. Singapore follows the United States globally and is number one worldwide on 11 indicators, the same amount as in 2022, including leading in Operational stability for businesses, Government effectiveness, ICT access, Logistics performance, Venture capital received, Hightech manufacturing, and GitHub commits. 

Israel follows in 3rd place, leading in nine innovation indicators, including R&D expenditure, University–industry R&D collaboration, PCT patents and ICT services exports. 

“Innovation across the world’s regions”. In the regional subsection entitled “Northern Africa and Western Asia In Northern Africa and Western Asia”, the Report states: “Israel stands out in various areas, holding top position in Market sophistication (11th*), Business sophistication (6th*) and Knowledge and technology outputs (5th*). 

Furthermore, it distinguishes itself globally as the one country that allocates over 5 percent of GDP to R&D, with a remarkable expenditure of 5.6 percent in 2021.”

(* global rank)

 

Conclusion

Israel is an unusual country. In terms of market size – well, as you’ve seen – it ranks among the smallest. But with regard to all other factors, it punches well above its weight, and in many ways this is not just relative to its size, but also in an absolute sense. 

In short, Israel has one of the world’s strongest, most sophisticated economies, especially with regard to innovation. You may not be convinced that your particular company or client will necessarily find it worthwhile to register a specific patent in Israel, but neither should you overlook it; for you may be looking a gift horse in the mouth!

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