Israel’s High Tech Industry (Silicon Wadi) Development: Role of Office of the Chief Scientist and Lessons for Nigeria (Part 2)

By Arlene Marom

One of the many important programs organized by Israel’s Office of the Chief Scientist (OCS) is the Global Enterprise Collaboration Program targeting multinational corporations that have established a presence in Israel. Designed to help startups overcome the difficulties they face in the commercialization of their R&D-based products, this program enables them to join forces with multinational corporations (MNCs) that offer a strong advantage in the commercialization, manufacturing, and global marketing of new products.

Providing a supportive framework for Israeli startups, the Global Enterprise Collaboration Program is based on the commitment of the OCS and the MNC to invest equally in pre-selected R&D projects that are conducted jointly by the MNC and the Israeli company.

Both startup companies and MNCs gain from this collaboration. Major benefits include sharing the risk of R&D, access to know-how and technologies not otherwise readily available, assistance in identifying partners, and improving the chances for successfully marketing and supporting the product or service internationally.

The MNC can invest in cash and/or kind. It can provide the start-up with such benefits as technological guidance, the use of equipment and labs, discounted software licenses, and regulatory advice – instead of, or in addition to, cash funding.

In order to apply, Israeli companies are required to submit a proposal for a joint R&D project with the MNC. Eligibility requirements for Israeli companies include a strong R&D focus, annual revenues not exceeding $70m, and no affiliation with the MNC. Eligibility requirements for MNCs include annual revenues of over $2 billion, significant investment in R&D, and a global presence.

The establishment of a joint project requires the following:  Both parties must be involved in the R&D, there must be synergy with the MNC’s core business, and the IP must be treated according to OCS guidelines.

IP can be treated in 3 possible ways:
–       Sole ownership by the Israeli company
–       A non-exclusive license for the MNC
–       Joint ownership by the Israeli company and the MNC

Israel’s R&D Law permits the MNC to share joint ownership (or a non-exclusive license) of the IP with the Israeli company, if mutually contributing to the development of the IP. In such cases, the right of the Israeli company to use the newly created know-how would be subject to the R&D Law. However, the MNC would have the unrestricted, royalty-free right to use the new know-how inside or outside of Israel, provided that the right of the Israeli company to use/exploit the know-how is not negatively affected.

Among the many MNCs participating in the Global Enterprise Collaboration Program are: Microsoft, Intel, IBM, HP, Oracle, Coca Cola, Merck, Renault and Deutsche Telekom.

In Israel today, in addition to cooperation with the OCS, multinational corporations operate more than 200 R&D centers across the country – attracted by a highly skilled workforce, quality infrastructure, risk-taking entrepreneurial culture, strong legal system based on international law, patent and IP protection, sophisticated financial structure, world-class universities and research centers, and significant government support for innovation. Israel ranks fourth in the world in the transfer of technology from academia to industry, enabling innovative technological solutions to be converted from a wide range of sectors.

Joining the many other multinationals already established here, Apple recently announced its decision to open an R&D center in Israel – its first outside the US – and Google has just launched an incubator for Israeli high tech startups

A number of MNCs – including Microsoft, IBM and HP – have developed extensive programs for startups, based on the utilization of their solutions in the development of innovative products.  These programs will be discussed in future articles in the series.

About Arlene Marom

Prior to moving to Israel, Ms. Arlene Marom was the Managing Editor of two publications in Florida in the field of construction – The Florida Contractor & Builder and The Pan American Trader. Ms. Marom also worked as Medical Librarian at Mount Sinai Medical Center and the Papanicolaou Cancer Research Institute. Since 1995, she has been involved with high tech startups in Israel’s Silicon Wadi, beginning with PowerDsine, which became Microsemi Israel. She works with clients on business development projects – identifying and approaching potential customers and partners – as well as creating sophisticated original marketing and business materials. She was selected as the Israel representative of DEMO Germany, introducing DEMO (the launchpad for global startups) to the Israeli high tech community, and bringing to Munich 9 of the 20 companies chosen from across Europe and Israel to present at the event.In 2008, she established the IsraelStartupNetwork, assisting startups by organizing events and providing ongoing updates about opportunities, including matchmaking between startups and requests from investors, distributors, etc. Ms. Marom represents Sramana Mitra’s 1M/1M program in Israel, organizing pitchfests for ISN members, with sponsors providing winners with scholarships to the program. Ms. Marom has a BA Cum Laude in Psychology with a minor in Philosophy from the University of Miami, MS in Library and Information Science from FSU, and Certification as a Medical Librarian from Emory University.

Follow her on twitter:@arlenemarom