Foreign companies that hire engineers and researchers in Israel, and foreign nationals who work for Israeli employers, eventually run into the same question: who owns what the employee invents or writes? Israeli law answers it through two statutes. The Patents Law 5727-1967 covers inventions, and the Copyright Law 5768-2007 covers software, documentation and other works. The rules differ for employees and for independent contractors, and they leave room for an employee to claim royalties.

Short answer: An invention an employee makes in consequence of their work and during their employment is a "service invention," and under Section 132(a) of the Patents Law it belongs to the employer unless they agreed otherwise. Software and other works an employee creates for and in the course of the job belong to the employer under Section 34 of the Copyright Law. Contractors are not covered by either default, so a written assignment is essential. If the contract is silent on pay for a service invention, the employee can ask the Compensation and Royalties Committee to set it.

1. What Counts as a Service Invention

The Hebrew term is amtza'at sherut (אמצאת שירות). Section 132(a) of the Patents Law defines it as an invention an employee arrived at in consequence of their service and during the period of service. Both conditions must be met. Such an invention becomes the employer's property unless the employer and employee have a different agreement, or the employer waives it.

Three points follow from that wording:

  • No written assignment is needed for ownership to vest in the employer. The statute does it.
  • The parties can agree otherwise. A contract can give the employee ownership, or, as is common in technology companies, broaden what the employer receives.
  • Timing matters. The definition looks at the period of service. An invention conceived after employment ends is not a service invention by definition, although disputes often turn on when the idea really took shape.

The statute does not use a "field of the employer's business" test or a list of resources. In practice, the employee's job description, whether the invention grew out of assigned work, and whether company information or equipment was used are what the parties argue about when deciding whether an invention arose "in consequence of" service.

In Practice: A Hypothetical Side Project

Consider a hypothetical algorithms engineer at a Tel Aviv navigation startup who builds a route-compression method on weekends using her own laptop. It was made during her employment, and it plainly draws on what she does at work, so it is likely a service invention even though she wrote it at home. Compare a colleague who designs a new kind of bicycle lock in his spare time. That invention was also made during employment, but it is hard to say it arose in consequence of his service. He still has to report it under Section 131 (see below), and the contract may say more, but the statutory default would not give it to the employer.

2. Notice, Waiver and Disputes

The Patents Law sets out a short procedure around each invention:

  1. Notice (Section 131). The employee must notify the employer in writing of any invention made in consequence of service or during the period of service, as soon as possible after making it, and of any patent application they file. This duty is broader than the service-invention definition, because either condition is enough.
  2. Six-month mechanism (Section 132(b)). If the employee's notice states that, absent a contrary reply within six months, the invention will become the employee's, and the employer does not reply within that time, the invention does not become the employer's property.
  3. Disputes go to the Registrar (Section 133). If the parties disagree over whether an invention is a service invention, either one may apply to the Registrar of Patents at the Israel Patent Office. This is not a Labor Court matter.
  4. Disclosure and cooperation (Sections 139 and 140). The employee must give the employer the details of the invention and help it obtain protection. If the employee refuses, the Registrar can allow the employer to act in the employee's place.
  5. Confidentiality (Section 141). Until a patent application is filed, the employee, the employer and anyone who received the information may not disclose the invention's details.

Employees of the State, soldiers, police officers and employees of certain state bodies are covered by separate provisions (Sections 137 and 138), including a restriction on filing a patent application abroad without approval.

In Practice: Treat Every Invention Notice as a Deadline

An employer that ignores an invention disclosure can lose the invention under Section 132(b) if the notice contained the six-month language. Build a simple intake process: a written disclosure form, a log of the date received, and a decision by someone with authority within six months on whether the company claims the invention. Keep the paperwork, because the notice date also matters for royalty claims (see the next section).

3. Royalties Under Section 134 and the Compensation and Royalties Committee

Owning the invention does not settle whether the employee is paid for it beyond salary. Section 134 says that where no agreement determines whether the employee is entitled to remuneration for a service invention, to what extent and on what terms, the Compensation and Royalties Committee decides. The Committee is appointed by the Minister of Justice under Section 109 of the Patents Law and sits at the Israel Patent Office. Claims go to the Committee, not to the National Labor Court.

Under Section 135, the Committee considers, among other things:

  • the position in which the employee was employed;
  • the nature of the link between the invention and the employee's work;
  • the employee's initiative in the invention;
  • the possibilities for exploiting the invention and its actual exploitation; and
  • reasonable expenses the employee incurred to protect the invention in Israel.

The courts have shaped how this works in practice:

  • Bayer v. Plurality (LCA 3564/12, Supreme Court, 2012). The Court held that a contract clause denying remuneration does not, by itself, prevent an employee from bringing a claim before the Committee. The Committee may still dismiss the claim.
  • Barazani v. Iscar (HCJ 4353/14, 2015). The High Court of Justice declined to interfere with a Committee decision holding that Section 134 is not mandatory, so an employee can agree to give up remuneration for service inventions. The Court also stressed that it intervenes in Committee decisions only in exceptional cases.
  • Levy v. Teva (High Court of Justice, December 2019). The Court upheld the dismissal of a former researcher's royalty claim as time-barred. Commentary on the ruling reads it as starting the limitation clock around the time the invention had to be reported to the employer, rather than at the end of employment, and as describing the employee's right as a right to apply to the Committee, not a vested right to payment.

The practical lesson for employers is that silence in the contract is what opens the door to a Section 134 claim. For employees, a claim should be raised close to the time of the invention, not years later when a product succeeds.

Source code, documentation, designs and similar material are protected by copyright, not patents, so the Copyright Law 5768-2007 applies:

  • Section 34 (employee works). The employer is the first owner of copyright in a work an employee created for the purpose of their employment and in the course of it, unless agreed otherwise.
  • Section 35 (commissioned works). When a work is commissioned, the author is the first owner unless the commissioner and author agreed otherwise, expressly or by implication.
  • Section 37 (transfers). Copyright can be transferred by contract, and a contract to transfer copyright or grant an exclusive license must be in writing.
  • Sections 45 and 46 (moral rights). The author keeps a personal moral right to be named on the work and to object to distortion or other prejudicial treatment that harms their honor or reputation. The moral right cannot be transferred, even when the economic copyright has been. The statute does not say expressly whether it can be waived, so contracts usually include the author's consent to anonymous use and modification, to the extent the law permits.

5. Contractors and Freelancers

The service-invention chapter and Section 34 apply to employees. A freelancer or consultant who works under a services agreement is not covered by either default. For copyright, Section 35 makes the contractor the first owner unless there is an agreement to the contrary, which can in principle be implied. Relying on an implied agreement is a poor plan, because it turns ownership into a factual dispute just when an investor or buyer is running due diligence.

A contractor agreement should include:

  • a present assignment ("hereby assigns") of all rights in inventions, code and other deliverables, including work done before the contract was signed;
  • a duty to sign patent filings and other documents, during and after the engagement;
  • a warranty that the work is original and not subject to a former employer's or client's rights, including open-source licenses the client has not approved;
  • confidentiality terms covering the client's trade secrets; and
  • an express consent regarding moral rights, as far as the law allows.

Labeling someone a contractor does not settle their status. Israeli labor courts look at the substance of the relationship, and a worker who is reclassified as an employee may bring employment-law claims. Our guide on employee vs. independent contractor status in Israel covers that test.

6. Inventions Made After an Employee Leaves

The Patents Law does not contain a post-employment period during which later inventions automatically belong to the former employer. A service invention must be made during the period of service. When an employee leaves and files a patent shortly afterward, the fight is usually over the facts: was the invention in fact conceived while they were still employed, and does it use the former employer's confidential information?

Employers protect themselves in three ways:

  1. Documentation. Lab notebooks, code repositories, design reviews and disclosure forms show when an idea first appeared.
  2. Trade secret law. The Commercial Torts Law 5759-1999 protects trade secrets, which helps where a former employee builds on confidential know-how. See our guide on employee trade secrets in Israel.
  3. Contract clauses. Exit procedures, a reminder of confidentiality duties, and a requirement to disclose related patent filings for a defined time after leaving. Israeli courts review post-employment restrictions on an employee's freedom of occupation closely, so such clauses should be narrow and tied to real confidential information. Our guide on non-compete agreements in Israel explains the limits.

7. Foreign Parent Companies and Cross-Border R&D

The Israeli rules apply to the employment relationship, so the first question is who the employer is. In most multinational setups, engineers are employed by an Israeli subsidiary. Service inventions and employee works then vest in that subsidiary, not in the foreign parent. Getting the IP to the parent takes a written intercompany arrangement, usually an R&D services agreement under which the subsidiary develops technology for the parent, or an assignment. These arrangements have Israeli tax and transfer-pricing consequences and should be designed with tax advisers from the start.

Foreign nationals working in Israel are subject to the same ownership rules as Israelis. Where an Israeli resident works remotely for a foreign company with no Israeli entity, the contract often chooses a foreign law. The Israeli statutes may still be raised, especially Section 134 royalty claims, so the safest course is to make the assignment and remuneration terms clear under both systems.

Israel Innovation Authority funding

Companies whose R&D was funded by the Israel Innovation Authority under the Encouragement of Research, Development and Technological Innovation in Industry Law 5744-1984 face a separate layer of restrictions, whatever the employment contracts say:

  • The grant is generally repaid through royalties on revenues from the funded products, which the Authority's published guidance describes as 3% to 5% of revenues until the grant plus interest is repaid.
  • Selling or transferring funded know-how outside Israel requires the Authority's approval and a redemption payment set by formula. Law-firm summaries of the rules describe a floor of the grants plus interest, less royalties already paid, and a cap of six times the grants plus interest.
  • Manufacturing abroad using funded know-how also requires approval and may increase the amount repayable. The rules for this were revised for funding applications filed after October 25, 2023.

For a buyer of an Israeli technology company, funded IP is a standard due diligence item, because moving it to a foreign parent after closing triggers these rules. Check the current Authority rules for the specific funding track before relying on any figure. Our overview of Israel Innovation Authority grants has more background.

8. Contract Checklist

For employees, an Israeli employment agreement in a technology or research role should cover:

  1. Confirmation that service inventions and employee works belong to the company, with a definition broad enough to cover inventions related to the company's business made during employment.
  2. A remuneration clause that refers expressly to Sections 132 and 134 of the Patents Law and states what the employee receives for service inventions. If the company runs an inventor bonus policy, say that it is the full compensation.
  3. A written disclosure procedure matching Section 131, and an internal process to answer within six months.
  4. Cooperation with patent filings, during and after employment.
  5. Confidentiality obligations and an exit procedure.
  6. Moral rights consent, as far as the law permits.

For contractors, use the list in section 5 above. Because there is no statutory default in the client's favor, the written assignment does all the work. For broader background on Israeli IP registration, see our guides to patent registration in Israel for foreign companies and Israeli copyright law for foreign businesses.

Frequently Asked Questions

Usually, if it is a service invention. Section 132(a) of the Patents Law 5727-1967 gives the employer ownership of an invention the employee made in consequence of their service and during the period of service, unless the parties agreed otherwise. No written assignment is needed. The employer can lose the invention if it waives it, or if the employee's Section 131 notice says it will pass to the employee and the employer does not object within six months. Contracts can change the default either way.
Possibly. Under Section 134 of the Patents Law, if no agreement settles whether and how much the employee is paid for a service invention, the Compensation and Royalties Committee decides. In weighing a claim, the Committee considers the employee's role, the link between the invention and their work, their initiative, how the invention can be and has been exploited, and reasonable costs they spent protecting it in Israel. The Supreme Court has described this as a right to apply to the Committee, not a vested right to payment.
In many cases, yes. In Barazani v. Iscar (HCJ 4353/14, 2015), the High Court refused to disturb a Committee decision that Section 134 is not mandatory and can be contracted out of. Earlier, in Bayer v. Plurality (2012), the Supreme Court held that a contractual waiver does not automatically stop an employee from bringing a claim to the Committee. The safest practice is an explicit clause that refers to Sections 132 and 134 and states what, if anything, the employee receives.
Often, yes, unless the contract says otherwise. The Patents Law service-invention rules and Section 34 of the Copyright Law 5768-2007 apply to employees. For commissioned works, Section 35 of the Copyright Law makes the author the first owner unless the parties agreed otherwise, expressly or by implication. Relying on an implied agreement invites a dispute, so foreign companies using Israeli contractors should have a signed, written IP assignment. Section 37 requires a copyright transfer to be in writing.
Not automatically. The employer is usually the Israeli subsidiary, so service inventions and employee-created works vest in the subsidiary first. To move them to the parent, the group needs a written intercompany agreement, such as an R&D services or assignment agreement, which also has tax and transfer-pricing consequences. If the Israeli company received Israel Innovation Authority funding, transferring the funded know-how outside Israel requires the Authority's approval and a payment calculated under its rules.
Often yes. Section 131 of the Patents Law requires an employee to notify the employer in writing of any invention made in consequence of their service or during the period of service, as soon as possible after making it, and of any patent application they file. That duty is wider than the service-invention definition, which needs both conditions. A side project made during employment must therefore be reported even if it may ultimately belong to the employee.