IP in ISRAEL
By: Naomi Assia Adv.[1]
I. Bases of the software protection
A. COPYRIGHT PROTECTION OF SOFTWARE IN ISRAEL
Software corporations in Israel are vigorously fighting against the phenomenon of software privacy. This article is a brief overview of the methods of copyright protection available to copyright owners of computer software in Israel.
Copyright Protection
The most extensive and accepted form of protection for computer software in Israel is copyright. The pertinent legislation is a leftover from the British Mandate, the Copyright Act 1911 (the Act) and the Copyright Ordinance 1924 (the Ordinance). Copyrights exist in Israel in every original literary, dramatic, musical and artistic work, as long as:
(a) in the case of a published work, it was first published in Israel; and
(b) in the case of an unpublished work, the author was an Israeli national or resident at the time he or she created the work.[2]
According to section 5(4) of the Ordinance copyright exists in the works from the time of their creation throughout the author’s life and for a period of 70 years after his death. Under Section 5(1) of the Act, the author of a work is the first owner of the copyright in the work.
In July 1998 the Israeli Parliament (“Knesset”) amended the Ordinance to include protection for computer software. Amendment no. 5 states: “For the purposes of copyright, computer software shall be treated in the same way as a literary work within the meaning thereof contained in the Copyright Act, 1911”.
Thus, in Israel, a copyright owner of computer software may avail himself of the protections contained in international treaties to which Israel is a signatory and of the extensive case law on copyright which exists in Israel.
Another major development in this regard was the adoption of the Intellectual Property Amendment Act (according to the TRIPS Agreement) (the Amendment), which came in force in 1.1.2000.
The Amendment amended the Act, the Ordinance, and other Intellectual Property laws in order to harmonize them with the TRIPS Agreement. The Amendment amended the definition of “computer software” so that it shall include both source code and object code.[3] The Ordinance was also amended in the issue of license to use, renting of computer software is defined as a copyright in the software.
Infringement of Copyright
The Act can be violated by a direct or indirect act of infringement. Under section 2(1), direct infringement occurs “…when any person who, without the consent of the owner of the copyright, does anything the sole right to do is by this Act conferred on the owner of the copyright.” Under section 2(2), indirect infringement occurs when “a person sells or lets for hire or by way of trade exposes of offers for sale or hire, or… distributes for the purposes of trade, or…imports for sale or hire…any work which to his knowledge infringes copyright or would infringe copyright if it had been made in Israel.“ Moreover, infringing is defined by the Act as “any copy including any colorable imitation made or imported in contravention of the Act”.
Remedies for Infringement of Copyright
Injunction
Upon a proper showing of the level of the potential damage by a copyright owner, Israeli courts will not hesitate to issue a temporary injunction against an alleged copyright infringer because of the extensive harm that the copyright owner can suffer awaiting trial or settlement of the matter. The issuance of an injunction is discretionary with the court; thus, all the facts and circumstances of the case will be considered.
Receivership
The court may appoint an ex parte receiver who has the authority to enter the premises of a defendant(s) who is infringing another’s copyright (for example the possessors and/or distributors of pirated software) and confiscate, in the defendant’s presence, the software believed to infringe the plaintiff’s copyright.[4]
Further, the receiver is authorized to enter such a defendant’s premises at all times until the end of the particular case (this may take several years) in order to ensure that the directives of the injunction are being observed.[5] This remedy is also given against end-users. In a case sponsored by the Business Software Alliance (BSA), a lawsuit was filed by Autodesk Inc. against a large engineering company and the plaintiff’s attorney was appointed an ex parte receiver. In the raid that followed the appointment, 18 prima facie infringing copies of AutoCad software were found.[6] The appointment of a receiver is clearly a strong deterrent against potential infringement.
Anton Piller/Seizure Order
An Anton Piller order is an ex parte order authorizing an applicant’s attorney, or the court’s designee, to enter the defendant’s property and seize the infringing products as well as the means used to produce them (i.e. the computers used to unlawfully reproduce the software). This remedy can be especially effective because it can prevent the destruction or hiding of illegal software prior to judicial hearings. Despite the harshness of the remedy, Israeli courts have demonstrated a willingness to use it if sufficient evidence exists.[7]
Enforcement Issues
During the last years there have been wide changes in the matter of criminal enforcement in regard with infringing products. An Intellectual Property unit in the Israeli police was established, and is operating all over the country against infringement of copyrights and trademark. The police is authorized to confiscate suspected goods. Moreover, a prosecution unit was established as well and deals with criminal suits.
Private Criminal Complaint
A remedy available in Israel that is not available in some other countries for violations of copyright is the ability of a copyright owner to file a private criminal complaint in the magistrate court against the alleged infringer. In a private criminal case, the court can grant remedies such as imposing fines or even a jail term.[8]
Damages
The monetary remedies a copyright owner may recover if he establishes infringement include recovery of damages and lost profits and costs, including attorney’s fees. A permanent injunction may also be obtained. This is in addition to the confiscation of the infringing copies and the receipt of restraining orders for infringing activities.
Under sections 6-8 of the Act, an action may be filed to recover possessions of copies which infringe copyrighted works and enjoin acts of infringement. Even if a plaintiff cannot show damages with sufficient particularity, section 3A of the Ordinance provides a statutory damage award as follows:
“Where the damage caused by the infringement of a copyright has not been proved, the court may, on the application of the plaintiff, award, in respect of every infringement, compensation in an amount of not less than 10,000 NIS” (currently 2,200 US$).
In Saggai et al v. The estate of Abraham Ninio[9] The Supreme Court held that the illegal reproduction of one copyright in large quantities will be considered as a single infringement and that it will be possible to apply the statutorial compensation several times only where the defendant has infringed several copyrights. However, the number of infringing acts will be taken into account in determining the amount of compensation.[10]
Organizational Actions against Software Piracy
One of the most active corporations in the fight against computer software piracy in Israel is AutoDesk Inc. In a series of civil suits against illegal use of software AutoDesk has settled out of court, receiving damages based on section 3a of the Ordinance, return of legal expenses and acquisitions of legal software copies (by the defendants) at full price in total, sums of between 100,000 NIS (20,000$ approximate) and 150,000 NIS (30,000$ approximate).[11]
A new breakthrough in Anti Piracy activity occurred recently, when AutoDesk joined BSA, the Israeli Organization of Software Protection (IOSP) and Microsoft in filing suit through Naomi Assia’s Law Firm against one of the largest Israeli operators of online bulletin boards, One Man Crew. The operators of One Man Crew have been making illegal copies of a large variety of software programs, including popular programs (such as AutoCad, Office, computer games, etc.) available to its subscribers to download to their personal computers. The prosecutors have obtained a preliminary injunction from the district court in Haifa to stop the operation of the BBS and to enter operators’ premises in order to gather evidence of illegal activity of BBS.
The parties are currently negotiating settlements.
In the latest development in the issue, Judge Ginat of the District Court of Haifa, ruled that a only a clear evidence on part of the defendant that he has legally obtained the software installed in his computer or the license to use them, will be enough to dismiss an allegation of infringement of copyrights. [12]
The Copyright Act Memorandum
The copyright legislation in Israel is based on the British legislation that stayed in force from the British Mandate. Therefore, during the past years, public committees have examined new legislation that will replace the British legislation, in order to provide answers for new and modern situations. The Ministry of justice published the copyright act memorandum on 2004.
As determined in section 2A to the Copyright Ordinance, the memorandum also sets that computer software (in any kind of expression) is considered as a literary work.
The fourth chapter of the memorandum deals with permitted usages, and determines that whomever holds a legitimate copy of a computer software is entitled to copy it for backup use, errors fixing, and for adapting the software to another program. The purpose of this section is to permit, in certain conditions, limited usages in a legitimate copy of computer software, without the need of further permission from the copyright owner.
As for the treatment with infringing products, the memorandum suggests an essential change. The current legislation rules that prosecutor will be the owner of the infringing copies. However, this can be sometimes unreasonable, especially when the financial value of the infringing product is higher than the value of the original literal work. Therefore, in order to level the rights of both parties, the memorandum rules that the ownership of the infringing copy can be transferred to the prosecutor, only within full payment of the value of the work prior to the infringement.
B. PATENT PROTECTION FOR SOFTWARE IN ISRAEL
At first glance. U.S. and Israeli law would appear to permit patent protection for all inventions that involve proceeded, including those involving software. Certainly, other technical processes or procedures, such as chemical or mechanical processes, have been eligible for patent protection in the US and Israel.
US patent law says, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, may obtain a patent therefore..." According to Israeli patent law: “An invention, whether a product or process, which is new, useful, and useable in industry or agriculture and includes an inventive step is a patentable invention”.
However, in Israel and the US, software and software-related inventions have traditionally been viewed as ineligible for patent protection because of software’s resemblance to human thought processes. This has been based primarily on the desire to avoid placing legal restrictions on truly mental processes, such as mathematics. The US Supreme Court once stated, “Einstein could not patent his celebrated law that E=mc2; nor could Newton have Patented the law of Gravity”. Such discoveries, The Supreme Court said, are “manifestations of … nature, free to all men and reserved exclusively to none.”
Since the early 1980s, though, U.S. courts and the US Patent and Trademark office have taken a new approach by favoring patent protection for software-related inventions. The Israeli Patent Register, however, seems to be wavering between the old and the new approaches.
Israeli case law
While there have been many software-related patent cases in the US, there have been only two in Israel so far. The first was Rosenthal v. The Patent Register, in which an Israeli court upheld the registrar’s decision so deny patent protection for a general calculation algorithm to be used generally in numerical control applications and computerized numerical control machines. The basis for the judge’s ruling was that the patent included only calculation steps, without any effect on physical matter.
At the time, the issue of patents for software-related inventions was new, so the ruling did not attract much attention in Israel, Thus, when software-related patents became more popular around the world, the Israel Patent Registrar also began registering software-related patents, despite the ruling of Rosenthal v. The Patent Register.
However, the issue took a surprising turn in 1993, when the Registrar denied patent protection for a software-related invention by United Technologies that controlled fuel flow into helicopter engines to make fuel consumption more efficient. Relying on the court’s ruling in the Rosenthal case, the Registrar said that the Israeli patent law denies protection for software and for inventions that combines hardware and software but whose innovative aspect involves only the software.
Key to Israel approach
The key to the Israeli approach to the patenting of software-related inventions lies in the interpretation of the term “process”. In the Rosenthal and United Technologies cases, courts interpreted the term as actually dealing with a certain physical matter to change its form or condition. According to this line reasoning, Israeli patent laws do not consider a computer program to be a process because it does not create physical changes.
Appeal: A change in direction
The United technologies decision might have barred future patent applications for software-related inventions. However, the company appealed the decision to the Jerusalem District Court, which overturned the Registrar’s decision.
Citing a 1981 US Supreme Court decision (Diamond v. Dieher), the Jerusalem District Court ruled that a patent application for an invention in which software is the only innovative element should be examined as a whole, and not just in terms of whether the invention includes software. If the consolidation of hardware and software is the innovative step in such an inventions that are innovative in the way they combine physical components.
Regarding the interpretation of the word “process”, the Israeli court said that a process should be considered patentable if it leads to technological advancement. The court ruled that United Technologies’ invention met this requirement because it made helicopter fuel consumption more efficient. The court ruled that when software is linked to equipment parts, from which receives information, and transforms the information into instructions that cause optimal changes in fuel consumption, these changes can be considered to have been caused by a process that is patentable under Israeli law.
The ruling indicates a growing tendency to approve patent protection for software related inventions in Israel. Recent US developments may further change Israel’s approach to patenting computer-related inventions. Specifically, US Patent and Trademark office has said that software stored on any tangible computer-readable medium is eligible for patent protection. This would apply most software-related inventions. It will be interesting to see if and when these changes will be implemented in the Israeli patent law.
C Trade Secret and Competition laws in Israel
The Israeli Commercial Torts Act, 1999 (“the Act”), deals with unfair competition and trade secrets.
Section 1 of the Act sets the tort of passing off, which is based on the British legislation. The passing off tort is based on proving the plaintiff’s reputation and goodwill. The first thing one needs to prove is that he has obtained recognition and esteem in the subject trademark. Courts in Israel have ruled that the plaintiff must show that the public binds the product’s trademark with the plaintiff. In addition, it has been ruled that there is no need to prove that all customers have been mislead, but it is enough to show that some customers may be mislead.
The Act also rules that one shall not publish misleading description about one’s business, occupation, property or service, and shall not unfairly prevent customers or employees from accessing to one’s business.
The second chapter of the Act deals with trade secrets. A trade secret is defined as any kind of private business information that cannot be revealed by others, and that the confidentiality of the information provides its owners with a business advantage, only if the owner of the information takes reasonable measures to keep it confidential.
According to section 7, one shall not be responsible for illegal use of a trade secret if the information was revealed during his work with the trade secret’s owner, and that knowledge has become a professional skill.
As for the damages and remedies, where the damage caused by the infringement of the Act, the court may, on the application of the plaintiff, award, in respect of every infringement, statutory damages in an amount not less than 100,000 NIS (approximately 23,000 USD).
D Open Source Software
The basic idea behind open source is very simple: When programmers can read, redistribute, and modify the source code for a piece of software, the software evolves. People improve it, people adapt it, and people fix bugs. And this can happen at a speed that, if one is used to the slow pace of conventional software development, seems astonishing.
The source code of software is a code written in a high-level program language. After the source code is written, the code is compiled and translated into a machine language (object code), which the processor can understand.
According to the classic model, programmers do not spread the source code of the software, so no one could change or modify it. In this way, the programmer could enjoy the exclusivity in the development of the software.
However, according to the open-source model, the software is distributed together with its source code, in order to enable other programmers to change and improve the software.
The Open Source Definition
Open source doesn't just mean access to the source code. The distribution terms of open-source software must comply with the following criteria:
Free Redistribution: The license shall not restrict any party from selling or giving away the software as a component of an aggregate software distribution containing programs from several different sources.
Source Code: The program must include source code, and must allow distribution in source code as well as compiled form. The source code must be the preferred form in which a programmer would modify the program.
Derived Works: The license must allow modifications and derived works, and must allow them to be distributed under the same terms as the license of the original software.
Integrity of The Author's Source Code: The license must explicitly permit distribution of software built from modified source code. The license may require derived works to carry a different name or version number from the original software.
Distribution of License: The rights attached to the program must apply to all to whom the program is redistributed without the need for execution of an additional license by those parties.
Losses and gains
Using the open-source software enables the user to locate software bugs, fix them and improve the software. In addition, the use of systems based on open-source can minimize the cost of acquiring licenses, and can encourage the competition in the market. Another reason for using the open source software is the high pace it is developed, due to the fact that the open source software enables many changes and improvements.
However, the open source software could be sometimes unsafe and unstable. The fact that any user can make changes without limitation, and even without the proper qualifications, can harm the safety level of the software.
Israel Local Law
The concept of open-source software has been spreading from the privet sector to the public sector. On November 2002, a proposal for amending the Tender Obligation Act has been filed to the Knesset. The proposal suggests that the country, government corporations and any other public enterprises will not sign contracts for acquiring software, unless the software was developed in an open-source model.
The main motive for the proposal was to encourage the use of open-source software.
Open-source software provides immediate solutions and improvement of the software’s applications for the benefit of the public. The use of operating systems based on open-source can lead to full control and treatment with viruses, security flaws and performances.
II Software Contracts
A. General principles
In general, according to the Israeli Contract Law (General Part) of 1973 (Hereinafter "Contract Law"), a contract can be formed orally, in writing or in any other way. In addition, the Israeli Contract Law provides autonomy and freedom as to the content of the contract, although the contract cannot be illegal or immoral.
There are some different forms of contracts that are related to "Internet contracts". One of them is the Shrink-wrap contract, which is a handy form to use when the software product is purchased and sold through distributors and retailers to the consumer market place. The Shrink-wrap contract is supposed to be an offer by the vendor that is accepted by either the opening of the package or use of the software. Those actions, done by the vendor, can be related as acceptance by behavior, according to section 6 to the Israeli Contract Law.
The Click-wrap contract, also known as the Click-on contract, can be accepted by clicking the "I Agree" button on the web page. These kind of "Internet contracts" are usually used when the parties are distant or strangers. The problem in Click-wrap contracts is that one can accept a contract by a simple click, without even knowing the meaning of his action. Nevertheless it is recommended in Israel not to deprive the legal validity of those electronic contracts, only because they were accepted in an electronic way.
One of the most important principles in the Israeli Contract Law is the principle of good faith, as set in sections 12 and 39. According to this principle, if one party do not act in good faith, or act dishonestly during the negotiation or the execution of the contract, the contract can be terminated. Moreover, according to part B of the Contract Law, one can terminate the contract in case he entered into the contract due to a mistake, mislead, compulsion or despoliation. If one of the parties claims for violation of the contract, he is entitled to ask the court for enforcement, termination or compensations.
License agreement
In order to secure the supplier's software rights, it is possible to deposit the source code of the software with an escrow agent. The escrow agreement usually forbids the client to transfer the software rights, or to copy or change the software. According to common escrow agreements, in case the supplier has started liquidation procedures or cannot fulfill his obligations to the client, the source code should be transferred to the client.
B. Order public
International private law
The Israeli Foreign Decisions Enforcement Act of 1958 defines foreign decision as a foreign injunction given in a civil case, including compensations. According to section 3 to this Act, Israeli courts can enforce foreign decisions, subject to the existence of 4 terms: 1) the injunction was given by an authorized court; 2) the injunction is final; 3) the injunction can be enforced in Israel; and 4) the injunction is enforceable in the country it was given. The Act also determines some cases in which the injunction will not be enforced by Israeli courts. For example, in case the injunction was achieved by deceit, or when the foreign court was not authorized. Moreover, foreign decisions will not be enforced by Israeli courts it case they can damage Israel security.
Anti-trust issues
The Israeli Business Restriction Act of 1988 deals with chain settlements, merging and monopoly. There were no new court decisions regarding software protection in connection with this Act.
Custom regulation
The Israeli Custom Ordinance forbids importing and exporting to Israel, any goods, constitute an infringement of copyright, or trademark. Therefore, it is possible, according to section 200A to the Israeli Custom Ordinance, to delay any goods, suspected as constitute an infringement of copyright, or trademark.
The owner of a certain intellectual property rights (“the complainant”) can file a request to the custom to delay any goods thatapparently constitute an infringement of copyright or trademark. To that request the complainant should attach a self-guarantee to cover all possible damages caused to the importer due to the delay. The amount of the guarantee depends on the estimated value of the goods (estimation is done by Customs). Customs will hold the counterfeit goods for 3 days only if such guarantee was placed.
The customs will notify the importer and to the complainant about the delay, and about the complainant’s duty to file a bank-guarantee as a condition for continuing the procedure.
After the complainant place the bank guarantee, he has 10 days to file a claim against the importer, or otherwise Customs is empowered to release the goods back to its owners (the importer).
The above-mentioned legislations were enacted after Israel has signed the Trips Agreement (Trade-Related Aspects of Intellectual Property Rights) for protecting intellectual property rights.
Export
The Articles of the Protection of Privacy, 2000 - The Articles set forth the rights for the transfer of data outside of Israel. The Articles ensure that data shall not be transferred to any country that provides less protection to Privacy issues than Israel. In that regard, Section 1 requires that the privacy law of the destination country for the transfer shall not provide less protection than the protection provided under Israeli law. The law of such a country must have a legal standard for collecting of the data, and such data must be accurate and updated. The right of inspection and security measures must be provided as well. Section 2 of the articles defines that, except for a few restrictions, the consent of the person to whom the data is related must be given in order to transfer the data.
III. Address of the Israeli Association of Software Houses
- General Secretary Industry House http://www.iash.org.il/
- Israel Export Institute Electronics and Software Department Director P.O.B. 50084 Tel Aviv 61500, Israel Tel.: 972-3-5142830 Fax: 972-3-5242881 http://www.export.gov.il/
- Israel Venture Capital (IVC)
Ramat Aviv Tower 5th floor, 40 Einstein St. P.O. Box 17672 Tel-Aviv 61175, Israel. Tel: +972-3-640-2350http://www.ivc-online.com/
IV. Literature
Assia, Naomi. COMPUTER LAW & PRACTICE 1987-2004
Kozlovski, Nimrod The computer and the Legal Proceeding 2003
J, Barsade, Esq. The Internet and online business law 2000 -2002
V. Abbreviations
CA Civil Appeal
CF Civil File
CP Criminal File
PD Piskei Din (Judgments)
PM Psakim Mahoziim (District Judgments)
[1]Naomi Assia is the head and the founder of Naomi Assia & Co. Law Offices and serves as chair person of science and technology committee of the Israeli lawyer Bar. Naomi Assia is also the author of the book: “Computer Law” in Israel. http://www.computer-law.co.il/
[2] S. 1 of the Act and S. 4 of the Ordinance.
[3] S. 2(2) of the Amendment, S. 2a. of the Ordinance.
[4] Ashraz v. Rosh Gesher et al. civil file no. 2453/87 (the plaintiff obtained an injunction restraining former employees from marketing unauthorized copies of its software to its customers).
[5] See Magic Software Enterprises Ltd. V. Compushake Ltd. Civil file no. 617/94; Motion no. 4375/94 Machshevet M.L. Ltd. & Compedia Ltd. V. n. Eilat Michon Computers Ltd.
[6] Autodesk Inc. v. Nepro, Civil File No. 251/94.
[7] See for example: Machsevet Ltd. V. Avi-Or, civil file No. 10/92
[8] See for example: Microsoft v. Pasgal computers Ltd. Criminal File no. 9053/88.
[9] Saggai et al v. The estate of Abraham Ninio, Civil appeal No. 592/88.
[10] Sadar computers Ltd. V. Alkto et al. Civil file No. 831/90.
[11] AutoDesk Inc v. Nepro, Civil File No. 251/94 (unreported Be’er Sheva district court); AutoDesk Inc. v. Arcadi, Civil File No. 1618/95 (unreported Haifa district court).
[12] AutoDesk Inc. and Microsoft Corp. v. B.A.B Engineering Inc. and others, Civil File No. 554/00 (unreported Haifa district court, Aug, 2002).