The Israel Innovation Authority, which offers grants to tech companies, has eased its rules, updating its repayment guidelines and allowing companies to license their intellectual property outside Israel without having to return their grants.
The Israel Innovation Authority, formerly the Office of the Chief Scientist, is a government entity that provides the majority of state grants to companies involved in research and development. These grants are paid back in the form of royalties, calculated according to the amount of sales connected to the R&D performed with the state’s funding and the level of the authority’s participation in the company’s R&D.
Now, in lieu of an immediate cash payment, approved companies will be allowed a payment plan. This is intended to allow the authority to continue to share in the risk of the company’s research stage until the final stages of commercialization of a product.
In addition, companies receiving grants from the authority can now license knowledge to entities outside Israel without it being considered a transfer of intellectual property — a move that previously obligated the company to return all grants received from the authority immediately.
Companies that transfer their intellectual property outside of Israel will not receive support from the authority after doing so, but companies that leave ownership of the intellectual property in-house but offer licenses for its use will receive support from the authority for any continued R&D, the authority said in a statement.
In addition, the guidelines for companies that receive funding from the authority were updated, and for the first time royalties will be scaled according to company size and the sector in which it operates.
Small companies, which until now paid royalties at 3.5 percent, will start paying 3% as of July 2017. This benefit will impact 99% of the companies receiving grants from the authority, the statement said.
In addition, companies in traditional industries, e.g., textile companies, will pay royalties at a lower rate of 1.3%, while those seeking support from the authority for the first time will continue to benefit from a total royalty exemption for the first three programs.
And while previously the interest rate on the authority’s grants was fixed for the duration of the royalty payout, it will now be updated once a year.