Israeli army may crack down on ex-soldiers profiting from tech expertise
The transfer from military to civilian use of prowess developed in the ultra-sensitive field of cybersecurity is probably the area creating the biggest headache

Israeli army may crack down on ex-soldiers profiting from tech expertise

New review of the uses recruits make of their skills after their service — a central driver of Israel’s startup economy — is already prompting alarm

Cadets in the IDF Cyber Defense Unit course, June 10, 2013 (IDF Spokesperson's Unit)
Cadets in the IDF Cyber Defense Unit course, June 10, 2013 (IDF Spokesperson's Unit)

The Israeli army is mulling a policy that would regulate the technologies and the expertise soldiers can use once they leave.

Details of a review of the matter, said to be in progress at the highest levels of the IDF, are still unclear, but there is already speculation and some alarm in the startup nation’s tech community, whose growth depends in significant part on knowledge and skills gained during army service.

“There is no current policy regarding the technologies and expertise the solders can use outside the army but the subject is being reviewed,” a spokesman for the army confirmed, declining to disclose additional information.

Israel’s tech ecosystem is heavily reliant on the skills learned by soldiers and officers during their army service: they serve their country in highly secret intelligence units, developing products, tools, codes and algorithms, and then, upon completing their duty — and generally after a trip abroad — they study at university and set up a startup company or join a multinational tech corporation that snaps them up for their talents.

The rules governing what intellectual property ex-soldiers can use in civilian life are quite clear, said Yuval Lazi, a partner in the high-tech and technology department at Barnea & Co. Law Offices in Tel Aviv. The intellectual property of things developed in the army belongs to the army, and soldiers are required to sign nondisclosure documents regarding their work.

Soldiers from the 8200 Unit in training (photo credit: Moshe Shai/Flash90)
Soldiers from the 8200 Unit in training (photo credit: Moshe Shai/Flash90)

“The rights to any intellectual property that a soldier has developed or produced during his time in the army — patents, lines of code or even photos — belong to the army and not to the individual,” Lazi said. “As a result, soldiers leave the army with skills they learned in the army to develop civilian technologies, but without the ability to embed or use the technologies they developed; they cannot copy, that is illegal.”

The army is strict about the enforcement of its intellectual property rights, he said. “I am familiar with cases in which the army halted the activity of a company, while investigating its officials, because they discovered that a former soldier embedded a technology developed in the army into the company’s product — this technology belongs to the army.”

However, there “is a lot of gray area,” especially when dealing with sectors like cybersecurity and software, said Carmi Gillon, a former head of Israel’s Shin Bet security agency who is now the executive chairman of the Israeli cybersecurity company Cytegic.

Former Shin Bet chief Carmi Gillon. (Orel Cohen/FLASH90)
Former Shin Bet chief Carmi Gillon. (Orel Cohen/FLASH90)

“When a soldier leaves the army, all the information is in his head,” Gillon said. “He doesn’t need to take the algorithms with him. And it is very difficult to know how to halt the leaking of this knowledge into the commercial markets.”

Cybersecurity is probably the area creating the greatest tension for the army, because most of the new startups being set up in this field are related to knowledge stemming from the army. It’s one thing is to take an idea developed in the military and convert it to medical purposes, say. It’s quite another to use the same idea in the same way.

“Because of secrecy, the army cannot properly protect its intellectual property like a regular business would, because by registering it, it reveals its capabilities. So here lies the problem,” said Menny Barzilay, a strategic adviser to the interdisciplinary cyber-research center at the Tel Aviv University

As part of their army duty, soldiers as young as 18 get exposed to highly secretive and strategic information and develop cutting-edge solutions. When they get released from the army they possess very sensitive information they can use to set up a company, Barzilay said.

“Sometimes they are not even aware of the damage they can be inflicting on the security of the state by setting up companies based on those techniques they have learned,” he said.

The line between what can be used and what cannot is very fine, Gillon agreed, and can be crossed unwittingly.

This creates a huge problem for the army because the secrecy of its operations can be compromised. “All armies develop tools that they don’t want the enemy to know about. But if these come out from a private company that afterwards sells it in the commercial market, there is a problem,” Gillon said. “Because we are talking especially about programmers — people who work with their heads at their computers — the ability to steal information, even if you are not a thief,” exists.

“I understand they [the army] are looking for a way to overcome this problem,” Gillon said. “It is difficult to believe they will manage. This is a risk that any industry or any intelligence organization takes, anywhere in the world.”

IDF soldiers at a control board in the National Cyber Bureau (Photo credit: Moshe Shai/FLASH90)
IDF soldiers at a control board in the National Cyber Bureau (Moshe Shai/FLASH90)


To deal with a similar concern, the Shin Bet published a legal document that said that one who steals or uses the organization’s secrets can be jailed for up to five years, Gillon said. This is a deterrent, he said, though he believes it can be implemented only “in theory.”

Israel has more startup companies per capita than any other nation, according to data compiled by Tel Aviv-based IVC Research Center, which tracks the industry. The number of active high-tech companies operating in Israel has jumped from 3,781 in 2006 to 7,400 in mid-2016, according to IVC. Many of its entrepreneurs have stemmed from army intelligence units, including the elite IDF 8200 unit.

Shooting itself in the foot

Nir Lempert, the chairman of the alumni association of the IDF 8200 unit, said the rules are clear: intellectual property created in the army belongs to the army. But, he said, citing a non-technology related example, what happens when a soldier trains snipers in the army and then goes out into the civilian world and sets up a shooting school for civilians? “He is teaching what he learned in the army. Does that mean he has to pay royalties to the army? So in the same way if someone learned in the army how to create a cyber-attack or to create a defense against a cyber-attack, or if a pilot learns to fly and then goes and works for El Al, should they pay royalties to the army? It would be absurd.”

Nir Lempert, chairman of the 8200 Alumni Association at the Hybrid event in Tel Aviv (Courtesy)
Nir Lempert, chairman of the 8200 Alumni Association (Courtesy)

The army has studied the matter in the past but has taken no steps, Lempert said. “They came to the conclusion that regulations would be more damaging than beneficial, in terms of Israel’s macro economy,” he said.

The army must take care not to cause a brain drain from the organization, Lempert warned. “The army wants officers to stay on and wants to make the most use of the knowledge they have acquired. The challenge here is attaining a balance.” If the army is indeed looking into the matter of copyright, “then I hope they reach the right conclusions,” he said.

Lempert is also the chief executive officer of Mer Group, a publicly traded company with holdings in telecom, security and cleantech activities.

Any move to try to regulate technology use will be detrimental both to the Israeli army and the Israeli economy, agreed Prof. Eugene Kandel, a former head of Israel’s National Economic Council and chief executive officer at Start-Up Nation Central, a nonprofit organization.

“Soldiers and officers that have potentially commercial ideas will be hesitant to expose them to the army and will wait to develop these when they are discharged, thus damaging the army,” he said. In addition, because of secrecy issues, the army is unable to patent things as well as they should. This will make it more difficult to protect intellectual property overseas, and will thus cause people to leave the country to develop the products.

Former head of Israel's National Economic Council, Prof. Eugene Kandel (Miriam Alster/Flash90)
Former head of Israel’s National Economic Council, Prof. Eugene Kandel (Miriam Alster/Flash90)

Israel’s high-tech sector, which has played a historic role in the nation’s economy and which accounts for about 50 percent of its industrial exports, has already ceased to be the nation’s growth engine, the Finance Ministry warned in a report in February, as it faces a shortage of skilled labor and declining research and development investment.

Saul Singer, co-author of 'Start-Up Nation'.
Saul Singer, co-author of ‘Start-Up Nation’ (Courtesy)

If the army starts limiting the amount of knowledge or technologies coming out of the army “it would be a disaster,” Saul Singer, coauthor of “Start-up Nation,” said. “If they start putting up regulations, we would have fewer startups and the military would lose very talented people more quickly.”

“Israel has a strategic interest in growing startup nation, so if you do something that restricts high-tech, you are hurting your economic and strategic interests. Historically the government and the military have understood this. You don’t want to kill the goose that lays the golden eggs, and that’s the high-tech sector. So if the military decided to do this, it would be contrary to the whole spirit and history of the country in relation to high tech.”

Any move in that direction would be “absolutely idiotic; there would be absolutely no benefit,” Singer said. “It is so contrary to what made this country startup nation. I am not surprised that some people might think this way, I’d just be surprised if this sort of counterproductive idea actually went anywhere.”

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