An Israeli patent can serve as collateral for financing a technology company, an acquisition or a portfolio-backed credit facility. Sections 89–93 of the Israeli Patents Law, 5727-1967, govern the creation, registration and enforcement of a pledge over a patent. The statutory regime also affects licensing, creditor priority and the steps required when a secured patent is sold or transferred.
For foreign lenders, investors and transaction counsel, the central tasks are identifying the Israeli rights in the collateral package, perfecting the security interest in time, establishing priority against earlier rights and addressing the effect of the pledge on the company’s ability to license its technology.
What Can Be Pledged: The Patent, Its Income or Both?
Section 89 of the Patents Law permits the patent proprietor to pledge, by written instrument, the patent itself, the income derived from it, or both. These alternatives produce different forms of collateral. A security interest over the patent is directed to the proprietary right; a pledge over income may concern royalties, licence payments and other identifiable receipts.
The instrument should identify each Israeli patent by number, specify the obligations secured and define the rights and revenues covered. Where the collateral includes patent applications, follow the registration procedure made available by the Israel Patent Office for recorded rights in applications.
Where the debtor’s intellectual property portfolio includes foreign patents, those rights require analysis under the governing law and recordal system of each relevant jurisdiction. An Israeli register entry is directed to the Israeli rights included in the transaction.
Registering a Patent Pledge Within 21 Days
Section 90 establishes a critical priority rule: a pledge over a patent is not effective against another creditor of the patent proprietor, a liquidator or a bankruptcy trustee unless it is registered in the Patents Register within 21 days after the pledge was created.
This is a priority and enforceability requirement against the persons specified by the statute. The commercial financing documents must therefore provide a clear date of creation, timely execution and prompt filing of the recordal request. Diligence should also identify any rights in the patent previously granted and registered, because the statutory pledge is subject to prior registered rights.
The Israel Patent Office’s official pledge registration service confirms the 21-day requirement and explains the recordal process. In a cross-border closing, Israeli counsel should receive the signed security documents and patent schedule in time to meet that deadline.
How to Record or Remove a Pledge at the Israel Patent Office
The Patent Office’s service covers recordal or removal of pledges and licences concerning registered Israeli patents and filed Israeli patent applications. A request requires the pledge deed or agreement, a power of attorney where the submission is made by an authorized representative and evidence of payment of the official fee for each patent or application affected.
Represented applicants and corporate applicants ordinarily use the Office’s online patent filing system with a smart card. The filing is submitted under the category for changes in the register and the request type for registration of a pledge.
The registration charge is prescribed by item 7(c) of the Second Schedule to the Patents Regulations; the amount payable is the fee applicable when the request is submitted.
To remove a registered pledge, the Office requires a signed consent document from the secured creditor. Once the secured debt is discharged, completion of the release should include obtaining that document, filing the removal request and checking that the register records the change.
Floating Charges and Separate Corporate Registries
Section 90 contains a specific exception where the patent forms part of assets subject to a floating charge created by a company or cooperative society that owns the patent. In that setting, the section does not require registration of the floating charge in the Patents Register.
Corporate security recordal must still be addressed under the legislation applicable to the chargor and the particular charge. For an Israeli company, the Israeli Corporations Authority provides a company-charge registration service.
Transaction documents should identify whether the security is fixed or floating, the legal entity granting it and the relevant registration obligations. This is particularly significant where a financing package includes both registered intellectual property and other corporate assets.
Licensing a Patent Subject to a Pledge
Under Section 91, granting a licence to exploit a patent subject to a pledge other than a floating charge requires the written consent of the pledgee.
For a technology company, that consent requirement can affect ordinary commercial licensing after a financing transaction closes. A credit agreement can therefore define permitted licences, procedures for obtaining consent, rights arising from existing arrangements and treatment of intra-group or ordinary-course licences.
When a lender evaluates its collateral, it should review licences already granted, registered authorized uses and any commitments that affect exclusivity or the patent’s commercial value.
Assignment or Sale of a Pledged Patent
Transfer of a pledged patent requires examination of the security instrument, recorded rights and the restrictions governing assignment. A prospective purchaser should establish whether the pledge will remain attached to the right, whether creditor consent is required and whether the seller must deliver an effective release at closing.
Recordal directions issued by the Israeli Registrar address transfers of patents with existing recorded security interests and the treatment of restrictions appearing in the pledge agreement. The buyer’s due diligence should reconcile the patent register, transaction documentation and the lender’s written discharge arrangements.
For ownership transfers see Patent Ownership Transfer in Israel: Assignment Agreements and Recordal.
Enforcement of Patent Security and Appointment of a Receiver
Section 92 requires court authorization to enforce a patent pledge. The court may grant appropriate relief, appoint a receiver or direct a sale of the patent.
Under Section 93, a court-authorized receiver may sell the patent, grant licences for its exploitation and collect royalties and other payments owed to the proprietor, subject to the court’s approval and directions. The power can extend to payments due before or after the receiver’s appointment, as provided in the section.
Enforcement planning should address the practical value of the secured patent. A buyer may need technical files, know-how and access to maintenance records; existing licences may affect the price; and ongoing official fees may be needed to maintain the right during insolvency or realization.
For multinational collateral packages, the scope of the Israeli receiver’s authority and the transfer of foreign patent rights should be addressed with counsel in the relevant jurisdictions.
Additional Pledges, Assignment of Security and Release
The Registrar’s recordal procedures also address registration of additional security interests, assignment of existing pledges and cancellation of recorded security. Later financing can involve consent requirements under earlier agreements, notice to prior secured creditors and intercreditor arrangements setting out relative priority.
The term “first-ranking pledge” in the finance documents should be supported by searches of the actual relevant registers and an analysis of existing commitments. After repayment or refinancing, the creditor’s release instrument and the subsequent register entry complete the administrative side of the release.
Patent Security Due Diligence for Lenders and Investors
A patent portfolio search should begin with the current proprietor, patent and application numbers, grant status, maintenance fees and the chain of title. It should then examine pledges, licences, co-ownership arrangements and other recorded rights affecting the collateral.
In financing and M&A transactions, the diligence should also consider whether the security package covers patent revenue, existing licensing streams and future licence arrangements, and whether the lender’s intended enforcement strategy is commercially viable.
A court-approved sale of a patent in insolvency may engage other rules governing purchasers. In Civil Appeal 4052/19, the Israeli Supreme Court considered the protection available under Section 34A of the Sale Law to a purchaser in a court-authorized sale. The ruling concerned the effect of earlier ownership claims, while leaving patent-validity challenges as a distinct matter.
For transactional due diligence see Patent Due Diligence in Israel. The statutory analysis of Israeli patent pledges appears in Yonatan Drori, Patent Law (Hebrew, 2023), Chapter 13, Sections 13.4.1–13.4.3. For contentious issues involving enforcement of patent rights see Patent Litigation in Israel.
