A company acquires an Israeli software startup, a media group purchases a video archive, or an investor evaluates a business whose primary asset is a catalogue of photographs and digital content. In each transaction, there is a fundamental distinction between the target’s longstanding use of an asset and its ability to prove that it owns, controls and can transfer the rights necessary for the buyer’s intended exploitation.
Copyright due diligence in Israel identifies the important works, traces the chain of ownership, examines third-party licences and evaluates how unresolved rights may affect the acquisition price, transaction structure and seller’s obligations. It complements a general intellectual property review but focuses on the legal rights in software and creative content rather than patent validity or the mechanics of an acquisition generally.
Which Copyright Assets Should Be Identified in an Acquisition?
For a software company, the relevant assets may include source code, proprietary libraries, technical documentation, graphical elements and interfaces. For media, publishing and advertising businesses, they may include photographs, videos, illustrations, scripts, music, recordings and archives. The review should distinguish works owned by the company from content it uses under a licence, and determine how essential each asset is to revenue and continued operations.
An asset acquisition differs from a share purchase. When specific assets are bought, the buyer must determine how every material right or licence will be transferred. In a share acquisition, the company holding the licence may remain the same, but change-of-control provisions can still affect permission to use the content. Continuity of the business does not automatically guarantee continuity of every licence.
How Is the Chain of Copyright Ownership Verified Under Israeli Law?
The starting point is Sections 33–37 of the Israeli Copyright Law, 5768-2007. In general, the author is the first owner. Section 34 contains the rule for qualifying works made by employees, while Section 35 deals with commissioned works. Section 37 governs transfers and licences, including the requirement of a written instrument for an assignment or exclusive licence.
The diligence process follows each asset from its creator to the target company. Who wrote the code or produced the photographs? When were the works created? Was the creator an employee, founder, freelancer or subcontractor? What documentation supports the transfer of rights? A management representation stating that “all IP belongs to the company” is insufficient without examining the underlying contractual and factual record.
Existing exclusive licences, third-party commitments and previously authorized uses should be documented alongside ownership. A company may own copyright but lack the commercial freedom that a buyer assumes it will acquire.
What Should Be Checked in Founders’ and Employment Agreements?
Critical software may have been created before the company’s incorporation or while a founder worked for a previous employer. The date of creation, relationship between creator and company, and applicable employment or assignment agreements therefore matter. Incorporation of the startup or years of using the code does not itself transfer copyright to the company.
Even where a work was created by an employee, the statutory question is whether it was created for the purposes of and during the course of employment, subject to any applicable agreement. A break in the chain of title may require a corrective assignment, a release from another rights holder or investigation of a dispute with a former founder.
Some defects can be cured before closing. Others may affect pricing, escrow, indemnities or the feasibility of acquiring the relevant product at all.
Works Produced by Freelancers, Agencies and Subcontractors
Businesses frequently rely on external software houses, designers, photographers, advertising agencies and producers. Diligence should determine who actually created each important component, which rights were transferred to the target and whether the service provider was authorized to transfer rights originating with its own subcontractors.
Payment and receipt of a finished file do not, by themselves, establish copyright ownership. The buyer should also ask whether the company possesses editable source files, development documentation and the permissions required to appoint a replacement contractor after closing. The distinction between copyright ownership and delivery of production materials is addressed in our guide to Commissioned Creative Content Agreements in Israel.
Licence Restrictions That May Affect an Israeli Acquisition
Licences may restrict use by duration, territory, platform, number of users, sublicensing or permitted commercial purpose. Transfer restrictions, group-company access and change-of-control provisions are especially significant in mergers and acquisitions.
A licence valid for the target’s current activities may not cover the acquirer’s proposed expansion. A subscription or media licence may also be held in the name of an employee, founder or vendor rather than the target itself.
Where the transaction involves an asset transfer, third-party consent may be necessary. The buyer should identify indispensable permissions and verify whether they will remain effective after the proposed transaction. The governing principles of assignments and licences are discussed in Copyright Assignment and Licensing in Israel.
Open-Source Software and Licence Compliance
A software product may incorporate components under MIT, Apache, GPL and other open-source licences. The diligence process should identify components and versions, the licences that govern them, their integration into the product and how the product is distributed.
The review should address attribution, required notices, obligations relating to modified code and any source-code provision requirements triggered by the relevant licence and distribution model.
It is incorrect to assume that every use of GPL-licensed software requires disclosure of all proprietary source code. The answer depends on the licence version, the affected code, the manner of combination and the way software is used and distributed. A technical dependency review may be necessary before counsel can reach a reliable conclusion. For related background, see Software Copyright in Israel.
Photographs, Music and Video Archives
A content archive can contain commissioned works, stock photographs, recordings, archival footage and user-generated content. Each component may be governed by a different grant of rights. A licence to display a photograph on a corporate website does not necessarily permit resale, and permission to perform music does not necessarily authorize synchronizing it with a commercial video.
The purchaser should review acquisition and licensing records, identify rights holders, verify the duration and scope of permissions and determine which uses may continue after closing. Where the central asset is a catalogue, an unresolved title issue affecting a small number of high-value works may be more material than numerous deficiencies concerning marginal content.
Moral Rights in Israeli Copyright Due Diligence
Sections 45–46 of the Copyright Law establish a personal moral right, separate from economic copyright, for the categories of works covered by those provisions. Acquiring economic rights does not automatically settle questions of credit, alteration or potentially prejudicial treatment of a work.
If a buyer plans to re-edit videos, create derivatives or reuse photographs in new campaigns, the transaction documents and the creator’s consents should be examined. The statute excludes computer programs from its moral-right provisions, although separate contractual obligations may still apply.
Assessing Content Generated with Artificial Intelligence
Targets may claim rights in text, images, videos or code generated substantially with AI tools. Diligence must distinguish the platform’s contractual permission to use an output from the separate question whether copyright subsists in that output under the applicable law.
Counsel should assess which source materials were supplied to the tools, what creative work was performed by humans, whether confidential information was disclosed and which representations were provided by vendors. Version histories and evidence of human creative contribution may be useful for significant works.
The transaction review need not resolve every theoretical issue about AI authorship. Its task is to establish whether the target can validly provide the ownership and permissions promised to the buyer. See also Who Owns Rights to AI-Generated Works?.
Existing Claims, Settlement Agreements and Third-Party Licences
The buyer should request records of takedown demands, copyright allegations, court and arbitration proceedings, settlements and disputes with employees, creators and vendors. Longstanding use without an objection is not conclusive evidence of a valid licence.
The diligence process should also uncover permissions already granted to others, particularly exclusive licences, commercial exclusivity and distribution restrictions. A work that is licensed exclusively to another business is not equivalent in value to one that can be commercialized freely, even if the seller lists both as wholly owned assets.
Turning Due Diligence Findings into Acquisition Terms
Not every problem requires abandoning the transaction. Sometimes the parties can purchase an additional licence, execute a confirmatory assignment, replace a software component or obtain third-party consent.
Where a critical software licence cannot be transferred, or title to the core code remains disputed, the problem may affect the economic premise of the acquisition. Transaction protections can include conditions precedent, price adjustments, document-completion undertakings, representations and warranties, indemnities and escrow arrangements.
The contractual response should reflect the particular asset and risk, its materiality and whether the issue can be cured. A generic warranty that all copyright is valid is not a substitute for a properly documented chain of title.
How Copyright Due Diligence Differs from Patent Due Diligence
Copyright review centers on protected works, ownership records, development agreements and permissions to use software and content. Patent review also involves granted patent claims, registration and patent validity, among other issues. A positive result in one area does not establish the status of a different category of intellectual property rights.
Both reviews may be undertaken as part of the same transaction, but the documents, statutory principles and evidentiary questions differ. For patent-specific concerns, see Patent Due Diligence in Israel.
Israeli Legal Sources and Further Guidance
The principal statutory framework is the Copyright Law, 5768-2007, particularly Sections 4–5, 11–17, 33–37 and 45–46. See also Yonatan Drori and Yotam Werzansky-Orland, Intellectual Property Law in Israel (2019), Chapter 4, pp. 346–348.
For advice on copyright ownership, licensing, M&A transactions and disputes involving creative content or software, see Drori Stav IP’s Copyright Practice in Israel.
