Cabinet Approves Tax Hikes and Budget Cuts

The Cabinet voted to increase the VAT tax and income taxes on some segments of the population in light of a projected budget shortfall. The Knesset still needs to discuss it.

According to Israel Hayom:

The new measures include raising income tax by 1 percentage point on monthly salaries exceeding the national average of 8,881 shekels ($2,198) in 2013. Taxes on monthly salaries of over 67,000 shekels will go up 2 percentage points. Income tax rates in Israel range from 10% to 48%.

Value added tax is also set to rise to 17% from 16% on Aug. 1, most government ministries' budgets will be trimmed by 5% and the tax authority will be cracking down on tax evaders to collect billions of shekels. Finance Minister Yuval Steinitz also ordered immediate tax hikes on cigarettes and beer, which went into effect last week.

Knesset Proposes Bill to End Domestic Fur Sales

The JPost reported on a proposed bill to make Israel the first country to ban fur sales nationally. Due to Israel's generally warm climate I'm not sure this will be a big issue for most people. In case you are wondering, there is a carve-out for shtreimels, the fur has worn by many chassidic Jews. Also, fur imports will still be permitted. 

For a related story, see here and here about the court fight regarding an Israeli company's export of macaque monkeys to the US for biomedical research. In that case, the Supreme Court allowed the company to export only the monkeys that were raised in captivity but not those captured in the wild. However, El Al, Israel's national airlines, in response to public pressure said that it would not transport monkeys for the purposes of experimentation.

Also, another JPost article reports that the Cabinet recently approved a measure prohibiting chicken farmers from starving hens in order to encourage them to lay more eggs, a process known as forced molting, beginning January 1, 2013. Also, the sizes of battery cages will have to be increased to bring Israel in line with European standards. **And an article from the JPost on August 19, reports that a raid on a pig farm also found inhumane conditions as well as potential violations concerning the pollution of groundwater from swine refuse. Apparently the laws on pig farming are fairly lax.**


For information on the Jewish law view of animal rights see the blog
Animals in Halacha run by an Orthodox Jewish veterinarian and the article here and the article entitled Animal Experimentation by Rabbi Alfred S. Cohen  here. This is Rabbi Cohen's conclusion:

Despite some disagreement as to the status of the prohibition of causing pain to animals - whether of biblical or rabbinic origin - virtually all rabbis agree that it is permitted to perform experiments on animals if the intention is to benefit humans. But that is not a blanket permit: although it is permitted In this case to cause pain to the animal, it is only "דרכו של איניש בכך" if it occurs because of "something which people customarily do." What this limitation means in practical terms is not clear. It is of course understood that at all times, a person must be careful to minimize the animal's pain as far as possible. There are other objections which may place a legitimate brake on animal experimentation. There are scientists who claim that some of the uses of animals in scientific studies are not needed, because the same results could be achieved without involving animals. Also, some destruction of animal life is wanton waste, tests performed for trivial purposes. These things would not be permitted under Jewish law. In addition, there is the fact that experiments are duplicated or triplicated in dozens of laboratories around the country and around the world, thus entailing massive loss of animal life. Given the ready access which scientists the world around have to each other's studies, the halacha could not countenance many experiments which do not really serve a worthwhile purpose but only repeat what has been done elsewhere.

Other scientific "advances" may also be barred by Jewish law simply because the discomfort they cause animals is too great for the negligible benefit to man. In this vein, R. Moshe Feinstein castigates the modern practice of penning up animals so that they can hardly move about as well as "fattening calves [with chemically doctored foods] in such a way that their flesh develops a white appearance." (White veal is considered preferable to dark veal). He denounces these practices as reprehensible.

What emerges from all this is that we cannot establish a firm ruling on the question of using animals in scientific experiments. Although in general, halacha condones causing pain to an animal if a person will benefit therefrom, that little "if" leaves a great deal to be determined. Much depends on the need and the circumstances, on the pain to the animal and the expected gain to humanity. This is a determination which the individual experimenter cannot make for himself but which must be addressed on an ad-hoc basis. As the horizons of scientific study expand, the need for further halachic guidelines grows.

Israel Updates its Computer Law to Comply with the Budapest Convention

Last week Israel amended its Computer Law to bring it in line with the Budapest Convention on Cybercrime. The Knesset created a new Section 6 to replace the old one. The new Section 6 makes it a crime to write or distribute software to infiltrate another's computer or or cause that computer to print false information, or whose purpose is to infringe on another's privacy or conduct eavesdropping even without actually causing harm or interference with the compromised system. It also tracks the Budapest Convention in requiring intent for the crimes listed in Section 6.


I couldn't find an English translation of the Computer Law online, so I am providing a translation that I (and Google) made after the jump.


For articles on Israel's Computers Law see this by Ruth Levush who apparently is the Law Library of Congress' Israel law expert, and an article called Computer Legislation: Israel's New Codified Approach from 1996 written by one of the law's drafters, Miguel Deutch, but not freely available online, and here and here for articles relevant to this topic. Bear in mind, however, that all of these sources in addressing Section 6, are addressing the old Section 6.

Adopted Children Granted Same Rights of Inheritance as Biological Children

The Knesset passed an amendment to section 16 of the Inheritance Law- 1965 equating adopted children to biological children by granting adopted children the right to inherit from their adoptive parents' relatives and granting the adoptive parents' relatives the right to inherit from the adopted child.

One interesting thing in the law (not as a result of the amendment) is that adopted children can inherit from both their biological and adoptive parents. Should adopted children be limited to inheriting from only one set of parents?

Note- This law only sets up the default inheritance rules but if someone wrote a valid will, that would control. There is nothing that would prevent a child from inheriting from 3 sets of parents via 3 separate wills.

Israel Enacts Patent Amendments

One of the major aspects of the new patent amendment is the change to publication of patent applications after 18 months instead of the 30 months that was previously the case.

For more on the new amendments, see the America-Israel Patent Law Blog.

Pre-Emptive Military Actions Panel Discussion

Here is a link to a panel discussion that took place at the annual Israel Bar Association meeting in July.


The panelists are listed below:

Biometric Database Plan to Undergo Further Review

An article in the JPost reports that the Interior Ministry agreed to review its plan for a pilot biometric database to investigate some of the security concerns it has raised.


According to the article, Israel is the second democratic country (Spain being the first) to create a biometric database of its citizens. However, India, is also in the middle of collecting biometric data including iris scans, facial images, and fingerprints from its 1.2 billion citizens, although there are concerns about privacy there as well. (See the articles from the Economist, and NY Times.)  Morpho, a company involved in the Indian data collection process is also providing Israel's airports with security equipment and its explosive detection system is being used by the Prime Minister's Office. In France, the constitutional court ruled earlier this year that a law proposing a centralized national database containing biometric data was unconstitutional.


Relatedly, the Israeli Law, Information and Technology Authority (Israel’s data protection authority, “ILITA”), has issued a draft directive, regarding its stance on the Protection of Privacy Law, limiting the collection of people's teudat zehut or national identity numbers unless. Teudat zehut numbers should only be collected after the database owner whether such collection is necessary and for how long the data is required. Part of that examination entails considering whether there is a less intrusive means for identifying the data subjects. That means that when you register to join a store's customer list, they should not ask for your national ID number, instead they should provide registrants with a unique customer ID number. 

For some scholarly papers on the vulnerabilities of biometric database systems and their solutions see here, here, here and here. There is also a book published by the American Bar Association entitled The Practitioner's Guide to Biometrics, but it is basically a collection of papers on some of the problems with biometrics. I don't think it's worth the price.


One fear of biometric fingerprints is that a user can be forced to place his finger on the scanner or his finger can even be detached from his hand by malfeasants and used to gain access to sensitive information. According to one article, a German company has come up with a way to defeat the second scenario by imaging the change in skin color that occurs when a live finger is pressed against the scanner. But then there is always the problem illustrated by this (poor quality) clip from the movie National Treasure.

Schedule for Dinei Yisrael Review Courses Posted

As a follow up to a previous post regarding this year's Dinei Yisrael exams for foreign qualified lawyers seeking to be admitted to the Israeli Bar, I just found the schedule for the Jerusalem review classes for the Dinei Yisrael Exam on the Bar Office's website.

It appears that Professor Yoel Tsur is stepping in for David Seville and organizing things this year.

The classes will be held at the Jerusalem Law Centre, 1 Chopin street- bus no. 13.

To register, contact The Israel Bar, Jerusalem, tel. 02-5411200, fax: 02-5610062  e-mail: mitmahim@israelbar.prg.il.

The charge for the course is: 200 NIS 1-2 subjects; 500NIS 3 subjects or more. And each exam costs 160 NIS.


And I have learned from Professor Tsur that even if you took the course in the past but failed the exam and want to take the course again, you must pay again. I'm not sure that's how David Saville did it and I definitely don't like that policy. I guess they don't guarantee your passage like BarBri.

Getting a Document Notarized in Israel for Use in the US

A topic that comes up every once in a while is whether a US attorney can notarize documents here in Israel. There are many US licensed attorneys living and practicing in Israel and it would certainly be convenient if US (or foreign) citizens could get their documents notarized for use in the US in front of one of them. I have seen posts by a US lawyer advertising his notarial services here in Israel and claiming that he is authorized by NY State to notarize documents in Israel. He is not.

In the United States, each state authorizes notaries to certify signatures and administer oaths. I am not familiar with any state that allows a notary public to certify a signature outside of the state where the notary is licensed. However, a notary from state A may notarize documents for use in state B only if the documents were signed in front of the notary while in state A. If the case was otherwise, any notary public from any state could notarize documents in any other state, which is not the case.

For example the Illinois Notary Handbook states:

GEOGRAPHICAL JURISDICTION

A notary public has jurisdiction to act as such throughout the State of Illinois (Sec. 3-105). In the certificates a notary is called upon to complete, there will be a heading such as “State of Illinois, County of ___________________”. The name of the county where the signer personally appeared before the notary public should be inserted on the certificate.

In New York, the Notary Public License Law states:

§135. Powers and duties; in general; of notaries public who are attorneys at law. Every notary public duly qualified is hereby authorized and empowered within and throughout the State to administer oaths and affirmations, to take affidavits and depositions, to receive and certify acknowledgments or proof of deeds, mortgages and powers of attorney and other instruments in writing...

But even more explicitly, the Department of State's webpage on Notarial and Authentication Services of U.S. Consular Officers Abroad addresses this question:

CAN A NOTARY PUBLIC FROM THE UNITED STATES PERFORM THAT FUNCTION ABROAD? No. The commission of a notary public is limited to the jurisdiction within the particular state in the U.S. for which the commission was issued. For additional information about notaries in the United States contact the National Notary Association, a Non-Profit Educational Organization, 8236 Remmet Avenue, P.O. Box 7184, Canoga Park, CA 91304-7184, tel: 818-713-4000.

Thus a person in Israel who needs something notarized by a US notary must make an appointment at the US consulate in Jerusalem or the embassy in Tel Aviv. Another option is to get the document notarized by an Israeli attorney and then get an apostille which is the authentication certification provided for under the Hague Convention Abolishing the Legalization of Foreign Public Documents, a multilateral treaty to which the United States and Israel are parties. From the embassy website:

As an alternative, individuals requiring document notarization for use in the United States may also use Israeli notaries as follows:

Both Israel and the United States are parties to the Hague Convention abolishing the Requirement for Legalization of Foreign Public Documents (October 5, 1961). The Convention calls for the use of a single signature by a designated certifying official in lieu of the chain certificate and abolishes the need for diplomatic or consular authentication. Under the Convention, the standard certification is called an apostille.

To use the Apostille, the document(s) must first be notarized by an Israeli notary. Those wishing to use a local notary for this service must contact them individually to see if they perform notaries. The notarized document must then be authenticated by the Magistrate's Court (Beith Mishpat Hashalom). Courthouses that offer this service are in Tel Aviv (03-6926211), Haifa (04-869-8000) and Jerusalem at the Ministry of Justice (02-6708511). There is no fee for the authentication.

Documents affixed with the apostille and the clerk's verification of the notary's signature using the above method, are just as acceptable in the United States as those notarized by the U.S. Embassy.

Note, however, that the above discussion pertains to documents that you need to get notarized. Official documents you receive from the Israeli government may only require an apostille without notarization. See the Ministry of Foreign Affairs page to see which documents need only an apostille.

You can get an apostille for other documents by following this procedure:

If you need to issue an apostille on your Israeli documents for use outside of Israel, the procedure is as follows:

Go to an Israeli notary public with an original photo ID (i.e. passport or Teudat Zehut) and the document requiring notarization. Ask them to fill out an authorization of signature form to attach to the document that requires notarization. Each document requiring notarization needs an authorization of signature form. This includes copies of the same document. The charge is 177 NIS per document, notarization of photo ID’s costs 71 NIS. All notaries have to charge the same price for this service.

Once you have the documents notarized they will need an apostille sticker and stamp. Apostille services are offered in Magistrate Courts. In Jerusalem, the Beit Mishpat Hashalom provides apostille services. They are located in Migrash Harusim, room 229a. Public reception hours are 8:30am-13:00pm. During July and August the hours are from 9am-12:00pm.

Movie Theaters Forced to Allow Outside Food

According to Ynet, the Knesset recently passed a bill requiring all public places that sell food to allow visitors to bring in their own food. Restaurants, of course, will be exempt.

The impetus for this bill was customer complaints regarding the high price of concessions, mainly popcorn, in movie theaters where patrons were banned from bringing in their own food. The Finance Committee railed against concessionaires exploiting captive audiences by charging exorbitant prices for food and drinks. The  new law won't just apply to movie theaters but to beaches, hospitals, and other public places that sell food. 

A June article at Sponser.co.il reported that the movie theater association's lawyer denied that moviegoers are a captive audience because they can eat and drink outside the theater or at home before or after they come to the theater. He compared the choice of buying a child popcorn at the movies to the choice of whether to buy him a first class ticket on a flight or to put him in coach. "It's all a matter of financial decision-making," he said. But the chair of the Finance Committee Carmel Shama-HaCohen replied that if they are comparing a child's request for popcorn and soda at the movies to his request to fly business class it shows how disconnected they are. The committee chair also was bothered by the idea that movie tickets are cheap because they are subsidized by the profits made on concession sales. But researchers at Stanford think that this is a good thing: lower tickets for all based on the consumption of some. (“The fact that the people who show up only for good or popular movies consume a lot less popcorn means that the total they pay is substantially less than that of people who will come to see anything. If you want to bring more consumers into the market, you need to keep ticket prices lower to attract them.” Theaters wisely make up the margin, he says, by transferring it to the person willing to buy the $5 popcorn bucket.)

Another article reported that movie concession stands make up to 80% of their revenue from popcorn and that popcorn sales alone account for 8% of the revenue of the company's operating the theaters. The markup on concessions may be hundreds or even a thousand percent of the wholesale cost, with popcorn costing moviegoers the equivalent of 160-200 NIS per kilo.

The Wall Street Journal Law Blog reported on the LA Times story of a Michigan man who recently filed a class action suit against AMC Theaters claiming that the high prices on concessions amounts to price gouging. But "Gary Victor, an Eastern Michigan University business law professor, told the Hollywood Reporter that he thinks the case is unlikely to succeed, since the Supreme Court has given businesses in well-regulated industries an exception from consumer protection liability."

There is an article explaining the Jewish Law view of price gouging here. In Jewish law, charging 1/6 more than the going rate is considered price gouging and the consumer is entitled to get that 1/6 back. More than that, he is entitled to rescind the sale. However,"if the differential is very large and obvious, we may assume that the buyer must have been aware and has therefore knowingly paid the price (BB 78a, Shulchan Aruch 220,8)." Thus, when a person goes to the movie theater and knowing the prices there are exorbitant, he still buys food, perhaps he is deemed to have waived his right to claim price fraud.

Proposed Amendments to the Protection of Privacy Law (1981)

Amendments to the Protection of Privacy Law (1981) have been proposed in the Knesset.

The new amendments will provide that:

• acts done by parents or guardians that would otherwise be a breach of the privacy of a child will not be considered a breach if done for the benefit of the child;
• "child" shall be defined as one up to and including 13 years of age;
• someone who purposely breaches the privacy of a minor can be punished by up to 7 years in jail;
• a person requesting information  from a child for inclusion in a database must first receive the consent of the child's parent or guardian;
• direct mail may not be sent to a child without prior permission from a parent or guardian;
• requesting information from a child or sending him direct mail without prior consent from a parent or guardian is punishable by up to 3 years in jail.

And an amendment to the Consumer Protection Law (1981) would prevent anyone from exploiting the age of a counterparty to a transaction.

I must say, I think the proposed jail terms seem a bit excessive especially when according to the notes to the proposed amendment convictions under the law do not require a showing of intent or negligence.


It is interesting that "child" is defined as up to and including 13 years old. First, that is the age of adulthood for boys in Jewish law. Second, Facebook does not allow anyone under the age of 13 to create an account but 13-year-olds are permitted. So under this law, Israeli teens will have a one year waiting period until they are Facebook legal.

Short and Sweet Supreme Court Decision

In a decision from yesterday (presumably related to access for Jews to the Temple Mount) the Supreme Court made its point concisely.

"The parties, or some of them, apparently think this case is being handled by this Court in its role as nursery teacher. Last chance: The appellant is requested to submit its request to the municipality pursuant to its announcement from July 9, 2012 and the municipality should review it accordingly. Updates are due by August 31, 2012."  

-Hat Tip- Ariel O.

Deadline to Apply for Dinei Yisrael Exams is July 13!

If you are a foreign lawyer and are planning to take the Dinei Yisrael Exams in August 2012, the deadline to send in your application is July 13. The cost is 160 NIS per test which you must pay at the Post Office to account number 4454120 and send the receipt in with your application.

I have some very good outlines available.

Make sure you read the Basic Requirements for Admission to the Israel Bar (revised 2013). In general, a foreign lawyer who wants to practice in Israel has to pass the Hebrew proficiency exam and 6 of the 8 substantive Dinei Yisrael exams before beginning the one-year articled clerkship or stage (from the French word "stagiaire"). However, if you arrive with two years of work experience you can begin your stage upon passing the Hebrew proficiency exam and can take the substantive exams later. But in order to take the actual bar exam you must pass all of the Dinei Yisrael exams first.
If you have five years of work experience, you just need to pass all of the Dinei Yisrael Exams and clerkship but you do not need to take the bar exam.

The Hebrew exam is given 4 times throughout the year (Jan, April, Aug, Oct) and the 8 substantive exams are given in January and August. The Israeli Bar Office is the gatekeeper to register for these exams- you must register at least one month ahead of time. There is an English review class given in Yerushalayim. And what appears to be a course in Hebrew for Israelis who are qualified overseas. The Lishka (Bar Office) also offers a course in Tel Aviv  for new olim (which appears to be in Hebrew). However, it consists of 42 classes, which looks like overkill to me.

But... in order to begin this process you need to have your degree recognized. To do that, on Mondays Thursdays between 9 AM to 1 PM, (as of May 2014) bring your actual physical diploma and an official transcript to the Hebrew U. Mount Scopus campus where the law school is. (If you don't have your diploma they will give you a hard time, and you will need an official letter letter from the law school that you indeed graduated.) You need to pay 420 NIS as well, so bring some money. Go to Room 116A. You can call them Mondays between 9 to 1 at 02-588-0044 or email: degreerec@savion.huji.ac.il. 

After you do that, bring those documents to the Bar Office at 1 Chopin St and open a file. Bring more money.

New Natural Gas Wealth Means Historic Change for Israel

New Natural Gas Wealth Means Historic Change for Israel
Sharon Udasin
For National Geographic News
Published July 3, 2012

Israel's northern port city of Haifa has been a crucial energy center for decades; refineries dating back to the British Mandate in this land have long processed the oil sent by pipeline or shipped here from abroad. Today, rigs are working off Haifa's coast to tap the first major fossil-fuel reserve ever found in Israel's territory, a store on which it hopes to build a far more independent energy future."

Employment Law: Jews and Tattoos

It's summertime, so a relevant topic to discuss is short-sleeves and tattoos.

A recent article discussed a case from this past January regarding a waiter who quit his job when he refused to wear a long-sleeve shirt to cover up his tattooed arms. (תע"א 8435-09 - Gabai, Moshe v. Pinot Cafe Ltd.) The waiter claimed that the restaurant discriminated against him because of his tattoos and that forcing him to wear long-sleeves created an oppressive working environment. Therefore, he said, his quitting was the equivalent of being fired. The labor court said that since it was winter and the restaurant had air-conditioning, it was not oppressive to require the waiter to wear long-sleeves. The court further said that although the caselaw so far has only dealt with discrimination based on outward appearance when it was used as a proxy for some other discriminatory purpose, a number of cases have ruled that a business may require its employees to maintain an appropiate appearance and may institute a dress code. The court applied a proportionality test in this case and determined that it was not discriminatory for the employer to require the waiter to wear long sleeves to cover his tattoos, especially since he was personally required to serve food and drinks to customers.

For an article on the prevalence of tattoos in Israel see here.

For an article on similar US law regarding tattoos at work see here,
here, here.

For a study of employer preferences regarding tattooed or non-tattooed employees see Visible Tattoos and Employment in the Restaurant Service Industry. 

For an article on tattooing in Jewish Law and how it applies to permanent or semi-permanent make-up see here.

For an article dispelling the common misconception that a Jew with a tattoo cannot be buried in a Jewish cemetery see here.

I have wondered for years whether a UV tattoo that can only be seen under a blacklight is a violation of Jewish law. Since it can't be seen by the naked eye, perhaps it is permitted. (See e.g. the discussion about eating bugs here in the text accompanying footnote 4.) If anyone has any information on this issue, I'd be grateful to be enlightened.

Similarly, I wonder if a tooth tattoo is permitted under Jewish law. (Although the one in the video below is on an implant.)

Adventures at the Misrad HaPnim

Wikipedia

Can you apply for an Israeli passport before your one-year aliyah anniversary, to be used after the one-year anniversary? 

I recently experienced a situation at the Misrad HaPnim (Interior Ministry) while trying to get passports for my family whose resolution is apparently not in the office's protocol.

While the laws and regulations promulgated in any government system seek to streamline daily life by clearly spelling out the rules that apply in any given situation, because rule-makers cannot anticipate every situation lawyers and courts exists to fill in the gaps. But sometimes there are situations where lawyers and courts are not practical. That's where blogs come in. In case anyone has the same issue, here is my experience:

According to Nefesh B'Nefesh, a nonprofit organization established in 2001 to help North American and British Jews make Aliyah, "You are entitled to apply for an Israeli passport one year after your Aliyah, provided that you have spent 365 cumulative days in Israel." If you are traveling outside of Israel before the one-year anniversary of your aliyah, you need to apply for a teudat ma'avar (travel pass).

But what if...  you are leaving Israel 10 days after the one-year anniversary of your aliyah?

On the one hand, you are not entitled to apply for a passport until your one year is up. On the other hand, you are not traveling within the one year so you don't need a teudat ma'avar.

This is the question that had the clerks stumped and required 3 trips to the Misrad HaPnim. On the first trip, approximately 20 days before the scheduled flight, the clerk (Clerk 1), after discussing it with a supervisor, said we should come back on the first day of the calendar month of the flight and we can apply for passports. On the second trip, the clerk (Clerk 2) stamped our paperwork and after discussing it with the first clerk and two supervisors, told us to come back the day after our one-year aliyah anniversary and apply for the passports because the computer system cannot process a passport request before that time. So, on the third trip I hope to complete the process.


*UPDATE* On the third trip- the clerk (Clerk 3) started to give me a hard time even though the paperwork was already stamped. She asked me who stamped the papers. Luckily, I remember what she looked like and Clerk 3 went to find Clerk 2 and brought her over. After Clerk 2 said she remembered me, Clerk 3 told her that next time she should write on the top of the page "This child appeared before me" and then stamp it. Clerk 3 said that had I not been able to identify Clerk 2 we would have had a problem. So just to safe, I surreptitiously took a photo of both clerks standing together.
I have to go back for a fourth time now to pick up the passports.


*UPDATE 2* On the fourth trip- I told the woman in the office I was there to pick up my passports and she asked if I had a receipt. No, I didn't have a receipt, they just told me to come and pick them up. So she checked the box and voila they were there.

Conclusion: You cannot even apply for a passport until the one-year anniversary of your aliyah has passed. Had our flight been scheduled for the day after our one-year anniversary we would have to shell out money for a teudat ma'avar and a passport.

FYI: The Misrad HaPnim branch in Jerusalem on 1 Shlomzion HaMalka St. is open S, M, Tu, Th from 8-12 and Monday and Wednesday afternoons from 2:30-5:30 (but not for visas and citizenship).

New Draft Regulations for the Protection of Databases

Trade Secret Theft, Corporate Espionage or anything else you want to call it has been getting a lot of press recently. (See here and here.) C. Frank Figliuzzi, the head of the U.S. Federal Bureau of Investigation’s counterintelligence division, testified that based on the FBI data, "economic espionage losses to the American economy total more than $13 billion." See article here. The Center for Responsible Enterprise and Trade (CREATE) recently issued a white paper detailing some of the problems and possible solutions to trade secret theft.

There are a number of weak links in corporations that allow bad actors to steal company secrets: unencrypted networks and databases, hack attacks, and theft of data by employees or contractors. Some companies refuse to completely outsource operations due to the threat of data theft by companies located in the home country of the outsourced plant, so they are choosing captive sourcing instead. In captive sourcing the parent company builds and operates the plant in another jurisdiction but they are still subject to threat of competitors hiring their employees away and with them, valuable trade secrets. Many countries do not have robust legislation making trade secret theft illegal, giving companies little recourse after being victimized. CREATE has a number of suggestions for companies to help prevent trade secret theft. They suggest that companies:

1. Conduct a strategic assessment of the company's trade secrets.
2. Undertake appropriate pre-contractual due diligence.
3. Employ strong contractual protections.
4. Utilize appropriate operational and security measures.
5. Take appropriate action after a business relationship has ended.

Some of the specific suggestions include clearly identifying in contracts what information the company deems confidential and requiring the counterparty to restrict, monitor, and record employee access to sensitive information, and specifying that the company has a right to audit the counterparty to measure compliance. Also, depending on the country it may be important to have a forum selection clause identifying a friendly forum for any IP or trade secret disputes. Because some countries do not recognize the concept of a third-party beneficiary, companies should also consider entering into confidentiality agreements with key employees of the counterparty. If subcontractors will be used, the company might want to retain approval rights and ensure that any confidentiality agreements flow down to the subcontractor and any violation is the responsibility of the contractor. Other security measures such as monitored physical access to confidential data, encrypted or expiring files, separate computer systems for sensitive information, keeping certain systems disconnected from the internet, and instituting computer use policies to allow the monitoring of data transmissions.


It is interesting to note that in its second version of draft regulations regarding the protection of privacy, ILITA, the Israeli Law, Information and Technology Authority (Israel’s data protection authority) recommended many of the same security measures regarding the protection of sensitive information stored in databases. If formally implemented, the regulations will require companies to:

1. institute a data security protocol that describes the database structure, access privileges, security measures, provisions for periodic audits and what access privileges subcontractors have been granted.
2. ensure that its systems are kept in a secure location which prevents access for unauthorized users; Owners of medium and high security databases must document all entries and departures from database system facilities as well as all equipment that is taken into or out of those sites;
3. conduct a security audit at least once every two years to certify compliance;
4. tightly control Employee access to data and passwords must be changed immediately upon termination of an employee;
5. conduct periodic training sessions for employees, commensurate with the scope of their duties, on database settings, security procedures, and the data security provisions under the law;
6. implement a mechanism for automatic documentation that will enable inspection of all login attempts to the system including: username, date and time, scope of access, and components accessed, to be kept for 24 months;
7. implement automatic documentation of events that raise suspicions of data breaches or unauthorized access;
8. report serious security events to the Registrar of Databases as well as any steps taken in remediation;
9. implement security measures that take into account the special vulnerabilities of mobile devices;
10. disconnect the database system from the Internet or other public network unless appropriate measures are taken to protect against unauthorized intrusion or malware that can cause damage or disruption to the system;
11. encrypt the transfer of information over a wireless network, public network or the Internet using conventional encryption methods;
12. segregate systems that access the database from other systems used by the database owner;
13. explicitly list in a contract with the subcontractor:

a. The data and systems that the subcontractor may access and for what purpose;

b. The types of activities the subcontractor may perform on the data;

c. The term of the relationship with the subcontractor and the subcontractor’s requirement to return and destroy any data upon termination;

d. The subcontractor’s data security obligations under these Regulations;

e. That the subcontractor’s employees must sign non-disclosure agreements to protect the security of the data;

f. The subcontractor’s obligation to include all of the relevant provisions of the Regulations in any contract with any subcontractor of his;

g. The subcontractor’s obligation to report to the database owner, at least once a year, of his execution of his obligations under these Regulations and to inform the owner of any data security event.