Business

Intellectual Property

Only “serious” countries take intellectual property seriously.

One of the most common Western gripes about Russia is no doubt related to the country’s Intellectual Property (IP) policies, or as most would say “lack thereof.” Just ask the World Trade Organization (WTO). The Association of European Businesses in Russia (AEB) recognized that IP is no laughing matter and has put its money where its members’ mouths are and established a special subcommittee on the subject.

To kick off the new year and coincide with the government’s reworking of many IP laws, the AEB held its first-ever IP subcommittee event. According to the subcommittee’s Ksenya Bortnik, “in view of the overwhelming interest in this first-time, event we had to upgrade the venue twice just to accommodate the larger than expected 150-plus crowd of Russia’s leading IP experts.”

The event was chaired by one of Russia’s most prominent IP gurus, Baker McKenzie’s IP head of department, Eugene Arievich. Keynote speakers included Yekaterina Tilling, head of IP practice at Pepeliaev, Goltsblat & Partners (the meeting’s main sponsor) and Vadim Kulikovsky, direct from the Russian Patent Office (Rospatent). The fact that the subcommittee is chaired by Mr. Arievich shows just how serious this committee is since he is undeniably Russia’s leading IP authority.

For most readers IP is probably not high on the list of interesting subjects, but if you have a company that is in the software industry or uses software, careful attention to Russian laws and especially to the recent changes in Russian legislation is highly recommended. In contrast to Russia’s reputation, its software laws are quite strict, and they are being enforced.

Do software licenses extend to Russia?

Foremost on the minds of many participants were issues pertaining to the use of computers and laptops sent into Russia. Can we always assume that it is legal to use laptops and the software on them wherever we travel? If not, when is a special license required?

Don’t forget to contact your friendly neighborhood FSB (formerly KGB) agent!

As speaker Daniel Klein of Hellevig, Klein & Usov pointed out, “if you’re developing encrypted software or any products and exporting out or importing into Russia, don’t forget to get a license from the FSB.” This may sound ominous and even frightening, but like many other countries including the US, France, and Saudi Arabia, Russia has very strict laws concerning encrypted devices that leave or enter Russia.

One concern facing those doing business in the country is that Russia’s regulations in this area are considered to be some of the world’s most difficult to comply with. This issue has contributed to the delay of Russia’s ballyhooed WTO admittance.

Governmental encryption licensing requirements were originally established in many countries to prevent and regulate the importation of encrypted communication devices that could be used for military purposes. Today, the military continues to use encryption but, according to Mr. Klein, less than .01% of all encrypted applications have any military application. Encryption can be found in anything and everything from your laptop to key cards in hotels to smartcard chips in ATM cards. Mobile phones alone can include two or even three separate encryption devices.

As one participant immediately pointed out concerning importation of encrypted software to Russia, it is easy to avoid these hassles by downloading the software in question from the Internet. By the same logic, it is easy to smuggle small diamonds into Russia. If you are caught, however, it can be viewed as a criminal offense. The difference between smuggling diamonds and illegally downloading encrypted software is that the latter is a violation of laws which were adopted with military secrecy concerns in mind. Good luck!

Let’s keep that a secret.

According to Margarita Divina of Baker McKenzie, companies wishing to maintain trade or commercial secrets have an onerous set of regulations to follow. Companies must document which employees were given access to trade or commercial secrets, which can extremely cumbersome, especially in today’s paperless world.

Ex-employees may use your company’s software.

Your employees who create or develop software (or, for that matter, any IP) during the course of employment may have a right to continue to use what they created even after they leave your company. It is, of course, possible to draft a contract that prevents employees from subsequent use of their own creations. However, as with many legal issues in Russia, effective legal prevention of such post-employment use is not so straightforward. As Yekaterina Tilling noted, according to Russian law, it is necessary to compensate an employee for each creation. The gathering of Russia’s top IP specialists were unable to come to consensus on whether it was acceptable to provide for such by contract or whether it was actually necessary to compensate creative employees for each and every creation.

Database theft

In some industries, a firm’s database may be one of its most valuable assets — for example, a real estate company’s list of properties for sale or list of investors looking to buy buildings. If an employee misappropriates a database, which can be a company’s lifeblood, he may be able to set up a competing company and cripple his former employer’s business. Russia now has strict laws to safeguard companies’ databases, including protection of substantial investment in their creation and mechanisms to register them with Rospatent.

In sum, for the first time in several years, the laws governing IP have undergone major overhaul, and many local experts do not see all of these changes as positive. In any event, all these developments promise to make 2008 an interesting year!