Russia Gears Up To Enter The Patent Race With New IP Reforms. Will It Kickstart Startups?

Russia’s government is looking to reform intellectual property law in the country, a move that could have an effect on how many patents get registered, and on the number of startups in a country known for its star engineers, but less so for business people who can execute on those ideas.

According to The Moscow Times, proposals have been tabled by the Chairman of Russia’s Federation Council Valentina Matviyenko at a meeting of the Council on Intellectual Property. In a larger package of reforms, one idea is to give those who create new technologies the rights to own patents on them.

Up to now, inventors have been working under contract with state institutions, and with the state ending up with control of any resulting IP. A draft of the new law, which is set to be developed further in the first quarter of 2013, would see the inventors themselves, as well as the enterprises or educational institutions where the inventors work, get first priority on those patents.

This is a little like the intellectual property equivalent of how Russia switched from the Soviet-style command economy to a capitalist/market economy — where the goal is to drive more enterprise. For a country that has long produced a lot of world-class engineers, the number of patents is relatively tiny. According to RIA Novosti’s account of the Council meeting, there were some 30,000 patents registered in Russia in 2011, with two-thirds of those for domestic inventors. As a point of comparison, the U.S. Patent and Trademark Office granted 247,713 patents in the U.S. in 2011. (That number includes Utility patents, which are the bulk of them, plus design, plant and reissued patents. In all, 49% of those patents were for domestic inventors.)

Up to now Russia has been steadily increasing the amount of investment it puts into R&D activities, which covers internet technology but also areas like natural sciences and defense technologies. The government budget for this was $1 billion in 2001 (31 billion rubles); this year the figure is $10.6 billion (328 billion rubles). But apparently only 15-20% of innovation work gets patented. Even less — only 3% — gets exported, and that is almost exclusively in nuclear and defense technologies. In other words, the hope is that by kick-starting more entrepreneurial patenting, Russia hopes that it can give a boost to its wider economy, too.

There is also a lot of money to be made in patents, too, as evidenced by the billion-dollar+ lawsuits between Samsung and Apple (now under review) and sales of hefty patent portfolios like Nortel’s in 2011 for $4.5 billion, and Google’s $12.5 billion purchase of Motorola.

Still, Russia is a contentious country when it comes to intellectual property: on the one hand, it’s notorious for being one of the worst offenders when it comes to digital piracy and violating copyright rules; on the other, you can see from the numbers above that it’s falling behind in the wider intellectual property and patent race. Improving the patent situation could be seen as a kind of stick-and-carrot scenario, where one might improve the other without too onerous measures being taken.

There is perhaps a more immediate example, though, of Russia’s commercialization gulf, which I’ve been seeing first-hand this week in Moscow.

Yesterday, watching a parade of startups pitching their ideas at TC Moscow, time and again I saw great ideas, with engineers offering interesting technology, sometimes very original, but often bettering similar products that are being created elsewhere with improved functionality. Yet many of them (I won’t name names) had a very hard time explaining how they would tackle the market, make an impact, and differentiate from the competition. (A typical answer to “what about XYZ competitor” was “we’re better.”)

Granted they were all Russian speakers pitching in English, but the gap between engineering brilliance and commercial execution is something that others closer to the Russian startup scene agree is a big issue.

“Supporting technology transfer from science to business has traditionally been the Death Valley of innovation in Russia,” says Katia Gaika, Deputy Director, The IT Cluster of Skolkovo Foundation, a tech incubator that is building a campus and raising funds in a bid to become a major tech hub for the country.

She says that gulf has had a direct impact as a consequence on outside, private investment from the likes of VCs, another important cog in the startup machine. “That issue makes investment too risky,” she says. “That’s why projects often don’t make it to market. VCs just don’t want to take that risk.”

Skolkovo, it should be pointed out, has already been trying to implement a more progressive, power-to-the-inventor regime with patents. “Whatever grants engineers got before meant they had to share their IP rights with the government,” Gaika notes. “In Skolkovo that was never the case.”

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