What it Means that Russian Businesses Can Now Legally Steal Intellectual Property from ‘Unfriendly Countries’

“It’s likely that Russian businesses will capitalize on the opportunity for IP infringement and piracy and continue to violate patent holder rights even if global tensions deescalate.”

https://depositphotos.com/154935652/stock-photo-copyright-infringement-concept.htmlRussian businesses now hold the key to pilfering, producing and profiting from western technologies. As of Monday, March 7, the Russian government has legalized intellectual property (IP) theft. With this move, businesses in Russia can now violate IP rights, as they no longer need to compensate patent holders from “unfriendly countries.” The list of “unfriendly countries” includes the United States, Canada, Australia, Switzerland, Norway, Iceland, the United Kingdom, Japan, South Korea, New Zealand, Singapore, Taiwan and all 27 European Union (EU) member countries.

Russia has faced growing isolation from the Western world following President Vladmir Putin’s invasion of Ukraine. The United States, EU member countries and others recently initiated sanctions against Russia and have enacted crippling trade limitations. Currently, Russia is sufficiently meeting its supply and demand needs for agriculture, energy and natural resources. However, Russia’s isolation and growing lack of skilled producers have led to a stark decrease in technological production and innovation.

The Russian Decree

Unsurprisingly, Prime Minister Mikhail Mishustin of Russia signed a decree establishing significant changes in the compensation structure for businesses that use or create inventions without the inventor’s consent. Patent holders in the “unfriendly countries” will now receive 0% of the profits from the production, sale and use of their inventions by Russian entities.

Patent infringment can have disastrous effects on western businesses and inventors, as Russian businesses can now replicate inventions and use copyrighted materials without consequences. The enabling disclosure requirement of patent law requires that patent holders explain their inventions in sufficient detail so that someone skilled in the art can make and use the invention. This essentially means that Russian firms can access publicly available patent databases and practice the patents to boost struggling technological production.

Although the Kremlin has not yet issued legislation regarding free piracy of copyrighted works and trademark infringement, it is only a matter of time before it does. In fact, authorities from Russia’s Ministry of Economic Development have suggested lifting protections on trademark laws in recent weeks. Legalization of trademark infringement and copyright piracy would allow Russia to operate and profit from Western businesses and services which have suspended operations in Russia due to the invasion of Ukraine. This would lead to wasted western business efforts, as the proposed measures would mitigate the current supply chain breaks entirely. The exploitation of American brand names is inherently undemocratic and counter to the United States’ ideals.

The Impact

The consequences of IP piracy and theft on western businesses and western economies might not be felt right away, as Russia can’t increase technological production in the short run, but the effects will become apparent over time. It’s likely that Russian businesses will capitalize on the opportunity for IP infringement and piracy and continue to violate patent holder rights even if global tensions deescalate.

Due to a lack of skilled workforce and technological innovators, the transition to technological innovation will not be easy for Russia. Thus, Russian businesses will most likely pay external contractors and skilled persons from Eastern European and Asian countries to bridge this gap. These countries have a large surplus of educated professionals that are either not adequately paid or underemployed. Thus, there is a large financial incentive for them to move to Russia to properly utilize their skills and have improved quality of life.

This migration of skilled workforce to Russia will depend on the United States’ immigration policy, which currently limits the number of skilled workers from foreign countries under the H1B visa category to 65,000. Interestingly, on February 28, 2022, the United States Citizenship and Immigration Services released this statement, “USCIS has received a sufficient number of petitions needed to reach the congressionally mandated 65,000 H-1B visa” for fiscal year 2022. Most skilled people from Eastern Europe and Asia would prefer to migrate to the United States, but if they cannot, they will continue to migrate to places like Canada, which has a streamlined immigration policy for skilled migrants, and, ultimately, Russia.

With Russia free to act without condemnation or punishment, establishing a Russian “Silicon Valley” with technological innovation that matches that of the west is a real threat. Due to ongoing tensions between Russia and western countries, including the United States, Russia will do everything in its power to cripple our businesses and economy. Reports have indicated Russia will use the legalization of IP piracy to offer entertainment, music, and other private works to the public free of cost. Since consumers generally seize opportunities for free access to such works, Russia could nab a large market share from U.S. businesses and appear charitable by distributing movies and music for free.

World’s Biggest Thief

As tensions between the west and Russia rise and new decrees are signed into action every day, it will be interesting to see how Russian businesses use this opportunity for legalized IP infringement and piracy, and how U.S. businesses respond. One thing is certain: Russia has once again violated international rights and will continue to do so if their businesses follow down this path. Russia will soon be the world leader in IP theft too.

Ishaan Jain also contributed to this article.

Image Source: Deposit Photos
Image ID:154935652
Copyright:lightsource 

Share

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Join the Discussion

14 comments so far.

  • [Avatar for Anon]
    Anon
    March 24, 2022 07:45 pm

    Artry,

    So many errors in your post….

    You clearly lack any training in law, and certainly do not understand patent law or international treaties (let alone, how an imposition of sanctions does NOT void treaties). Your assertions (as to my not understanding, such as “rents” has no basis in fact. I have merely rejected YOUR dependence of the use of the term in YOUR inserting your judgements as to proprieties. You now butcher Quid Pro Quo, as if someone (“for the slow people“) you have shown what you only assume. You also mis-state my positions on US patent law (which I clearly recognize as Sovereign-limited: hence the invocation of international treaties). And the treaty mechanism is very different from my use of Quid Pro Quo – so your strawmanning should be capped.

    Your notion of “using” as opposed to “stealing” simply assumes your own assertion that there is nothing wrong with what Russia has done.

    You would be quite alone in that view. As to which of us may inhabit a Metaverse and which of us reflects reality, well, you have not shown any grasp of reality in any number of the areas that you would merely gurge forth your feelings.

    But you be you – as you are clearly not willing to recognize your limits.

  • [Avatar for Arty Burton]
    Arty Burton
    March 23, 2022 12:39 am

    It is like talking to a wall here.

    Pretty much EVERY name is the name of a real person. If you are asserting that there is a particular Arty Burton with a famous (and relevant) reputation that is being infringed – please clarify, because I can’t find one.

    With regard to “accusation of impropriety”, once again “impropriety” is a “moral” term that has no meaning in a discussion about cause and effect.

    The whole essence of my argument is that by using “moralizing” terms to describe what are fundamentally causal issues you are creating a fundamentally misleading narrative.

    When you trip over a crack in the road you were not “assaulted” by the road.

    Sure, the US may have fully legitimate “national security” reasons for behaving as it does. And, it turn, when steps they take pursuant to these “legitimate” reasons affect China’s (or Russia’s) equally legitimate “national security” concerns, China (or Russia) will likewise act to protect these “national security” reasons.

    What is “illegitimate” is when after you make an agreement with someone and then refuse to hold up your end (even for perfectly legitimate reasons) you still expect (and demand) that the other party delivers on their side of the deal. That isn’t just “illegitimate”, it is “delusional” bordering on “stupid”!

    The mere fact that you don’t understand what “rents” does not mean that everyone else is obligated to go with your ignorant view. There is a rather extensive literature on “rents” in economics, and in actual fact it even addresses “rents” in relation to innovation (it was a key focus of Schumpeter’s work).

    What you seem to not understand is that the Quid Pro Quo mechanism works by making the delivery of the Quid being contingent upon the receipt of the Qou. One more time for the slow, people who do not provide the “Quo” have no reasonable right to expect a “Quid”!

    The other thing that you seem to be oblivious to is that the “US Patent System” works – ONLY IN THE US! (Hint, it is IN THE NAME.)

    When the US wants OTHER countries to adopt its patent system, they negotiate – by offering one of those “Pros”. Then, when they renege on delivering the “Pro”, they should not be surprised when the other party decided to not deliver the “Quid”.

    One more time the US Patent Law does not apply OUTSIDE THE US unless the US makes it worthwhile for countries other than the US to make it so apply.

    Once you understand this, a brief perusal of a map will make you aware that Russia, China, and in fact MOST of the world are located OUTSIDE the US – and thus under no obligation to recognize US IP Laws.

    Once they decide that they in fact DON’T recognize those laws, when people in those countries copy whatever they want it is not “stealing”, just “using”.

    And if you can’t understand this basic logical principle – then I don’t know if there is anything you can understand.

    With regard your views that my comments are “unmoored to the laws of THIS country”, I draw your attention to the article’s headline which makes it very clear that the discussion is about businesses IN RUSSIA, which operate under the laws of RUSSIA.

    Finally yes, you are correct in that Russia (like most countries) passed (many) laws in accord to international treaties. And since sanctions are a clear and direct violation of those treaties the Russian legislature becomes free to renounce the laws they enacted as the “Quo” for the “Quid” now being denied to them. Again, if that is too complex for you, I don’t know how to make it clearer.

    I would have thought it is obvious that treaties do not have a “unless we decide to sanction you or decide that it isn’t in our national interest to comply” clause. As such, it seems clear that saying “not adhering to our side of the treaty doesn’t count in this case because – SANCTIONS” is not a credible argument. You seen to disagree – fair enough, you are free to do so.

    Feel free to enjoy life in your Metaverse – the actual world may go on as it does, but I accept that this really should not be a concern for you.

  • [Avatar for Anon]
    Anon
    March 22, 2022 07:31 pm

    I “get” that you said that you took the name from a story – but my reply indicates that the name is that of a real person (did you bother Googling to follow what I had said?)

    Also, your “the US stated it quite explicitly and unambiguously when banning exports of leading edge chip technologies to China.” does NOT make clear how this leads to your accusation of impropriety, as you fail to understand the context of the US actions (that is, the very real national security implications in the case).

    You seem to want to ‘live” by only those items that are convenient to you. That, and your continued insistence on using the term “rents” (and the clearly pejorative implication of that term) indicates that you are refusing to truly understand the Quid Pro Quo nature of the patent bargain. Unless you are willing to even bother contemplating that there is such a bargain, your views simply carry no weight. Your “appeal to history” is unavailing, as you clearly neither know, recognize, nor care about that history and how the US Patent System may differ from that “most of history” casual reference you make.

    Further, I have NO SUCH confusion as to the existence of IP rights and ANY generation of ‘rents.’ YOU should understand what it means for a patent to be a negative right, and that there is NO such thing as ANY guaranteed income from having a patent right.

    It is thus only your errant view that seeks to impose some type of “good or bad” with any resulting “rents.”

    Again – you sound like an ivory tower academic with no actual hands on experience.

    Please do not confuse and conflate patent decisions across Sovereigns. Your “UK” examples do not — and cannot — speak to US patent law.

    That you postulate whether or not an inventor’s “wants” as meaning nothing shows just how critical your lack of understanding of patent is. Your “this is the way of the world” is not. I do not take it as any form of criticism, I take it that you have no clue what you are talking about. So now, I must amend my criticism of you as being an Ivory Tower academic, to one of merely a wanna-be academic with no tower at all (ivory or otherwise).

    Your “logic” is also shallow and flawed if you want to misapply “spirit of American Innovation” as somehow requiring a seance. Your view of what is “socially destructive” is unmoored from any actual understanding of law and history.

    Your detour into copyright law (Disney) is just that: a detour. So let me quote you TO you: “But again, NOT THE POINT!

    Your rambling about “state deciding” is also just that: rambling.

    As to “My problem is with people who don’t understand that laws do not exist in “nature”.” – again, rambling.

    Your view of “what the State giveth, the State can take away.” is also unmoored to the laws of THIS country. If there be takings, then there be consequences of such takings. You seem to think that it is SOLEY a power game.

    Which also brings us back to your erroneous view of Russia. It is simply error to think that a legislature — ANY legislature — can make laws in a complete vacuum. Again, there are consequences to Russia’s new laws BECAUSE they had passed previous laws in accord to international treaties. You employ a logical fallacy by trying to imply that these consequences are merely generated from me and my “infinite wisdom [that I] believe it should be.”

    I state what is true, not because I state it, but because it IS true. This is so regardless of any level of my own wisdom.

    Lastly, put your strawman away as to “no one likes to have the rules changed on them in the middle of a game” – especially in view of what YOU have also attempted to hold in view of Russia’s actions, as well as your not understanding of the FULL rules of the game when it comes to US patent law and national security (there were — in fact — no rule changes in the middle of the game as to the instances impacted by national security).

    I have “managed to live this long” – and far better than you – by being willing to learn and understand the reality of innovation and innovation protection. You on the other hand, have bought into some fever-dream of all innovation should be able to be used without any rules (I am leaning towards you being a software coder).

  • [Avatar for Arty Burton]
    Arty Burton
    March 22, 2022 07:17 am

    Slight correction to my post – it seems that it was only after Tesla died that they grabbed it all – so it was his estate that couldn’t sell the (so called) IP, not Tesla personally.

  • [Avatar for Arty Burton]
    Arty Burton
    March 22, 2022 03:22 am

    Regarding Huawei and China more broadly, its not like some sort of a “secret” than needs to be teased out – the US stated it quite explicitly and unambiguously when banning exports of leading edge chip technologies to China.

    Notably, just like they confiscated all of Tesla’s inventions for “National Security” reasons. Coincidentally – as in truth is stranger than fiction – the who got decide whether Tesla would be allowed to sell HIS OWN inventions was Donald Trump’s uncle. Small world, isn’t it.

    As for the “the nom de plume” – learn to read!. A said it is a CHARACTER OUT OF A BOOK you nong.

  • [Avatar for Anon]
    Anon
    March 21, 2022 02:39 pm

    As soon as a dominant power says, “Well, yes, there is innovation, but we wont let businesses in a county we consider to be a competitor use this IP because then they may out-innovate us”, well that becomes a whole new game

    Your myopia is tremendous if THAT is why you think Huawei has run into issues.

    Again – let’s be clear – what basis do you have for such an assertion?

    (as far as the nom de plume, it is typically bad form to take a real person’s name as your nom de plume – my I suggest that you switch to another name?)

  • [Avatar for Arty Burton]
    Arty Burton
    March 21, 2022 07:27 am

    Well Anon,

    As it happens, I do know some things about IP and Innovation, having finished most of a PhD on the subject before having to quit because of health issues, and having taught Entrepreneurship & Innovation at several universities. The fact that I used to be an investment executive at a venture fund and presently work at an early stage biotech company also provides me with some insights on the topic. I even know (as I’d bet you don’t) that patents originate from a special right awarded to creative cooks in Ancient Greece to a 12 month exclusive monopoly on creative new recepies.

    If it isn’t obvious Arty Burton is not actually my real name – I “stole” it from a character in a book (yes, an “out of copyright” book) to use as a nom de plume.

    So, moving on to your points.

    I found your response, shall we say, interesting.

    The fact that patents generate rents (AKA “economic profits after capital costs”) is indisputable. This is their clear, unambiguous, and explicit purpose – as should be obvious from the fact that for most of history they were explicitly known as “a grant of monopoly”.

    You seem to be confusing the fact that IP rights exist to generate rents with the issue of whether such rents are good or bad. That is a broader issue that depends both on specifics of each case and on the overall IP legal regime. Sometimes patents a good and sometimes they are not.

    For example, the UK became a world power because rather than giving John Harrison a patent on his marine chronometer, they gave him a prize and allowed the technology to be widely replicated. Likewise, we don’t even know who it was that figured out a practical way to copper clad ship hulls – but it is was a good thing for the British Navy he didn’t get a patent.

    On the other hand, without patents Edison would never been able to fund the development and commercialization of his electricity system.

    The fact that innovators (in the US or elsewhere) “want” the rewards of a US patent means nothing. Notably, it was only AFTER they became a net “exporter” of IP that the US transitioned away from copy whatever we can get from anywhere to its current IP regime. Just like Bill Gates and Steve Jobs were fine copying anything they could see until AFTER they started to earn profits from their IP. This is NOT a criticism, it is just the way of the world.

    Now, as for the “spirit of American innovation”, this is not a seance. It is a logical analysis of value flows.

    There is nothing inherently “good” or “bad” about inventing stuff, but yes, I think that inventing new useful stuff is generally socially useful. And because I think that, I also think that putting up artificial barriers (such as restricting access to key design tools) so as to prevent people you don’t like from being able to invent new useful stuff themselves is generally a socially destructive act.

    Again, there are no “victims” here – except in so far the fact that when people who gathered a lot of power by saying “trust me” decide to turn around and abuse that power while saying “Boy, were you a sucker to trust me”, there WILL be a hostile response.

    Again, there are no MORAL issues, only ones of power competitition.

    When Disney lobbied Congress to change the law to extent copyright to effectively forever (after already extending it in 1976 from 28 years to 50 years past the author’s death), this wasn’t “to reward innovators”, it was to reward Disney (a company that is particularly known for trying to find ways to wiggle out of paying author’s royalties). But again, NOT THE POINT!

    Morals have NOTHING to do with this discussion.

    What does have to do with it is that fact that States make laws that they believe are in their interest and change them when this becomes appropriate.

    To borrow from a creative writer: ‘Twas always thus and always thus shall be.

    So to to the extent that a State decides that enacting a set of laws that may be to its detriment is worth it because in exchange a counterparty agrees to do something the first State believes is in its benefit, in can act to do so. Thereafter, if it finds that the counterparty didn’t honor its side of the agreement – well, guess what, its just like when you don’t get paid, you stop working.

    Again, I don’t have a problem with “global value chains”. My problem is with people who don’t understand that laws do not exist in “nature”. In case you haven’t realized, “property” and “ownership” are also grants of the state. A dog doesn’t own (have a “property right in”) its bone, nor does a monkey own its banana. ALL property is a grant of the State, and (in this case, a bit God like) what the State giveth, the State can take away.

    Which brings us back to the issue of Russia. Once a legislature enacts law, THAT becomes the actual law of the land and the way legal issues get resolved in that State. From that point on, “following the law” means acting in accordance with that new law – regardless of what you in your infinite wisdom believe it should be.

    to be “right” or “wrong”. The only statement be taken. Please understand the context of the forum that you have engaged.

    As for my comment on Huawei and “the US has been abusing elements of their IP regime to attack” , the unambiguous fact is that IP laws were “sold” to the world as a way of providing an incentive for innovation. As soon as a dominant power says, “Well, yes, there is innovation, but we wont let businesses in a county we consider to be a competitor use this IP because then they may out-innovate us”, well that becomes a whole new game – and no one likes to have the rules changed on them in the middle of a game. If you managed to live this long without discovering that, well I am glad I was able to inform you.

  • [Avatar for Anon]
    Anon
    March 20, 2022 04:27 pm

    Arty Burton,

    I found your response, shall we say, interesting.

    The fact that you chose to use a term (rents) indicates that you lack actual in the field experience in innovation, as that term is primarily used by mere Ivory Tower academics. I have not only studied innovation (extensively), I have lived it.

    You also plainly, but no less solidly “get it wrong” when you attribute “they” (being down the chain) necessarily find a structure of Quid Pro Quo protection for innovation to NOT be particularly attractive. I have worked with many US innovators that have started literally with only their ingenuity and their hard work, and desperately want the return of the US patent system of old that brought this country from an also-ran, largely ‘copy someone else’s work’ to a bastion of some of the world’s highest levels of creativity.

    You seem to distinctly lack the spirit of American Innovation, and instead display a rather dystopian Victim attitude, as if anyone with initiative to invent and patent is somehow ‘the bad person,’ or that only EVIL faceless corporations ever have (somehow unearned) patent rights. You are the one with the presumptuous attitude with your “imagine that other people will any consideration at all to my moral views when formulating their own thoughts or actions.” Be clear: your moral views have NO impact to the formulation of innovation protection. Zero. That this may ‘make you feel bad,’ is also of zero import. The founding and history of innovation protection exists quite apart from what you may feel your morality is, and even, how you may feel those systems should be.

    You mistake your Ivory view of “monopoly rights over global value chains” with what it takes to EARN the exclusionary (and please, please please inform yourself that patent rights are NOT monopoly rights) the right to protect one’s innovation. You have a problem with “global value chains?” Be forthright about it. You have a problem with any notion of property? In a short phrase: too bad. Your feelings simply are not dispositive of the right and wrong connected with the legal issues at hand.

    Additionally, I will fully agree with your view that “nothing wrong” is inherently a moral argument. There is ZERO presumption on my part, and in fact the presumption is yours. This is about legal matters, and ONLY to the extent that “following the law” is deemed to be “right or wrong” should my statement be taken. Please understand the context of the forum that you have engaged.

    My thoughts have more than enough clarity, thank you.

    If you want though to delve into morality and Huawei, then you are indeed attempting to throw rocks standing in the shards of a former glass house. What – exactly – would you assert as “the US has been abusing elements of their IP regime to attack?” Heed your own advice on clarity – what you spouted down below is utter rubbish.

  • [Avatar for Contrarian]
    Contrarian
    March 19, 2022 07:47 pm

    Is there any pre-war data on the value of patented technology in Russia and in other countries such as the US? I speculate that it was already the case that a very small portion of inventions disclosed in US patents were also patented in Russia. If so, a new lack of patent enforceability in Russia would have a small effect on the profits of companies from “unfriendly countries”.

    I’d like to see more evidence to back up the idea that highly valuable industries could have arisen in Russia but for the enforceability there of IP rights and now, without such enforceability, those industries will arise.

    Undoubtedly, the effect will be industry-dependent. Royalties owed for implementations of patented inventions related to fossil fuel extraction (a large industry in Russia) will see a larger impact than that for implementations of patented inventions related to semiconductor manufacturing (a negligible industry in Russia).

    Regarding immigration, even with an unreasonably low rate of allowance of immigration of skilled employees in the US, the desirous skilled migrants of the world will probably place quite a few countries higher than Russia on their preference lists.

  • [Avatar for Arty Burton]
    Arty Burton
    March 17, 2022 07:31 pm

    Anon,

    I will stipulate to your view that “force” may not be the correct term to describe “had to agree to in order to not be locked out of the global trading system”, as it can indeed be argued that “accept being locked out” can be presented as a “freely available” choice.

    The broader context however is that the functional purpose of the “modern IP” system is to allow select entities (mostly in US/EU/Japan) who received from their governments monopoly rights over particular information to maintain control (including pricing control) over global value chains – thereby ensuring that they capture all economic profits (“rents”) from such value chains.

    This is not a structure that is particularly attractive to the people down the chain who create such value.

    The reason “…people would still go to Russia…” is clear. People will act in accordance with what they perceive as their best interests, and if you believe that someone like the Huaiwei example will boycott Russia just for the “warm inner glow” of being lauded in the NYT, well do I have a deal for you on a used bridge between Brooklyn and Manhattan.

    As for “nothing wrong”, that is an inherently “moral” argument, and I see no reason for being so presumptuous as to imagine that other people will any consideration at all to my moral views when formulating their own thoughts or actions. I would suggest that the clarity of your thoughts would benefit from adopting this perspective.

  • [Avatar for Anony]
    Anony
    March 17, 2022 01:09 pm

    In my career, I have had only one client who ever wanted to file a patent in Russia for a shipping related product. Not sure who else is filing patent applications in Russia unless you have a Russian inventor and a Russian company. There was one point where is was less expensive to have Russia examine a PCT application but no more.

  • [Avatar for Anon]
    Anon
    March 17, 2022 10:00 am

    Arty,

    I reject your premise of “force,” as any Sovereign who has accepted the conditions of modern IP (through WTO or otherwise) have done so ONLY by the choice of the Sovereign.

    Further, your rationalization of why people would still “go to Russia” in the midst of Russia violating its own scores of choices of entering treaties and protocols is rather astounding. You gloss over prior issues as if there were NO reasons whatsoever for State decisions (a clearly erroneous position ) and then act as if Russia’s current actions have nothing wrong with them.

    I cannot see any value whatsoever in the position that you have put forth.

  • [Avatar for Arty Burton]
    Arty Burton
    March 17, 2022 06:43 am

    Something is only “theft” if it violates the laws of the State where it takes place. People forget that modern IP is a US invention that they forced on to countries as a condition of the WTO. No WTO – no reason to accept US concepts.

    As for finding tech staff, the US has been abusing elements of their IP regime to attack hostile entities. A particularly blatant – and relevant – example is Huawei.

    A partnership where Huawei sends their – very capable – engineering people to Russia to help Russia create/implement technologies that are being denied to them by US policies but they could then buy from Russia (e.g. Semiconductor Manufacturing Tools) would ramp up Russia’s tech sector really quickly.

  • [Avatar for Pro Say]
    Pro Say
    March 16, 2022 11:59 am

    “Russia will soon be the world leader in IP theft too.”

    Communist China will not give up their crown without a fight.