IT in the Russian Federation

Russia: IT Legal Environment

Overview

The general legal climate is increasingly improving with Putin’s commitment to accession to the WTO.  But he is putting off most major decisions until after the election this year (2004).  For the IT legal environment there has been steady progress towards a legal environment comparable to other Western nations.  This has a huge impact on the ICT market.

Intellectual Property

Russia’s Copyright Protection laws provide protection for images, music, software programs, and video.  It also clearly extends to protect copyrighted material once such material has been digitized.  This is comparable with most Western nation’s laws on the subject.

New leaps in Patent Protection were announced in February of 2004 when a government decree will permit state scientific institutions to grant patents and other intellectual property rights to actual inventors.  Russia has traditionally had problems turning their inventions into viable business products. 

As for Trademark Protection there are several key factors that must be considered in Russia:

  • Russia is a “first to register” jurisdiction, which means that cases occur where a party is able to register a trademark only because it was the first to do so
  • They still do not have formal rules to recognize famous or well-known trademarks from international companies
  • RosPAtent has taken a formalistic approach – possible registration of the same rademark in different classes of goods

As a follow up to the trademark protection, there are specific Domain Name Issues.  RosNIIRos (administers the .ru zone) sees no obligation to verify whether an applicant’s proposed domain name might already be a registered trademark.  This has played an important role in several cases:

  • Case of Eastman Kodak vs. Grundul
    o       Grundel registered the domain name Kodak.ru
    o       Decision for Grundel
  • Quelle Aktiengesellschaft vs OOO “TF Tandem-Yu”
    o       Russian company OOO “TF Tandem-Yu” registered the domain name ‘quelle.ru’
    o       Decision for German company Quelle
  • OOO “Kodak”  vs. Grundel
    o       Eastman Kodak Russian subsidiary ,OOO “Kodak,” also brought suit against Grundel
    o       Decision for OOO “Kodak”
    o       Note: the court’s decision did not include an order to RosNIIRos to cancel the registration of the domain name or re-assign it to anyone else.

Software Piracy in Russia continues to be a major inhibitor to the ICT market.  In the early to mid 90s, it was common for most of Russian businesses to be using pirated copies of the Windows Operating System.  The piracy rate has steadily dropped over the past ten years according to the Business Software Alliance, reporting an 87% rate in 2002.  As of January 2004, piracy is down to 79%.

Competition Law in Russia can apply to asset transactions or outsourcing deals and is limited to commercial transactions.  Its main application is IP infringement as an unfair trade practice.

Privacy/Consumer Protection

In Russia, any company selling goods over the Internet needs to be aware that the ultimate consumer will have enforceable rights under the Law on Protection of Consumers’ Rights.  This is applicable to both companies internal and external to the country. 

There is a basic constitutional right to privacy (section 24.1) which reads “The collection, keeping, use and dissemination of information about the private life of a person shall not be allowed without his or her consent.”  This right is further supplemented by the Law “On Information, Informatisation and Protection of Information.”  This law provides expressly that the collection, storage, use and dissemination of personal data is allowed only with the consent of the person who the data belongs, or by court decision. 

Russian’s attitudes towards privacy are most likely influenced by their long-term Soviet rule.  They are probably more likely to share information because it was so ingrained in Soviet culture for everyone to know what everyone else was doing.

There are possible censorship issues with Putin as he makes another play for the presidential position. 

e-Commerce Contract Law

The electronic digital signature and electronic document laws will dramatically increase the e-Commerce market in Russia.  Case law shows the courts will look favorably on contracts entered into electronically and this will bring new confidence for international companies looking to do e-Commerce in Russia’s growing market.  The digital signature law may be too tight of an approach as it includes verifying centers which must apply for government licenses.

Taxation

Currently there is no special tax regime for electronic transactions in Russia.  If a company has “permanent establishment”, it is subject to Russian profit tax, and electronic transactions related to a)sales of goods (work, services) in Russia and b) import of goods into the customs territory of Russia will be subject to VAT at the rate of 20%.

 

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