Russia’s recent accession to the WTO has obligated it sign and ratify the Trade Related Aspects of Intellectual Property agreement (TRIPS). This will provide for great intellectual property protection within Russia for both foreigners and locals alike. According to the Intellectual Property Rights Index Russia currently, ranks 97 out of 130 countries ranked. This is an astonishingly low number for an economy that ranks as the ninth largest in the world – even though much of the economy runs on the extraction of natural resource. Russia’s adopting of the TRIPS agreement will obligate the country to set minimum standards for it IP protections such as ensuring that copyrights and patents are protected for at least 20 years and impose more effective enforcement mechanism such as preliminary injunctions. Recently I have been evaluating the correlation between foreign direct investment in a country and the IP protections that are in place.
High levels of FDI in a particular country will help a country to grow economically since the inflow of capital will increase the marginal productivity of labor in the sector the money is invested. An increase in efficiency and output will typically result in higher wages for the workers of a specific sector, putting pressure on the other sectors to increase wages as well. In turn this will be positive for both income and output. The increase in FDI is one of the forces that bring new and existing technologies to developing countries. As I have discussed in previous posts one of Russia’s biggest challenges is the lack of productivity in many of its key sectors. For example the steel sectors – one of Russia most products areas – operates at a mere 30% of American productivity in that sectors. As such, it is imperative that Russia be able to attract new investors to make its productivity more efficient.
In order to attract new FDI it is necessary to give investors the confidence that its technologies will be protected. Russia has taken some serious stride to implementing stronger protections. This year the United States will work closely with Russia to enhance bilateral coordination on IPR enforcement and protection. This will include the organization of the United States – Russian Intellectual Property Working Group according to the USTR. We can already see evidence of Russia’s commitment to enforce IPR in the VKontakte v. Gala Records case; there the 13th Commercial Court of Appeals affirmed the decision of the Arbza Court of St. Petersburg. They ruled that Russia’s leading social networking web site, VKontaket – translated it means you are in contract – was liable for copyright infringement for the distribution of unlicensed music through its web site.
While this is only a small example of the commitment to enforce IP rights there are many more examples that can be found. One of the important commitments Russia made when it joined the WTO was to ensure that its government and courts would be more transparent. This can already be seen as the Supreme Arbitration Court of the Russian Federation makes all of their rulings available of their web site. As I continue to stress throughout my posts, Russia has a long way to go in order to ensure its future growth and raise investor confidence, but they are constantly taking strides in the right direction. I will continue to examine the correlation between IPR and FDI and perhaps take a look at a few other countries to provide some survey analysis and see how it will apply to Russia.
Tim Felix A. Bruecher, Development of Foreign Direct Investment and Intellectual Property Protection, 5th September 2008, Winterbach, Germany.