|
|
|||||||||||
BISNIS is the U.S. Government's primary market information center for U.S. companies exploring business opportunities in Eurasia. A part of the U.S. Commercial Service, BISNIS disseminates information electronically and through consultations by its staff of trade specialists. Questions or comments? |
||||||||||||
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
|
Many companies fail to understand this basic premise of “territoriality” regarding IPR protection. The United States Patent and Trade Office found in research conducted in 2005 that 85 percent of SMEs did not know that U.S. patent and trademark registration only provides protection in the United States. Potential consequences in failing to understand this basic premise can have devastating consequences on a company. As an example, one U.S. small business owner reported that a business partner in Russia had secured trademark registration for all the products in the company’s catalog. The U.S. business owner had secured trademark registration in the United States for his product line, but assumed that a U.S. trademark would protect his intellectual property in Russia. Unfortunately this is not the case and his business suffered significant damages. First to Use v. First to File System Another fundamental difference exists between U.S. and Russian trademark law. The United States is a “first to use” system, meaning that generally speaking the first individual or company to use a trademark commercially, or have constructive use based on an “intent to use” application filing date, would receive priority. Under Russian trademark law, the first to file for a trademark would have priority over someone who may have used the trademark before. To the casual reader, this distinction may appear unimportant, but in actuality the difference is dramatic. For example, as a small business owner, you may not realize that in Russia if you have not filed for trademark registration or registered your trademarks, an entity with no affiliation to your enterprise can register your trademarks. This system of “first to file” is not unique to Russia; in fact it is quite common throughout the world. In fact, an industry has developed in Russia of people, informally known as “trademark squatters”, who exploit this distinction in trademark practices whereby they will register a popular trademark and offer it to sale to the rightful owner. One infamous squatter has publicly claimed that he has registered multiple U.S. and European trademarks, with no intention of using the trademarks other than to attempt to sell them to the U.S. and European companies for large sums of money. While such squatters may be attracted to popular trademarks, you should not exclude the possibility that you could become a victim of such a venture. For more examples of trademark squatting in Russia, you may read the following article; Someone’s Stolen My Brand! (Passport Magazine). You should also be aware that in Russia, as in the United States and other countries, trademarks may be cancelled if they are not used within a certain timeframe. This is considered a means of keeping the trademark registry free of unused trademarks, given the limited human and capital resources of many trademark offices.Useful Resources When considering the potential benefits and risks in registering your trademarks and other intellectual property in Russia, the following Web sites provide a broad array of useful information. Rospatent (Federal Service for Intellectual Property, Patents, and Trademarks) "IPR Toolkit” hosted by the U.S. Embassy in Moscow Strategy Targeting Organized Piracy (STOP!) Initiative, U.S. Department of Commerce U.S. Patent and Trademark Office As in all decisions critical to your business, you may wish to consult with an attorney when considering registration of your IPR in Russia. As referenced in this article, IPR regimes of other countries differ from the U.S. model, including in areas such as transparency and access to information. A knowledgeable and experienced IPR attorney can help you avoid costly mistakes. |
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
 by Kendrick D. White This article first appeared in Financier Worldwide Magazine's 2007 Emerging It is becoming more competitive in Russia's regions, which is prompting and pushing Russian entrepreneurs to improve their performance and seek out new financial and strategic partners, which can help them to expand. Speaking or even thinking about Nizhny Novgorod as a new "Bangaluru" or "Russian Silicon Valley" seemed strange just a few years ago. Today the situation has changed dramatically, and the idea of "clusters of entrepreneurship", particularly in hi-tech sectors of the local economy, has caught people's imagination. Moreover, to make this vision reality, we can see concrete political steps being taken and investments made. Cluster theory suggests there should be a critical mass of specialists, such as consultants, corporate finance specialists and venture capital (VC) and angel investors, surrounding key university towns. If such a "cluster" of active market participants is located close to a local university this can help stimulate new hi-tech innovations and promote the commercialization of technologies and other businesses being developed through that university system. This winning combination of highly educated scientists together with venture capital funding, introducing into the market innovative new commercial ideas, can easily be found in the United States in such clusters as Silicon Valley and Silicon Alley formed around key universities. In Russia such clusters have developed slowly. One reason has been the lack of local investment liquidity, another the lack of local business training programs to train middle and top level managers needed for business development. As the previous Director of the European Bank for Reconstruction and Development’s Central Russian Regional Venture Fund I led early efforts to invest US$10 million into local pharmaceuticals producer Nizhpharm. We had difficulty enticing Moscow managers to move from Russia's capital to Nizhny, so we focused instead on in-house training. Since the mid 1990s our fund had received technical assistance financing from the German development bank KfW, which paid for management training for our investee companies. That was useful, but it could only be targeted to one investment project at a time. Since then we have seen a growing number of regional companies moving from trading to local production. They face increasing competition and have realized that, to develop the accounting and quality control systems necessary, they must invest in developing a strong management team. One of the principal needs of these clusters is a supporting infrastructure of educational and training programs and specialists, and this is now finally falling into place. If we add increased activity by domestic angel investors, micro and small business lending programs and venture capital financing, development in regional capitals and their surrounding regions will really take off. I know of several MBA programs, one such being run by the South Urals University in Chelyabinsk where I have been invited as a guest lecturer. The university helped set up the two-and-a-half year program but the students or their companies pay for it. These are not young students but rather professional finance and strategic planning managers, HR directors and business proprietors. The program focused on sophisticated topics like understanding asset pricing models and how best to establish a company's capital structure. Myself and many other guest lecturers are often amazed by the advanced questions students ask. I know of several new executive MBA programs being established in Nizhny, including one planned for next year through the local branch of the School of Higher Economics and another manned by the Green City executive education institute, all intended to prepare students for management careers with local or international enterprises. As competition increases it is logical and necessary for such programs to develop countrywide in order to meet the increasing needs of entrepreneurs to improve their companies' competitiveness. This is all part of making Russia increasingly plugged into the global economy. Russia's economic environment - particularly regionally - is becoming more competitive, forcing entrepreneurs to improve performance and competitiveness in order to survive and grow. The rapid development of MBA programs, consultancies and support networks, together with angel investor clubs and venture capitalists, has only positive effects on local entrepreneurs. It gives them access to expertise and new capital, two factors to help them integrate further into the global economy. These are all positive trends I'm taking advantage of in building an investment advisory firm focused on linking global private equity investors with progressive regional enterprises. These are trends I intend to build on with companies that not only need expansion financing, but are also ready to embrace international business practices and transparency in order to attain success. Start-up and Venture Capital is Needed Here! To start up and expand, entrepreneurs really need capital financing, they need venture capital and increasing working capital liquidity. These are sentiments often heard in the corridors of business. Some years ago I intended to invest into an attractive company in Nizhny, which was reluctant to sell shares to a foreign venture fund. They were willing to sell only a small minority of shares to foreign investors, even then at an outrageous valuation price, and eventually we had to walk away. Today, companies' attitudes are different; barriers have been dismantled which protected regional business elites and natural competitive forces are changing entrepreneurs' attitudes towards private equity investors. Increasing competitiveness is forcing regional companies to expand or die. You also see a strong trend in consolidation within many sectors such as the retail and service industries, as companies are pushed together to stay competitive. Many set themselves up ten years ago and succeeded quite profitably until now, but today face macroeconomic pressures emanating from Moscow and beyond, pressures largely responsible for today's era of increased transparency and competition. Take pharmacies; each city had its own home grown pharmaceuticals retailers which are now trying to compete against rapidly expanding national chains. There are economies of scale in this which can successfully solve a number of issues which independent operators couldn't solve alone. This is being replicated across many sectors in Russia, and is pushing regional companies to seek strategic and financial partners. Going East and South There's an understanding in Russia that 80 percent of the country's financial resources are controlled by Moscow. If true – there exists plenty of evidence that it is – it is a serious weakness for the country's long term development. For example, there are a number of western investment funds in Moscow. They have generally been successful, but the entry valuations on new projects coming from Moscow and St. Petersburg are steadily rising. Also, there are many financial intermediaries in these cities, consultants and advisors helping their clients develop successful business plans. These plans are often promoted via sophisticated tenders to those in the investment community anxiously seeking qualified projects. Often, they compete against each other in the same limited number of tenders for the opportunity to invest, resulting in high entry valuations on these projects. Another problem is that many regional companies have up until recently been reluctant to pay for high level consultants to help prepare business plans. This widens the gap between Moscow investors seeking projects and regional entrepreneurs who are often unprepared to provide realistic business plans expected by investors. These two groups often miss each other as they have no common language or understanding on how to further develop a business. It's much easier for a Moscow investor to review a ready business plan than travel back and forth to a provincial city trying to build the plan himself with the entrepreneurs. The problem for investors now is that the time of finding easy post-privatization and restructuring deals, "low hanging fruit", is ending, and the hard work of true venture capital investing is beginning. Competition is fierce in Moscow and St. Petersburg and simultaneously there are fewer deals spread more thinly in Russia's vast regions, but these projects, in our opinion, offer significantly better valuations in the long run. Regional companies need corporate finance advisory services, to work on the ground to help them develop their business plans such that they will be fully screened and qualified to secure private equity investment capital. We consider the macroeconomic shift towards investment in the regions inevitable, which in coming years will surely put regional capitals in the spotlight as attractive investment destinations. This will make Russia a significantly more diversified economy, with stronger ties nationwide with the global economy. Ambition & Fire in Their Eyes If you travel into Russia's regions you will often meet a certain type of self-made entrepreneur who talks with genuine ambition and hunger about his business and its growth potential. The leading entrepreneurs have often lived or traveled abroad and accept the world as an open market. They are ready for western partners to help them grow their business, but at the same time need advice and coaching on how to present their business plans and ideas in a professional format and then negotiate win-win partnerships. Russian regional companies are becoming more and more sophisticated today and are competing more intensively than ever before, as the fight between different brands seeking market share heats up. Successful domestic producers, selling their own indigenous brands see this market as growing rapidly and are gearing up to expand production and distribution nationally. Added into the mix are western multi-nationals, who view all of Russia as their market and want to dominate within it. There is some pressure on them to develop green-field operations, but they also see incentives in buying local, established brands and the teams behind them. Eventually I believe that much of Russia's markets will be divided up and dominated by a handful of local brand producers fighting against multi-national brands – which is ultimately good for Russian consumers. Kendrick White is Managing Principal at Marchmont Capital Partners (www.marchmontcapital.com), an American owned business advisory firm based in Nizhny Novgorod, Russia.
|
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
|
|
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
The Entrepreneurship Insights e-Bulletin, published by the U.S. Russia Center for Entrepreneurship (CFE), provides knowledge and ideas on important issues and current trends of entrepreneurship development in Russia, as well as reports about recent events and activities of CFE and its partners. The first three issues can be viewed online at: www.cfe.ru/eng/bulletins . BISNIS Website Introduces RSS Feeds Want to receive the latest BISNIS news the moment it is published on our website? BISNIS recently added a new RSS (Really Simple Syndication) feature to its website that allows users to sign up to receive Latest News and Multimedia Hub Clips feeds. More information on how RSS works including how to get an RSS reader can be found at: www.bisnis.doc.gov/bisnis/rss. Trade Finance Guide Trade Finance Guide, A Quick Reference for U.S. Exporters was published by The International Trade Administration in April 2007. It has been written to help U.S. companies, especially small and medium-sized enterprises (SMEs), learn the fundamentals of trade finance to turn their export opportunities into actual sales and to achieve the ultimate goal: to get paid for their export sales. Eleven concise, two-page chapters offer the basics of numerous financing techniques, from open accounts, to forfeiting, to government assisted foreign buyer financing. The Trade Finance Guide is available online at: www.ita.doc.gov/media/publications/abstract/trade_finance_guide2007desc.html. |
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
| Protecting Your Intellectual Property in Russia • Clusters of Entrepreneurship • Russian Affordable Housing Program: Challenges and Opportunities • Eurasia Resources • Upcoming Events • Top |
|
BISNIS is the U.S. government's primary market information center for U.S. companies For more information, call: 202-482-4655 or email: bisnis@ita.doc.gov. To call BISNIS toll-free, dial 1-800-USA-TRADE (872-8723) |
|
Director Managing Editor Contributors Articles by non-U.S. government employees express the views of the authors and should not be construed as a statement of U.S. government policy. |