California has its Silicon Valley, Israel has its Silicon Wadi, New York has its
Silicon Alley – and the companies there are all making money hand over fist. So
it’s not surprising that Russia would want to get in on the act too, with a
“Silicon Mir” (village).
And in fact, Russia is indeed in the midst of
setting up an advanced technology center, to be called Skolkovo
(www.i-gorod.com), located outside Moscow. The site, located next to the campus
of Skolkovo Moscow School of Management, a Russian-managed school to produce
Westernized business leaders, is cooperating with top American schools, such as
MIT. The business school has been a great success and has shown Russia’s
leadership that the country can succeed in international trade, moving beyond
exporting resources such as oil and gas.
Russia also still retains its
traditional strength in science, including physics and computer sciences. So all
it has to do is add the newly minted MBAs from the management school with geeky
computer brains, and you get a business case that just screams out for hi-tech
start-ups to line up and start innovating.
Thus the impetus for Skolkovo,
which has recently entered into cooperation agreements with a number of hi-tech
institutions and companies around the world, including in Israel. Over the
summer, Ariel University signed a cooperation agreement with the Skolkovo
Foundation and established a private partnership (israelsk.com) to help Israeli
companies hook up with Russian hi-tech companies to produce technology jointly,
both in Israel and Russia, assisting them with contacts, legal help and
Several weeks ago, Ariel and Skolkovo held a conference in
Tel Aviv that described the opportunities, as well as the problems, in doing
business in Russia. Speakers from both Israel and Russia were featured,
describing the business models that would work best and how to ensure that
Israeli intellectual property remains protected and does not get siphoned off by
the Russian partner, leaving the Israeli partner high and dry.
actually, is one of the greatest fears among Israeli and Western businesspeople
who are considering investing in Russia. Can you really trust them? Yes, the
laws today – two decades after the fall of Communism – are all
But it’s just a front; in order to get anything done, you
have to dole out a lot of “baksheesh
,” as they used to call it, and you can be
sure that a Russian “oligarch” billionaire – which there seem to be a lot of –
can match whatever you can afford to shell out, thus “claiming” your patent or
IP as his own.
That’s the way we’ve always believed it to be and the way
it was, until recently, says Anna Moshe, an Israeli attorney who specializes in
helping Israeli technology companies get involved in Russia.
Russians know what their reputations are in IP protection, and they have taken
great strides in correcting the situation, to ensure that Western investors feel
comfortable with the system,” she says.
“Two decades may seem like a long
time, but it is not long enough to erase the ideas of communism, under which
entrepreneurship was totally unacceptable,” says Moshe, a partner at the law
firm of Moshe, Bloomfield, Kobo, Baker & Co. “The Russian leadership
realizes that no one is going to invest unless they are sure that their money is
safe. As a result, they have been updating laws on IP protection, making them
consistent with Western laws.”
So, an Israeli start-up that sees an
opportunity for support and investment has nothing to fear from making a deal
with a Skolkovo company. What they may have to do, though, is give up a part of
their ownership of the device or technology, Moshe says.
“In this they
are no different than Israel, or even the US,” she says. “The point of Skolkovo
is to create more jobs in Russia and to retain tech knowledge in Russia. They
are tired of being dependent on the West and want to own their own technology –
and least partially.”
As a result, Moshe says, any Israeli or Western
company seeking to do business in Russia had better be prepared to give up some
control of their intellectual property – either licensing it out for long-term
production in Russia, or a joint ownership agreement.
It’s a strategy
that another (not yet former) Communist giant, China, is following as well, much
to the chagrin of many Americans, who fret over the export of made-inthe- USA
technology to China. They are concerned that China will use its cheaper
workforce and mass production capacity to make legal knockoffs of what they had
formerly purchased from the US.
But that’s the deal – both in China and
Russia, Moshe says.
“Israel does the same thing, as do many European
countries, and all large corporations in the US expect to own at least part of
the intellectual property,” she says. “Nobody thinks this is strange, but when
it comes to Russia and China, people are ‘shocked’ that they would want the same
As things stand now, any Israeli company that plans to work with
Russia knows what it’s going to cost them. (To get as good a deal as possible,
they ought to be speaking to someone like Moshe, who has a staff of attorneys in
Israel and Russia that will protect their rights and ensure that the deal is
worthwhile.) The decision to work with Russia is that of the board of directors
of the Israeli company; i.e., the decision of an individual company, as long as
it does not violate security laws.
But the winds of attitude change are
starting to blow in the West. In January, for example, President Barack Obama
expressed concern about IP privacy and protection to visiting Chinese President
Hu Jintao. More recently there have been numerous comments by American officials
decrying arrangements where part of US-developed technology ends up in Chinese
With a presidential election coming up, and a recession still
raging, it wouldn’t be out of the question for one of the candidates to propose
– and maybe enact once in office – laws against American companies sharing
advanced technology with the Chinese, and of course the Russians, unless
approved by a government panel. If that does happen, there’s no doubt Israel and
other countries will follow suit.
It’s a shame for Russia that they
waited so long to build a hi-tech center. It just may be that the window they
were hoping the IP would flow through to Skolkovo may be closing.
will they do with Skolkovo then?