There are often misconceptions about negotiating intellectual property (IP) development agreements with developers located in Russia. This article details five common misconceptions and provides tips for complying with applicable laws under such agreements.
MISTAKE # 1: Personal data of Russian citizens must always be stored in Russia and cannot be transferred.
Personal data of Russian citizens must first be collected in local databases, but can then be copied to any other database. Such a copy would be considered a “cross-border transfer”, but cross-border transfers of data, including transfers to foreign entities and databases, are permitted under Russian law.
Advice: Cross-border transfers are subject to compliance with the requirements of Russian Personal Data Law, which include, among other requirements, (1) the legal basis for the transfer (individual consent or otherwise) and (2) data transfer or data processing agreements, even in intra-group transfers.
MISTAKE # 2: Any contract with Russian developers must be governed by Russian law.
If the transaction includes a “foreign element” (eg, a foreign entity, a portion of foreign intellectual property embedded in the software), then the agreement may be governed by foreign law at the discretion of the parties. English or US law, with customary protections and liability provisions, is often used for complex technology development projects with Russian developers.
Advice: You will still have to comply with the mandatory requirements of Russian law applicable to agreements governed by foreign law.
Advice: Prepare agreements in a bilingual format (English-Russian).
MISTAKE # 3: Russian developers cannot assign intellectual property rights, and these rights forever belong to the developers.
The Russian Civil Code does not allow the assignment of moral rights and any waiver of moral rights is unenforceable. However, other intellectual property rights, and especially (exclusive) property rights, are fully transferable.
Advice: An agreement with a Russian developer may allow the assignee to use the created IP without mentioning the name of the developer (author).
Advice: Always review the underlying employment contracts to confirm that the Russian equivalent of the concept of “work for pay” is included.
Misconception # 4: The development of any technology in Russia requires obtaining an encryption license from the Federal Security Service.
Certain activities require a state license (for example, the development and manufacture of software incorporating encryption). However, if the technology uses a third-party encryption tool or a third-party encrypted communication channel, a state license is not required.
Advice: Export control restrictions apply to the transfer of certain types of technology. These restrictions include the obligation to obtain a qualification certificate from the Federal Technical and Export Control Service (FSTEK).
MISTAKE # 5: Russia, Belarus and Ukraine have the same laws.
While their treatment of intellectual property rights and technology may be similar in some cases, Russia, Belarus, and Ukraine are different jurisdictions and have significantly different laws and regulations.
Advice: Always consider hiring a local legal advisor to advise you on relevant local laws and regulations.