Skolkovo Innovation Center Update: Rules for Aspirations: Fueling Inspiration or Regulating It?

08.12.2010

On September 28, 2010, President Dmitry Medvedev signed a bill on the Solkovo innovation center and related amendments to the legislation. It had been introduced to the State Duma on May 30, 2010, thus the substantial adaptations and specifications of many of the initial provisions took almost four months. I  previously evaluated some of the positions and ideas in the original bill, and in general, the current version does appear to be better balanced and reasoned than the earlier draft.

A positive attitude towards the idea of an innovation center is not enough to make it a reality. I firmly believe that it has quite serious potential but that the skeptics should also have their say.

There are three important things that have now, in one way or another, become clearer. At a meeting of the working group of the Russian Union of Industrialists and Entrepreneurs on Skolkovo, attended by Vladislav Surkov and Viktor Vekselberg, it was unequivocally stated that only companies prepared to provide truly innovative ideas would be recognised as participants but that copying and modification of existing technologies were not needed. Secondly, only research and development by project participants are envisaged by those charged with developing the project,  definitely not production. Thirdly, intellectual property and related rights must belong only to the inventors. 

Also the one should keep in mind that from the Skolkovo project the new LLC shall be created to obtain Skolcovo benefits.

An important place in creating the conditions for working at the innovation center belongs to the company that will manage it – essentially the “boss” of Skolkovo. This company is granted very broad powers indeed. In comparison with the original draft, the law describes its functions in more detail and regulates its interaction with subsidiary organizations somewhat better. Yet much remains outside of the public’s view(beyond public scrutiny? Opaque? Lacking in transparency?), and the law is silent about the structure of the management company. This sphere of relations still needs more detailed regulation and it will be important how the relations between the management company and the center’s participants are regulated. The law provides for rules being passed on the activities of the management company, but unfortunately, no one has laid eyes on this document.

The conditions for including a legal entity in the register of the project’s participants are also important. There are four of them, set out in detail in Clause 10. Yet the law also allows the management company to set additional binding conditions other than those stipulated in this clause. Perhaps granting such broad discretion to the management company is justified, but nevertheless, as-yet unknown “additional conditions” naturally arouse concern.

Equally important are the conditions for the expulsion of legal entities from the Skolkovo. There are three such conditions, and they are specified quite clearly (breach of project regulations, breach of the law, or withdrawal from the project). In my opinion, however, the question of appealing against expulsion should also be addressed. Moreover, the law gives no indication as to how such decisions should be made. The relevant procedure is left to the discretion of the management company. It is not even known yet if there is any way of appealing against decisions made by the management company. It is likely that there is, but it would be useful to have this spelled out. 

There is one more major issue that needs clarification: the transition period. The Law stipulates that the management of the Skolkovo must reside within the Skolkovo center. However, as long as the Center has not build yet it can reside in any location, but by 1, January 2014 shall be relocated to Skolcovo in order not to loose its tax and other benefits. Obviously the question remains what do I do on January 1, 2014 if I well settled in other place. What would happened with my properties etc. I used for three years. Will be Skolcovo redy to provide me with the nesesarry infrastructure etc. The relocation process is not only about phizical movement but legal as well. The resident will have to diregester from one place and move to another. 

Intellectual Property Rights

The general rule regarding intellectual property rights is that these rights belong to the developer. In specific cases, however, the state may place orders for research and development and retain the corresponding intellectual property rights.. This is logical, but the law could do with a rule stating that all the given rights will belong exclusively to the developers.

The law’s limitations on the powers of the central and regional authorities concerning Skolkovo seem justified. The territory of Skolkovo will constitute an independent zone where officials’ powers relating to land and transport issues, construction supervision, and education, among other things, will not apply. Everyone apparently understands that this is an essential condition for the experiment to work, yet doubts remain: Much will depend on how the new enclave will handle and adapt to an aggressive environment.

Even with the law signed, there are still critical issues that need to be discussed. There is the principle issue of transparency concerning such a public-private partnership in the innovation sphere. Much also depends on a general improvement in Russia’s investment climate. The successful and dynamic development of Skolkovo’s innovation center would be a huge and positive step toward a more favorable general economic environment.  

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