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. Last Updated: 07/27/2016

Russia Suffers Losses in Patent War

Russia's defense industry is losing billions of dollars in potential profits every year as foreign companies and agencies continue to rip off valuable technologies from Russian-made arms not patented abroad, military officials contend.

The head of a recently established federal agency to protect military intellectual property, Yury Gaidukov, said in a recent interview that Russia could have earned anywhere from $1 billion to $10 billion a year just licensing the use of Russian-made arms technologies, if they had been fully protected by patents.

Gaidukov said designers and researchers at Russia's depressed defense companies often defy international patent laws, which provide for any invention to be first patented in the country of its origin.

They instead sell results of their intellectual activities, often for as little as a few hundred dollars, to foreign companies and agencies that patent them in their own countries.

Not only does this mean Russia loses the right to sell the technology, Gaidukov said, but foreign holders of such "priority patents" can theoretically ask Russian defense companies to pay a fee for using technologies their own employees have developed.

Gaidukov said his agency has already registered numerous cases in which Russia lost patents in this manner, including at least 800 since 1992, with U.S. and European companies and government agencies acquiring most of these patents.

The agency is working to clinch deals with all major defense companies, research institutes and design bureaus to ensure that their technologies are first patented in Russia, he said. Under such a deal, managers of these companies will oblige all employees to sign special contracts barring them from registering their inventions anywhere outside Russia.

The agency also plans to start checking all Russian arms to determine whether they are protected by patents before allowing their export, he said.

Gaidukov claimed some foreign companies are quite open about their use of Russian products. He said, for example, that a representative from the U.S. aircraft manufacturer Boeing told the head of a Moscow-based patent company during a patent conference in Seattle in 1997 that Boeing had discovered 14 different technologies in VPK MAPO's MiG-29 fighter that it intends to use.

None of these 14 technologies have been patented and, therefore, VPK MAPO cannot demand any fee from Boeing, Gaidukov said.

Boeing spokesman Viktor Anoshkin, reached by telephone, denied any knowledge of the planemaker's reported intention to take advantage of MiG-29 know-how.

VPK MAPO spokesman Sergei Somatov acknowledged in a telephone interview last month that his company has failed to patent much of the technology behind its products.

A local patent expert said companies like VPK MAPO, with a corporate culture rooted in a Soviet past when the state took care of all financial details, often fail to even think of registering with Russian patent officials.

In the few cases where a Russian company holds a patent, Gaidukov said his agency will assist in taking legal action to defend it.

He said the agency is currently helping the Moscow-based Scientific Research Institute of Steel, or NII Stali, to prepare a lawsuit against the Malyshev plant in Kharkov, Ukraine.

NII Stali has developed a dynamic tank-protection system that the Ukrainian manufacturer of armor vehicles is "illegally exploiting," an official with the institute's legal department said in a telephone interview.

The Kharkov plant's T-84 MBT, an extensive modification of the Soviet-made T-80 tank, is equipped with the system. Malyshev, however, has not purchased any license to produce the system, which is mounted on the tank's armor and expels tiny bomblets meant to disrupt the flight of an incoming shell.

The official, who asked not be named, said NII Stali has already patented the system with the European Patent Office in Switzerland.

In some cases, however, foreign companies agree to buy a licenses rather than face lawsuits, Gaidukov said.

Such was the case with Bulgaria's Arsenal plant, which was manufacturing Kalashnikov assault rifles despite the fact its initial license had expired 14 years before, according to Gaidukov.

He said the plant recently agreed to buy another license from the Izhmash plant, in the Russian city of Izhevsk, which holds a patent on the gun.

Nevertheless, there are 11 other countries - including Israel, the Netherlands, Finland, Sweden, South Africa and India - where local arms manufacturers continue to illegally manufacture Kalashnikovs without bothering to purchase licenses, according to Izhmash.

As a result of this illegal production both the plant and the gun's inventor, Mikhail Kalashnikov, are losing millions of dollars in potential license sales, Izhmash spokesman Mikhail Mikhailov said. He said one Kalashnikov production license could cost anywhere from $6 million to $10 million.

Not everyone in the defense industry, however, is thrilled about everything Gaidukov's agency is doing.

While welcoming help where they can get it, some companies said they feared concerns over patents could slow down the already painstaking process of arms exports authorization.

"This may have us face more bureaucratic hurdles," said one official at VPK MAPO.

The official, who asked not to identified by name, also objected to the patent agency's intention to charge a fee based on a percentage of the value of each contract it sanctions.

Gaidukov acknowledged this was true, but declined to elaborate. He said only that most of the fee will go to new arms development.