Russia mulls making software piracy legal and patent licensing compulsory

Russia is considering handing out licenses to use foreign software, database, and chip design patents, and legalizing software copyright violations, in response to sanctions imposed over its invasion of Ukraine.

According to Russian business publication Kommersant, a government document drafted on March 2 outlines possible actions to support the Russian economy, which faces extensive trade restrictions from the US, the UK, and Europe, and business withdrawals.

With companies like Apple, Oracle, Microsoft, and SAP halting sales (though not ending service to existing customers), Russia has instituted tax breaks for technology firms and conscription deferments for IT workers to retain its core resources and talent during the conflict.

The March 2 document, Kommersant says, proposes a compulsory license for patented software, databases, and chip designs, and contemplates abolishing criminal and administrative liability for software license violations, but only for rights holders from countries that support the sanctions against Russia.

Companies inside Russia and external firms from countries that haven't ventured an opinion on the invasion and shelling of civilians should see continued legal protection, whatever that's worth, for their intellectual property.

The compulsory license would be allowed under Article 1360 of the Civil Code of the Russian Federation. As algorithmically translated, it reads:

The Government of the Russian Federation has the right, in case of emergency, related to ensuring the defense and security of the state, protecting the life and health of citizens, to decide on the use of an invention, utility model or industrial design without the consent of the patent owner, notifying him of this as soon as possible and with paying him adequate compensation.

Our reading of this is that the Kremlin wants to grant organizations licenses to use patented technology, without the permission of the patent holders, with some kind of payment offered.

Back to the bad old days

History doesn't repeat itself but it rhymes. It used to be that practically all software in Russia was pirated or used without a license. It may yet be again and may not matter as much. Though the Russian Federation adopted copyright commitments made by the Soviet Union before its dissolution in 1991, subsequently enacted its own copyright rules in 1993, and joined the Berne Convention in 1995, software copyrights were widely ignored in the country during the 1990s.

According to a Duke University School of Law article from 2000, The Moscow Times put the software piracy rate at 91 per cent in 1996.

By 2004, Russia had managed to reduce the rate of pirated software to a mere 87 per cent, according to the Business Software alliance(BSA) [PDF].

Improvements in intellectual property protection proved slow. In a blog post discussing the Kommersant report, software-licensing attorney Kyle Mitchell recounted his time in Moscow, Russia from 2008 to 2009, when copyright rules were widely ignored.

"With Larry Lessig making the rounds for Creative Commons, and a thousand voices proclaiming the 'freedom' of anything we could rip and share online, Russia was a kind of copyright-free demilitarized zone," he wrote. "Only at the heavy ends of the economy, or in the organs of the state, did the laws on the books, or the looming consequences of potential WTO accession, really come to bear."

By 2010, the software piracy rate in Russia had fallen to 65 per cent, per the BSA [PDF]. However, copyright enforcement in Russia sometimes served purposes other than international trade norms, like suppressing political opposition.

That year, in response to a New York Times exposé, Microsoft wrote a blog post lamenting that Russia's use of software piracy charges to harass organizations engaged in public advocacy wasn't exactly what it had in mind as it pushed to protect its commercial interests. In the US that same year, Public Knowledge published a report [PDF] on meritless copyright claims being used to suppress political speech.

In 2013 and 2015, Russia adopted more copyright rules. And by 2017, according to the BSA [PDF], the rate of unlicensed PC software installation reached 62 percent in Russia – about what it was a decade earlier.

DRM has moved on

Yet even if Russia goes ahead with these latest proposals, the future of software piracy could fall short of the past. With cloud computing, IT companies have found a better business model that, coincidentally, keeps intellectual assets locked away in data centers.

In an email toThe Register, Mitchell said he was reluctant to try to assess the impact of the Russian proposals.

"Even if implemented in the strongest proposed form, this could very well be totally swallowed by events, including official sanctions and the voluntary boycotts of private vendors, payment networks, and so on," he said.

"It's easy to read the proposal primarily as a somewhat limp-wristed response, a low-priority mitigation. Companies are walking away from the table. Their Russian customers are left with the chips and cards they have in hand."

Mitchell expressed skepticism at the suggestion that piracy reduction should be counted as a main driver of cloud adoption.

We could see the loss of functioning customer-vendor relationships for software having politically meaningful effects in two ways: widespread disruption of basic business administration and derailing of more specialized, tech-dependent projects

"That's in play, but causation isn't clear: how much and how often as a factor, rather than a knock-on effect?" he said. "'Cloud' is a complex phenomenon, and quite contextual. There are niches in the United States where installed-program license keys remain the norm. At the same time, there's been a long, ongoing, rather public business and policy conversation in Russia about self-sufficiency, security, and foreign dependence."

"We could see the loss of functioning customer-vendor relationships for software having politically meaningful effects in two ways: widespread disruption of basic business administration and derailing of more specialized, tech-dependent projects. I've seen reference to market research showing cloud service growth in Russia, as elsewhere. But I've also seen reports suggesting Russian business isn't as far along in its shift as, say, the USA," he suggested.

If Russia should return to egregious intellectual property violations, Mitchell said that Western firms have historically been able to seek redress from Russian firms via arbitration, often in Stockholm or London.

"Widespread international agreements honor both commitments to arbitrate and the judgments of arbitrators," he said. "Western firms certainly have gone after Russian firms before foreign arbitrators, and then gone after Russian property abroad, where they could find it." ®