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Why Yandex can never get high capitalization in USA like Google or Microsoft?

Source: Roem

russia-yandex-ip-1240-850Russia’s technology industry has an Achilles Heel: most start-ups and established companies fail to make best use of their intellectual property or patents.

Here is the problem: many Russian technology firms are world-class innovators, but they fail to manage this innovation. Instead of protecting and patenting their intellectual property, they do nothing.

It’s usually for the same reasons:

Some inventors and company owners simply don’t believe in patents as a concept for good; for them, all innovation should be opens source; that is a commendable thought, but when it comes to running a business it is also potentially suicidal. If their company is successful, any rival can simply come in, copy the idea and obliterate the innovator. Even worse, for some cutting edge innovation, the rival can reverse engineer the idea (achieve the same outcome but with a slightly different technical approach) and then patent the whole concept, leaving the original inventor dead in the water.

The other mistake made by many companies is that they don’t realize the huge value of their patents, and fail to manage their patent portfolio.

Russian technology companies need to understand that patents can be used:

  • As a defense, to keep rivals from copying their ideas and pushing them out of the marketplace;

  • For offense, when they try to move into new markets and want to make sure that their arrival in the market can not be challenged by competitors.

  • As a business model, through licensing patents and making money from royalties.

Instead, Russian companies often sit on their hands or do next to nothing. When it comes to international patent registrations, say in the United States, Europe, India or China, Russian companies barely register in the rankings.

The result:

1. Russian companies struggle to gain new markets, and find partners or investors. For starters, Russian firms listed on international stockmarkets struggle to find investors, because their intellectual property portfolio is so much worse than that of direct competitors (for example Yandex vs Google or Apple). And because they have not protected their innovation, they also find it near-impossible to break out of the Russian market and tackle Western or Asian competitors head on. They find it difficult to find partners or customers, because they can not proof (through their own patent portfolio) that their services and products are truly authentic and don’t infringe the intellectual property rights of third parties.

2. Success goes to companies that patent something first, not those who invent it first. The “go-slow” approach of Russian companies means that even if they invent something, they will not reap the rewards. In contrast, look at Kasperksy, one of the few Russian companies with a very active patent portfolio. Their industry is highly competitive, and they constantly file patents to ensure their rivals can not undermine their strategic position in the market. 
If Kaspersky failed to patent its innovation, its rivals would swiftly move in – and Kaspersky could not sue them for stealing its innovation.

3. Russian companies don’t make money from their innovation, and therefore don’t have enough funds to invest in new research and development. Not every idea has to be used internally – but if you invent something great, you can sell it, or license the technology to another party, which generates valuable cash flow. Patents are also an incredibly useful tool to borrow money, with patents often used as an asset to borrow money against. Only companies with a strong patent portfolio also find it easy to raise the money for further expansion.

4. Finally, IP rights protect a company from being taken for a ride when a key developer or inventor leaves the company to join a rival. In Russian employment law, no-compete clauses are illegal. So the only protection a company has against the poaching of a key staffer are patents filed by and assigned to the company. Take Yandex: recently one of the key developers and head of its mail service, Egor Ganin, left the company and joined main competitor Mail.ru as head of their mail service. 
This gives Mail.ru a huge opportunity to get a lot of Yandex innovation for free, because not all of it was patented. Ganin can now simply take his know-how and use it a Mail.ru. Years of investment by Yandex have gone up in smoke.

5. Finally, here’s a lesson from the world’s successful technology companies: Whether it is Google, Facebook, Samsung or Microsoft: they all consider a strong patent portfolio as a measure of their health as a company. Patents show that a company has a strong innovation pipeline. That helps to attract investors, the next generation of researchers and developers, and it will secure the long-term survival and success of a company.

Unless Russia’s tech companies understand these lessons, they will always be Tier 2 players, confined to and challenged in their domestic market – and highly vulnerable even there.

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Author: grill-ip

Grill IP is a non-profit project for educational and entertaining purposes only. Our aim is to provide quick and easy access to aggregated and original patent news, IP analysis, interesting business cases in IP, basic legal updates and a list of patent transactions.

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