Dechert OnPoint: Georgia to Foster Innovations through New Legal Framework

Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associate Irakli Sokolovski and associates Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

INTRODUCTION

On 22 June 2016 the Parliament of Georgia adopted the Law on Innovations (the “Law”), a piece of legislation that aims to create national innovation ecosystems to facilitate social and economic development. These ecosystems are based on knowledge and innovation, facilitating the application of technologies developed by other countries and spreading intellectual property and technologies developed in Georgia in order to increase the competitiveness of all fields of technology, science and economics. In particular, the Law Government involvement in the innovative sector, provides for several types of infrastructure to support innovation and regulates related intellectual property issues, among other things. This edition of OnPoint brings light to the major aspects of the new Law while providing an overview of the new tools and institutions that it introduces.

GOVERNMENT INVOLVEMENT

The Law introduces two key state bodies tasked with aiding the development of innovation: the Innovation and Technology Agency (the “Agency”) and the Research and Innovation Board (the “Board”).

As an advisory body of the Government of Georgia (the “Government”), the Board has been charged with coordinating the creation of the State Strategy of Innovations and its submission to the Government. The Government approves the State Strategy of Innovations and defines the bodies in charge of implementing the strategy. Other functions of the Board include coordinating the development of national and regional innovation ecosystems between state bodies as well as the state, private, educational and scientific sectors and reporting to the Government regarding innovative activities.

Operating in the form of a legal entity of public law under the Ministry of Economy and Sustainable Development of Georgia, the Agency has been assigned to support innovation. It will work to commercialize research work, stimulate the application of innovations and provide various incentives for innovation.

INFRASTRUCTURE

According to the Law, state bodies or other persons may establish various infrastructure hubs to promote innovation. The range of types of infrastructure defined by the Law include Scientific/Technological Parks, Business Incubators, Business Accelerators, Technology Transfer Centers, Industrial Innovation Laboratories (FabLab) and Innovation Laboratories (ILab), and Innovation Centers.

Scientific/Technological Parks are expected to provide infrastructure and professional services to universities, scientific/research establishments and other interested parties, facilitating cooperation between such parties to foster innovation. Business Incubators provide workspace, administrative assistance and other technical support to persons carrying out innovative activities (the “Subjects”) for a limited period of two years. The Subjects shall be selected for this purpose on a competitive basis. A Business Accelerator mainly focuses on providing a workspace to the Subjects, developing and refining their business ideas and business models and making certain investments on their behalf as necessary. The beneficiaries of this kind of support from Business Accelerators should also be selected via a competitive process. The Law also concerns the services that other types of infrastructure should provide to competitively-selected businesses. Such services include the transfer of innovations, business modelling, concept development, financial support, trainings and establishment of employment platforms, among other things.

According to the Law, the Government, Agency, scientific/research and educational institutions or other interested persons may undertake or participate in co-financing innovative projects, activities or infrastructure on transparent, impartial and public financing basis.

INTELLECTUAL PROPERTY RIGHTS

The Law regulates the intellectual property rights attached to innovations. In particular, it grants intellectual property rights to inventions created by employees or recipients of orders during the course of employment or contractual obligations within a project funded by the Agency to the employer or the client, unless otherwise agreed in the employment contract. The Law requires indication of the inventor’s name when a patent is registered for an innovation.

The Law defines new terms such as Innovation and Commercialization of Innovation. Innovation covers not only innovative products but also innovative processes, organizational innovations and innovative marketing schemes. The commercialization of Innovations entails innovation that in practical use has positive economic or social effects. According to the Law, a share of revenue from the commercialization of intellectual property rights shall belong to the inventor. However, it’s left up to the Government to elaborate the rule of establishing the amount and granting such guaranteed share to the inventor. In some cases, where the Government has provided financing, the relevant Government agency or authorized legal entity may require a share of the revenues for seven years following the financing; that share should not exceed 5% per annum.

Patent holders may be required to license out certain Government-funded patented innovations to other applicants chosen by the Government. If the Government and patent holders fail to agree on the license transfer, the Law allows the Government to deliver a decision on issuing a license to another beneficiary following the established procedure. However, the Government may only exercise this authority granted by the Law if: (i) the patent holder does not use the patent within a reasonable time; of (ii) the uses of the patent do not meet health and safety requirements.

CONCLUSION

In sum, the Law intends to promote Georgia’s knowledge and innovation economy via the establishment of a number of new mechanisms. Legislators aim to provide various instruments to establish complex infrastructure and support education and sciences. While the practical aspects of the Law are still to be tested, the Law itself provides a promising set of tools for persons working in the innovation sector.

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Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.