Five Novelties Introduced by the New Law on Innovation Activity

Five Novelties Introduced by the New Law on Innovation Activity

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Recently, the Serbian Parliament has adopted new Law on Innovation Activity. This Law is a part of the Strategy of Scientific and Technological Development for the period from 2021 to 2025, whose basic motto is "The Power of Knowledge", which was adopted by the Government of the Republic of Serbia last year. Serbian digital community welcomed the adoption of the mentioned law, bearing in mind that the digitalization of the domestic economy has reached its peak in recent years, which was significantly contributed by the Covid-19 pandemic. In addition to the above, the Serbian startup ecosystem was recognized as “the most promising one” according to the report of the "Start-up Genome" (an organization specialized in following and reporting about worldwide Start up ecosystems). As the report states, the reason for this is quality professional staff and favorable tax treatment.

Below, we present the five most important novelties which introduce the new Law on Innovation Activity.

Innovation entities receive their legal definition

Until the adoption of this Law, innovation entities were not a legal category and there was no legal definition for them. However, the business practice itself has given rise to concepts such as start-up, spin-off, investment angel, which the new law has taken over, many without being translated into Serbian.

Thus, the new Law on Innovation Activity for start-ups says that it is a newly established company (or entrepreneur) that develops an innovative product and /or service and which has the potential for rapid and large growth. If we divide this definition into several segments, we can conclude that three elements of the start-up are marked as important:

1) this needs to be a new company;

2) an innovative one;

3) its growth needs to be scalable. 

In addition to start-ups, the new law explicitly defines spin-offs. In essence, a spin-off can be treated as a subtype of start-up, since in practice it often happens that one company establishes a new company (its daughter company) to develop and commercialize a specific innovation project, which is a spin-off.

By their nature, start-up and spin-off companies are young innovative companies. The beginning of their business is associated with numerous costs and risks. Therefore, investment angels are especially important for them, ie business investors who are ready to invest their financial resources in their innovative projects.

It is important to note that our legislator, aware of the dynamics and speed of change in the digital world, does not close the circle of innovation entities, but speaks of "other innovation entities" and defines them as entities engaged in innovation activities, who are registered in “National innovation entities system”.

Entities of innovation infrastructure

Innovation entities often need help and support, especially in the initial phase of development. Hence, the Law on Innovation Activity speaks and explicitly defines the entities of the innovation structure, which consists of: Start - up support organizations, Science and technology parks, and other entities of the innovative structure.

Start-up support organizations consist of companies whose predominant activity is the implementation of start-up support (such as providing workspace, professional, administrative, technical, and other services), all to facilitate innovation activities.

On the other hand, Science and Technology Parks (STP) are companies whose primary goal is to encourage economic development through the promotion of innovative thinking, by stimulating and managing the exchange of knowledge between universities, research organizations, businesses, and markets. Serbia has several Science and Technology Parks and the most famous are located in Belgrade, Novi Sad, Čačak, and Niš.

In addition to the above, new legislation also envisages the possibility for several STPs to unite and form the so-called network of STPs. The formation of the mentioned network aims to speed up and facilitate the flow of information important for the development of innovation projects, and also enables easier connection with their members.

Establishment of a special “Register of national innovation entities”

An important novelty is the establishment of a “Register of national innovation entities”. This Register aims to keep a record of the entities of the national innovation system, as well as to facilitate the financing of innovation activities (including state economic incentives).

Establishment of the “Fund for innovation activity”

The Register of national innovation entities is subordinated to the “Fund for Innovation Activity”, which has the financial support of the Government of the Republic of Serbia.

Therefore, in addition to its main goal, ie managing the Register, the Innovation Fund provides and manages financial resources from national, international, and other sources to implement innovation policies and also determines and implements support programs aimed to encourage innovation in both private and public sector.

The special regime of intellectual property law

Intellectual property rights are closely connected with the activities of innovative companies. Innovative entities often develop a product or service which can be protected by some Intellectual property (IP) rights.

It is important to emphasize that if any IP rights derive as a result of research in an Accredited scientific research institution financed from the state budget, in that case, the Law on Science and Research will be applied, meaning that the state will be their owner.

By Nenad Cvjeticanin, Cvjeticanin & Partners