So, how does Soviet intellectual property law work within a democratic society? And does it encourage innovation, or does it stifle it?
The same way that the Soviet Union's political, economic and social institutions were all adapted by the UASR along with many of the country's legal codes, norms, instruments and policies throughout the 1930s and early 1940s.
Soviet intellectual property law is far more "democratic" than the Western models of today.
You are forgetting that the UASR is still a "communist state" or "Communist Party-ruled state".
What you have to understand and think about deeply is that the UASR is not this idealized liberal socialist United States of America with Red clothing. Rather, t
he UASR is the Soviet Union if it has the world's largest capitalist economy.
This false dichotomy of the UASR = democratic and the USSR = authoritarian has to stop.
The UASR is a very authoritarian and a very democratic state all at the same time. The only reason you call it "democratic" is because you see all of this from a liberal lens where the ruling communist party has open factionalism, the press is relatively free, there are tolerated non-party oppositionists and a relatively wide degree of ideological diversity and that the workers' state does not send hundreds of thousands of perceived opponents of the government to the gulag (which the UASR definitely has, GULAG is just an abbreviation of the Main Directorate of Correctional Labour Camps, and the UASR has correctional labor camps).
But on the other hand, you are forgetting the post-civil war mobilization conditions, the Red Terror, the open repression of the reactionary Democrats and Republicans, the unlimited state of emergency that suspends civil liberties since 1939, the Sons of Liberty insurgency and the need to squash the organization to pieces, the vast expansion of the security and surveillance apparatus, the centralization of the political and economic system, the dissolution of the codified constitution and "rule of law" in favor of unlimited soviet power, universal labor and military conscription, directive brute force planning instruments in order to push for communization, the paramilitary nature of law enforcement and policing, Communist Party control of the military, not to mention the invasive militarism and the ruling party-state machinery that deliberately gerrymander election outcomes to its favor; all of which a liberal or a libertarian (left or right) of OTL would balk at.
And if you think this is all just temporary because of the civil war or because of the fascists or because there's a world war and that the Second Cultural Revolution is some version of OTL 1960s that becomes successful and it will one day turn the UASR into this imagined libertarian socialist utopia with communist characteristics, I'm afraid to tell you it's not the case. Some of the above will change but most of what I listed are permanent. They're there to stay, granted that part of the reason why is because of an ongoing Cold War.
You and I are not going to feel very comfortable living in such a society.
That too: too much is held by too few hands, but whenever someone tries to remedy this, a massive chunk of the population is conditioned to think these policies are "communist liberalism" that will ruin their chances of becoming billionaires.
No, we're not agreeing on this. My problem is not about concentration of wealth or property in a few hands. My problem is such a phenomenon is inevitable as long as there is money and property. This is not some redistributionist socialism. We are not the same.
The middle stratum of the American population, maybe, but there's something very wrong in thinking that the working class is somehow fully indoctrinated to the idea of them being "temporarily embarrassed millionaires". The working class just wants to have basic economic security, despite how distorted that idea might be.