A transfer of technology generally takes place through a legal relationship by which the owner of a patented technology or know-how sells or grants a licence to use the said technology or know-how, to another person or legal entity.
These legal relationships are essentially contractual in nature, which means that the transferor of the technology consents to transfer and the transferee consents to acquire the rights, the permission or the know-how in question. There are various methods and legal arrangements through which technology may be transferred or acquired, including the following:
The sale or assignment of IP rights
The first legal method is the sale by the owner of all their or its exclusive rights to a patented invention and the purchase of those rights by another person or legal entity. When all the exclusive rights to a patented invention are transferred, without any restriction in time or other condition, by the owner of the patented invention to another person or legal entity, it is said that an assignment of such rights has taken place. Similar principles and characteristics apply to the assignment of other objects of industrial property (e.g. trademarks and industrial designs).
Licensing
The second legal method is through a licence; that is, the permission given by the owner of a patented invention to another person or legal entity to perform, in the country and for the duration of the patent rights, one or more of the “acts” which are covered by the exclusive rights to the patented invention in that country. When that permission is given, a “licence” has been granted. It may be recalled that these “acts” are the “making or using of a product that includes the invention, the making of products by a process that includes the invention or the use of the process that includes the invention”.
Know-how contract
The third of the three principal legal methods of transfer and acquisition of technology concerns knowhow. Know-how generally refers to the knowledge of how to do something, the expertise acquired in a given field. The know-how may be communicated in a tangible form by way of documents, photographs, blueprints and computer cards, among others. It may also be communicated in an intangible form. An example here might be the act of an engineer of the supplier of the know-how explaining a process to an engineer of the recipient.
It is possible to include provisions concerning know-how in a written document that is separate from a licence contract. It is also possible to include such provisions in a licence contract. Whenever provisions concerning know-how appear in a separate or distinct writing or document is normally called a “know-how contract”.
Franchising
Commercial transfer of technology may also take place in connection with the system of franchising as it relates to the selling of goods and services. A franchise or distributorship is a business arrangement in which the reputation, technical information and expertise of one party are combined with the investment of another party for the purpose of selling goods or rendering services directly to the consumer. The outlet for the marketing of these goods or services is usually based on a trademark, service mark or a trade name, and a special décor (“look”) or design of the premises. The licence of such a mark or name by its owner is normally combined with the supply by that owner of know-how in some form – technical information, technical services, technical assistance or management services concerning production, marketing, maintenance and administration.
Sale and import of capital goods
The commercial transfer and acquisition of technology can take place with the sale, purchase and import of equipment and other capital goods. Examples of capital equipment are machinery and tools needed for the manufacture of products or the application of a process.
Joint venture agreements
A joint venture is a form of alliance between two separate companies. There are two fundamental forms of joint venture: the equity joint venture and the contractual joint venture. The equity joint venture is an arrangement in which a separate legal entity is created with the agreement of two or more parties. The contractual joint venture might be used where the establishment of a separate legal entity is not needed or where it is not possible to create such an entity. Licensing agreements, know-how contracts or other legal methods for the commercial transfer and acquisition of technology can be integrated into either form of joint venture arrangement.
The turn-key project
In certain instances, two or more of the business arrangements for the transfer of technology, and hence the legal methods that they reflect, can be combined in such a way as to entrust the planning, construction and operation of a factory to a single technology supplier, or to a very limited number of technology suppliers. Thus, the turn-key project may involve a comprehensive arrangement in which one party undertakes to hand over to his or her client – the technology recipient – an entire industrial plant that is capable of operating in accordance with agreed performance standards. More usually, the turn-key project involves the undertaking by one party to supply to the client the design for the industrial plant and the technical information on its operation.
Consultancy arrangements
Consultancy arrangements generally relate to the support, advice or other services provided by a consultant (whether an individual or a firm) while planning for the acquisition of a given technology, designing a new plant, preparing tenders for the construction of a new building, factory or equipment, seeking to improve an existing technology, or other activities for which expert advice with relevant know-how may be required.
This is the article advising on “The main contractual agreements for the transfer of technology” by Apra Law Firm. If you have any questions or concerns, please contact the hotline for further advice and support.
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