What is Technology Transfer?

Nov 23, 2023 | Technology Transfer

Author: Pooja Bhatia, Author and CEO, Inoberry LLC.

What is Technology Transfer?

Have you ever wondered where our world would be without innovation, knowledge, skills and expertise? Would we have vaccines protecting us from diseases including COVID? Technology transfer has been happening since time immemorial in various ways from generation to generation.

The importance of technology transfer can be illustrated by the indelible ink that has been used in elections for years. It was developed in the CSIR-National Physical Lab, patented by NRDC and licensed to Mysore Paints and Varnishes Limited (Earlier called Mysore Lac and Paints Limited).In the year 2022, DRDO reported that they have signed 1464 technology transfer agreements.

Technology transfer offers the following advantages:

1. Knowledge dissemination
2. Fosters innovation and economic development
3. Promotes practical application of scientific discoveries.
4. Competitiveness at national and global level
5. Job Creation
6. Capacity building
7. Attracts investment
8. Bridges the gap between research and real-world solution
9. Effective utilization of valuable knowledge and technologies
10. Benefits the society by offering solutions to its problems.

Technology Transfer is a complex process involving a number of steps to transfer knowledge, skills, innovation and technologies.  Technology transfer can be of various types. The most common form of technology transfer is publications in journals, industry-academia collaboration and joint ventures. The following are other types of technology transfer:

1. Technology development and transfer: Creating solution to address the given problem statement provided by a company to another company or institutions and then transferring it.
2. Know-how transfer: When knowledge is transferred with or without associated IPRs, it is called as Know-how transfer.
3. Licensing: It is a process of allowing a third party or third parties other than the owner of the IPR to use, make or sell products or use or make or sell products using the process protected.
4. Assignment: It is a process of assigning rights of one party to other party to use, make or sell the IP protected product, process or innovation.
5. Spin-off formation: It is another form of technology transfer where IPR and/or technology and know how is licensed to a newly created startup or company based on the institutional technology or IPR.
6. Material transfer: is a form of technology transfer where IPR associated or non-IPR associated material is transferred for further testing, evaluation or research.

Technology transfer is a process involving the following steps:

1. Market assessment
2. Marketing
3. Deal Negotiation
4. Signing of Agreement

Each step of technology transfer requires skills and expertise to move it ahead.
Read more on the skills required in the upcoming write up.
Original Published at https://www.linkedin.com/pulse/what-technology-transfer-bhatia-vasaikar-clp-rttp-patent-agent-awfzc
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Technology Transfer Agreement and it’s important clauses

Jun 14, 2023 | Technology Transfer

In today’s rapidly evolving technological landscape, the transfer of intellectual property rights, know-how, and technology plays a crucial role in driving innovation and economic growth. Technology transfer agreements serve as legally binding contracts that govern the transfer of these valuable assets from one party to another. Such agreements provide a framework for the licensor (the party transferring the technology) and the licensee (the party receiving the technology) to establish their rights and obligations, ensuring a smooth and mutually beneficial transfer process.

A technology transfer agreement is a legal contract that governs the transfer of intellectual property rights, know-how, or technology from one party to another party. This agreement ensures that both parties understand their rights and obligations regarding the use, ownership, and protection of the transferred technology.

Advantages of Technology Transfer Agreements:

1. 1. Facilitates Knowledge Exchange and Collaboration

Technology transfer agreements enable the exchange of specialized knowledge, expertise, and technical information between the licensor and the licensee. This collaboration allows the licensee to gain insights into new technologies, methodologies, or processes, which can enhance their own research and development efforts. It promotes innovation by leveraging the strengths and capabilities of both parties.

2. Accelerates Commercialization of Technology

By entering into a technology transfer agreement, the licensor can commercialize their technology more effectively. The licensee gains the rights to use, manufacture, or sell the technology, leveraging their existing infrastructure, market access, and distribution channels. This accelerates the process of bringing innovative products or services to the market, benefiting both the licensor and the licensee.

3. Expands Market Reach

Technology transfer agreements often involve the transfer of technology across geographical boundaries. For the licensor, this opens up new markets and opportunities that they may not have been able to access independently. The licensee, on the other hand, gains access to cutting-edge technologies or intellectual property rights that can enhance their competitiveness in existing or new markets. It facilitates market expansion and growth for both parties involved.

4. Risk Mitigation and Shared Expertise

 Technology transfer agreements allow for the sharing of risks and responsibilities between the licensor and the licensee. The licensor can mitigate their risks by transferring technology to a party that has the necessary resources, capabilities, and market presence. At the same time, the licensee benefits from the licensor’s expertise, research, and development efforts, reducing their own risks associated with developing new technologies from scratch.

5. Access to Intellectual Property and Exclusive Rights

 For the licensee, a technology transfer agreement provides access to valuable intellectual property rights, patents, trademarks, or copyrights associated with the technology being transferred. This grants them exclusive rights within a specified territory or market, ensuring a competitive advantage over rivals. The licensee can leverage these intellectual property rights to protect their investments and prevent unauthorized use by others.

6. Cost Savings and Efficiency

Technology transfer agreements can lead to cost savings for both parties. The licensee avoids the expenses associated with extensive research and development, as they can leverage the existing technology or know-how. The licensor benefits from the monetization of their technology, generating revenue streams through licensing fees, royalties, or other financial arrangements outlined in the agreement. This efficient utilization of resources benefits both parties.

7. Legal Protection and Clarity

By entering into a technology transfer agreement, both the licensor and the licensee obtain legal protection and clarity regarding their rights and obligations. The agreement clearly outlines the scope of the license, the permitted uses of the technology, and any restrictions or limitations. It also includes provisions for confidentiality, intellectual property rights, representations and warranties, and dispute resolution mechanisms. This clarity minimizes the potential for misunderstandings, disputes, or infringement issues.

While the specific clauses included in a technology transfer agreement can vary depending on the nature of the technology and the parties involved, here are some important clauses commonly found in such agreements.

1. Introduction and Background

The agreement typically begins with an introduction section that identifies the parties involved and provides a brief background on the purpose and context of the technology transfer. It may include a description of the technology being transferred and the objectives of the agreement.

2. Definitions

This clause is included to ensure clarity and common understanding of key terms used throughout the agreement. It provides precise definitions of important terms, such as the technology being transferred, intellectual property rights, know-how, confidential information, and any other specific technical or legal terms unique to the technology or the agreement.

3. Grant of License

 This clause outlines the scope and terms of the license being granted by the licensor to the licensee. It specifies whether the license is exclusive or non-exclusive, meaning whether the licensor grants the licensee the sole rights to use the technology or if other licensees may also be allowed. The clause may also define the geographical territory or market in which the license applies.

4. Payment Terms:

This clause details the financial aspects of the agreement, including any upfront fees, royalties, or milestone payments that the licensee is required to pay to the licensor. It may specify the payment schedule, currency, and any additional financial considerations. This clause also commonly addresses audit rights to ensure accurate reporting and verification of sales or usage data.

5. Confidentiality and Non-Disclosure

 Given the sensitive nature of technology transfer, this clause establishes the obligations of both parties to maintain the confidentiality of the transferred technology and related information. It includes provisions for marking information as confidential, restrictions on disclosure to third parties, and the duration of the confidentiality obligations. This clause ensures that proprietary information remains protected.

6. Intellectual Property Rights

 This clause addresses the ownership and protection of intellectual property rights associated with the technology being transferred. It clarifies whether the licensor retains ownership or if it is transferred to the licensee. It may also include provisions for the registration, maintenance, and enforcement of these rights, as well as any limitations or restrictions on their use.

7. Representations and Warranties

 In this clause, the licensor makes certain statements and assurances regarding the technology being transferred. These representations and warranties may include affirmations about the licensor’s ownership of the technology, its validity, or its non-infringement of third-party rights. This clause provides a level of assurance to the licensee regarding the quality and legality of the technology.

8. Indemnification

This clause outlines the parties’ obligations to indemnify and hold each other harmless from any claims, damages, or liabilities arising from the transfer or use of the technology. It provides protection in case of intellectual property infringement or other legal disputes. The clause may specify the indemnification process, including notice requirements and the extent of the indemnifying party’s liability.

9. Term and Termination

This clause defines the duration of the agreement and the conditions under which either party can terminate it. It may include provisions for termination due to breach of contract, insolvency, or mutual agreement, as well as any post-termination obligations, such as returning or destroying confidential information or discontinuing the use of the technology.

10. Governing Law and Jurisdiction

This clause determines the jurisdiction and laws that will govern the interpretation and enforcement of the agreement. It helps resolve any potential disputes by specifying the courts or arbitration procedures that will have jurisdiction over the agreement. This clause ensures that the agreement complies with the legal requirements of a specific jurisdiction or that it aligns with the parties’ preferences for resolving disputes.

In conclusion, technology transfer agreements play a vital role in facilitating the transfer of intellectual property rights and technology between parties. They promote collaboration, accelerate commercialization, expand market reach, mitigate risks, provide legal protection, and offer various other advantages to both licensors and licensees. These agreements are essential tools for fostering innovation, driving economic growth, and maximizing the value of technology.

Reference

Akhzami, & Al, S. (2018). Technology Transfer and Commercialisation. Daya Publishing House. Retrieved from https://www.perlego.com/book/3067576/technology-transfer-and-commercialisation-pdf (Original work published 2018)

Author: Anas, Christ Academy Institute of Law, Bengaluru

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Technology Transfer Model: Israel

Apr 20, 2023 | Technology Transfer

 In an era of technological advancements, innovations are on a verge of representing the qualitative approach of a changing society. On one hand, innovations have the potential of ameliorating the quality of life by significantly contributing to labor and production. On the other hand, such transitions also demand ground-breaking competitive advancements that can square up to the needs of changing dynamics of developments. The ideology of managing the adoption and flow of knowledge has become a crucial parameter for every country. Therefore, it’s of utmost importance to focus on scientific and technological research methods for fruitful exchange to maintain the aura of competition.

Technology Transfer comprises of transferring skills and knowledge of technological advancements through legal recourse such as licensing and assigning so that the accessibility of innovative developments is assured at a wider range throughout the globe. This phenomenon helps in exploiting the already existing knowledge about technological advancement and at the same time provides scope for further innovations. In the words of the World Intellectual Property Organization (WIPO):

“Technology transfer is a collective term for the mechanisms and processes that enable the development of a product or a technology used to manufacture products from the knowledge formed in public research organizations.”

The main parameters that function alongsidefor a successful technological transfer mechanism are academia and industry. Academia contributes to promoting and generating novel knowledge, whereas industry synthesizes such knowledge into a marketable entity, thereby making the two parameters act directly proportional to each other. This interface has a significant impact on economies driven by knowledge and innovations, which subsequently lead to an advanced modern society.

However, this interface doesn’t exist since time memorial. Educational institutions and industrial sectors had their separate ways, with no intention to cross paths. Their objectives were opposed to each other, back in the times, the former being rigid towards the traditional ways of spreading knowledge and the latter being flexible in adopting ways to generate wealth. Till the 19^th century, universities were isolated from the various aspects of society whereas industrial organizations were practically involved in ameliorating the economic conditions. The idea that their interaction could help the country in its growth and development was only figmental.

The very first reason these two sectors started coming together was war. A majority of the technological advancements taking place in the 20^th century were driven towards facilitating the war situation prevailing during that era. This led to the diversion of objectives in the academic sectoras scientists and researchers were expected to use their studies catering tothe needs of society. Another factor was the propagation of education as a basic right for all. This allowed  education not being limited to only a few but presented as a commodity accessible to all. Research and innovations started developing simultaneously.

Innovations percolated the idea of being protected from infringements  through emergence of intellectual property rights. Academic researchers that had the probability of generating industrial products sought protection through patenting their invention, which later were licensed to the preferred industry which would generate marketable products using the invention and would share the profits with the patent owners by paying contracted royalties rates. Hence, this led to the genesis of the technology transfer mechanism.

When talking about innovations, wars, and a leading economy, Israel comes to mind instantly. It has gained a considerable appreciation for its innovation-based economy and serves as an inspiration for all the developing countries. We have covered the innovation model of Israel and the reason behind its journey for becoming the Start-Up Nation in one of our previous articles in the Blog, which can be accessed here. In this article, we will address the successful technology transfer model of Israel and what lessons concerened thereto.

Israel has heavily invested in civilian research and development (R&D) projects and has been inspiringly successful in building a flourishing knowledge-based economy. The concept of technology transfer in Israel dates back to the 1960s and its model has been adopted by great nations such as the United States of America. The success rate of the Israel technology transfer model has led WIPO to consider it as the best practice in existence. Israel has three sectors devoted to R&D and there exists a clear demarcation between all three concerning their methodology of having an impact on the market. These three sectors include industry, academic, and government.

Industrial R&D is led by business entities who indulge in developing a product that can fit the market demand. Owing to the commercialization aspects, it receives a huge amount of funding, both public and private, as compared to the other two sectors. Academic R&D is mostly curiosity-driven, wherein the researcher is free to contribute to the pool of knowledge and embrace academic freedom. It is supported by the research center in academic institutions. Government R&D is devoted to public welfare. The research is generally necessity-oriented focusing on public health, education, agriculture, so on and so forth. Such research is either proposed via tenders or by specific governmental research institutes.

All three sectors operated independently and were concerned with their specific technology transfer mechanism till the late 1950s. The universities started coming up with Technology Transfer Companies (TTC), an independent legal entity, operating as a not-for-profit subsidiary of a particular university. The objectives of such TTC were to commercialize academic research on University’s behalf. These TTCs are regulated by statutes framed by the concerned university that governs the right and obligations of the research.

The first of its kind TTC was started by the Weizmann Institute of Science by the name Yeda Research & Development Co. Ltd. Its success has contributed to a paradigm shift in the technology transfer model in Israel, and at the same time, it has become a vanguard for several other TTCs that were established subsequently. It has also set a benchmark by being among the top universities around the world in terms of generating income from commercialized academic research. Faculties of the University also act as a consultant to private sectors that help in creating a link between academic and industrial sector. Its strategy of creating a harmonious balance between public interest and financial profits has made its technology transfer model exemplary for the rest of the world.

The role of the TTC includes but is limited to the following:

• To check if the invention qualifies for patent registration
• To deduce the probability of commercializing a particular innovation
• To formulate market strategies for introducing a suitable innovation
• To propose the innovation to specific industrial bodies who might be willing to introduce the resultant product in the market.
• To facilitate the university and the concerned industrial entity with the licensing agreement, in case such proposal is successfully implemented.
• To identify any research gap with the registered innovation that can hinder the commercial viability of the invention concerned.
• To provide proper guidance to the researcher by suggesting ways that can fill the void created by the research gap, so that the innovation becomes compatible with the marketable standards.

The part of the share received from commercialization of academic research goes to the concerned University, which is utilized as funds for future research.

Israel has come up with another interesting concept called “Technology Entrepreneurship”. It is an amalgamation of technology and business, facilitated by academic institutions to introduce an innovative and marketable product.

Enstorage Inc., founded in 2007, by two business entrepreneurs (Mr. Eran Yarkoni & Mr. Nachman Shelef), and an academician (Prof. Emanuel Peled) was the first of its kind, which led to the genesis of such a concept. Such a business model is formed based on the intellectual properties associated with the technological innovation, which eventually decides the licensees willing to vouch for the result of such innovation. This arrangement has made all three R&D sectors in Israel come together and promote innovations in a manner that minimizes the risk of market failures and at the same time contributes to maintaining information symmetry.

Another major contribution for having such an advanced model of technology transfer is attributed to the Israel Tech Transfer Organization (ITTN). It is a private non-profit organization that provides a platform for technology transfer companies in Israel towards fruitful engagement. It facilitates these companies through synchronized affiliation with world-renowned universities and research institutions. The objective of having such an organization was to set up an authority to represent the interest of member companies before the government. It also helps in bridging the gap between local companies and global institutions, helping them engage in advanced technology transfer. It also promotes the awareness of innovations and research propositions, thereby enhancing the public accessibility of the same. As of now, there are fifteen organizations contributing to the cause for which ITTN was formed.

Israel Advanced Technology Industries (IATI) is yet another player in this field. It is an umbrella organization that aims to connect Israel’s tech ecosystem and act as a medium for integrating governments’ goals with the various sectors of the industry. It also provides accessibility to successful global R&D, business & financial enterprises to promote mutual R&D and engender business opportunities for its members. At present, it has a plethora of members that include academic institutions, incubators, investment entities, service providers MNCs, tech-transfer offices, etc.

Some of the successful technology transfers assisted by IITN are listed below:

Author- Himani Jaruhar, National Law University Odishas

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Technology Transfer: Steps, Advantages, Precautions

Mar 6, 2023 | Technology Transfer

Technology Transfer (TT), also called Transfer of Technology (TOT) refers to handing over or transferring a technology, knowhow, methodologies, processes, confidential information, trade secrets by the Technology Developer (TD) to the Technology Buyer (TB) and this transfer is completed by execution and signing of a Technology Transfer Agreement, very similar to the way sale deed is signed at the time of buying/selling of the house when ownership is transferred from seller to buyer of  a house. The agreement, generally called as Technology Transfer Agreement has all terms and conditions agreed between the parties to complete the process of Technology Transfer. However, Technology Transfer is very sensitive in nature and is prone to getting exploited easily due to intangible nature of the technology. Therefore, lots of precautions need to be taken while entering into Technology Transfer arrangement.

Why to transfer a technology?

To develop a new technology/product, there is huge investment involved in terms of time, money and resources. After technology is developed, scaling up the technology to industrial level and bringing it to the market could be very challenging for the Technology Developer. On top of it, if Technology Developer doesn’t have clue about how to sell the technology, he may be wasting a lot of time without any substantial gain.

It is moment of great joy for the Technology Developer to see his technology working well at industrial level and reaching consumer effectively. In order to commercialize technology, usually Technology Developer, being scientist or researcher, does not have expertise, resources and bandwidth to manufacture, market and sell the technology on his own. Therefore, it makes a lot of sense for the Technology Developer to transfer technology to the suitable company that is already into manufacturing similar product (s) and has well established systems to manufacture, market and sell the product in given territory or the country.

If executed well, usually Technology Transfer is beneficial to both developer and buyer. On one hand, Technology Developer gets opportunity to join hands with the buyer and commercialize technology and on the other hand, the Technology Buyer gets opportunity to new technology which may add lots of value to his business.

Modes of transfer

as generally happens by means of licensing, assignment or joint venture. In licensing the Technology Developer permits the buyer to use technology for a specific period of time without transferring the ownership whereas in case of assignment, the Technology Developer transfers technology to the buyer permanently and in this process, ownership is also transferred. In joint venture, both developer and buyer come together, join hands and establish business jointly. Depending upon the preferences of the parties, the suitable mode of Technology Transfer may be worked out.

Further, the technology can be licensed in exclusive or non-exclusive manner. In case of exclusive license the Technology Developer (licensor) agrees not to grant license to any other company whereas in case of non-exclusive license, Technology Developer can grant license to more than one companies.

Steps to transfer a technology

Once technology is developed, the steps to be followed to transfer technology are as below:

1. Detailed documentation of technology to be transferred is very critical. If there is a possibility to register technology as copyright, patent or design, it should be done by the Technology Developer before Technology Transfer process is initiated. Novelty in the technology, problem statement, working of the technology, prototype details, feasibility studies shall be documented in detail. Specific emphasis shall be given to the extent of know-how, confidential information that developer discloses to the buyer because once this information is disclosed to the buyer, there is no way to recover it back. For this reason, it will be wise for the developer to register intellectual property wherever possible so that disclosure of technology becomes easier and safer.
2. It is advisable to make a BEDP (Basic Engineering Design Package) for the technology that is being transferred. This helps the Industry to simulate the manufacturing process of the technology and scale up the technology.
3. Technology Developer shall have idea about value of the technology. Initially relying on secondary market research data related to market need/size/preferences and applying right techniques, value of the technology shall be estimated.
4. At least 50-60 potential companies which may buy the technology shall be listed out and further contact details of top officials in the company shall be extracted.
5. Such companies shall be contacted, and positive leads shall be separated out for further follow up. Discussions with such companies may be initiated to finalize the deal. Usually lots of communications and negotiations happen at this stage.
6. Execution of the agreement is the final step where all terms and conditions agreed between the developer and buyer are converted to the agreement.

Precautions before entering into Technology Transfer agreement

After discussions and negotiations on terms and conditions, the parties enter into Technology Transfer agreement. For Technology Developers, precautions to be taken before signing the agreement are as below:

1. Technology Developer shall be clear about the kind of rights he is granting to the buyer and the jurisdictions to which such rights extend to.
2. Value of technology that Technology Developers is getting, and royalty/payment terms/applicable taxes shall be made clear.
3. Most of the times, Technology Developer is required to provide initial assistance to the buyer in terms of meetings or trainings the teams. In such a case, Technology Developers shall ensure that he is being paid for such trainings and his travel is also taken care of.
4. Term of the agreement, ways of terminating the agreement and effect of termination of the agreement shall be checked properly. Exit from the Agreement shall be smooth for both parties.  
5. Other than this clauses on indemnity, Governing law, dispute resolution may be looked into thoroughly.

For Technology Buyer, following precautions are needed to be taken:

1. Check status of IP filed or granted in the name of the Technology Developer. If patent forms substantial part of the Technology Transfer agreement, it is required to get validation search done to check strength of the patent. Legal status, term of the patent and countries in which patent is filed/granted is also needed to be checked thoroughly. As a part of Technology Transfer, if Technology Developer is going to assign patent to the buyer, it is imperative to make note of prosecution details of the patent, especially renewal fee payable annually in different countries because if such IP is going to be assigned to the buyer, all liabilities and future fee payments also become responsibility of the buyer.
2. Scope of rights granted to the buyer shall be such that it should enable buyer to sell the end product smoothly without any hinderance.
3. Freedom to operate analysis shall be performed by the buyer to see if product made using the technology of the developer is safe to be launched in a given jurisdiction or not.
4. Invention of the Technology Developer may work well in the laboratory but in order to bring product in the market, scalability of the technology shall be checked. It is better to obtain prototype or feasibility studies data from the Technology Developer.

Case study: Jasmine Exporters in Tamil Nadu

Tamil Nadu is the leading producer of jasmine in India and the flowers produced in the state are being exported to various countries like Singapore, Malaysia, Sri Lanka & United States etc and due to long travel time, the flowers would get spoilt and lose fragrance. More precisely the post-harvest losses were 35-40% and this was causing a huge loss to the flower growers.

There was attempt made to solve this problem by working on the better packaging technology. The Indian Council of Agricultural Research (ICAR) along with National Agricultural Innovation Project (NAIP) sponsored project ‘Value Chain on Flowers for Domestic and Export Markets’ in collaboration with M/S. Vanguard Exports, a private successful flower exporter, developed a reliable export packaging technology that would cater to the near and far overseas markets.

R&D of the project was undertaken by Tamil Nadu Agricultural University (TNAU). The technology was disseminated to jasmine growers and entrepreneurs through training programmers and demonstrations. A total of 1280 Growers and entrepreneurs were trained through 26 training Programs in Jasmine growing area of Tamil Nadu.

The technology primarily involved treatment of flower bud strings with boric acid, followed by packing in ventilated corrugated fibre board (CFB) boxes with butter paper lining and the ventilation is made by making holes in the corrugated fiber boxes. After proper packaging the boxes are airlifted to respective destination. The packing in case of longer travel further involved packing of boric acid treated flower bud strings in aluminium foil lined light weight cardboard boxes. These boxes in turn are packaged in large thermocole boxes with intermittent ice gel packs to maintain the temperature and humidity inside the box. These thermocole boxes are transported in refrigerated vans to airport and then it is dispatched to the respective destination.

With this packaging technology, shelf life of flowers increased to 72 hours against 36 hours in normal packaging system and post-harvest losses were reduced from 40% to 10% and the export volume increased to 1000 kg/ day in 2013 (100%) from 500 kg/day in 2008. Before NAIP intervention, the net profit gained was only Rs. 9,250/day, and after the intervention it increased to Rs. 17,500/day. For Dubai market, the export volume increased to 900 kg/ day (2013) from 600kg/day (2008) and the net profit hiked from Rs.2,250/day (2008) to Rs.9,250/day (2013). Tamil Nadu Flower Growers’ Association, Sathyamangalam (3000 growers) was linked directly with jasmine exporters for marketing. Patent for the packaging technology was filed in the name of TNAU (1370/CHE/2010).

Technology Transfer is a very effective way to commercialize a new technology If worked out well, both Technology Developer and buyer can be benefitted by this arrangement. However, both parties shall be aware of terms and conditions they are agreeing upon to make this arrangement win-win for both.

References:

1. https://tnau.ac.in/research/wp-content/uploads/sites/60/2020/02/Annexure-7-Jasmine-Packaging.pdf
2. https://agritech.tnau.ac.in/export_import/jasmine/index.html

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Technology Transfer: Meaning, Types and Steps

Oct 18, 2021 | Technology Transfer

Innovation and growth have always been synonymous to each other, ultimately leading to development. Business ecosystems are largely dependent on these innovations and diffusion of technology plays a crucial role in shaping the future of these organizations. The term ‘technology transfer’ indicates the movement of knowledge, skills, know-hows and other valuable assets of the organization which is driven by profit. The concept of technology transfer is age old and has been rightly referred by Mansfield as, “One of the fundamental processes that influence the economic performance of nations and firms is technology transfer”.

Economists have long recognized that transfer of technology is at the heart of process of economic growth, and that the progress of both developed and developing countries depends on the extent and efficiency of such transfers. In recent years, economists have also come to realize (or rediscover) the important effects of international technology transfer on the size and patterns of world trade.

Meaning of Technology Transfer

The process of disseminating knowledge, skills and other know-how that manifests in the form of technology from its owner (individual or an organization) to another person or organization is known as technology transfer. It is also popularly known as Transfer of Technology. Various stakeholders amongst whom technology transfer takes place includes universities, business organizations, research and innovation societies and others. Such transfer takes place with the motive to share skills, knowledge, technologies, methods of manufacturing and other related profit motives. The transfer is further done with an intention to provide improved accessibility to a wide range of users who can then further develop and exploit the technology to develop new products, processes, applications, materials or services.

Types of Technology Transfer

Technology transfer can be broadly classified into vertical and horizontal technology transfer.

1. Vertical Technology Transfer- This chain of transfer includes basic research to applied research, applied research to development and from development to production. It is also known as internal technology transfer. This type of transfer is mostly carried out between research associations, universities, and governments, among others.
2. Horizontal Technology Transfer- When technology which has already been put in place or use within one organization is further transferred and used in another place, the transfer is known as horizontal technology transfer. It is also known as external technology transfer. This type of transfer takes place between private companies, small and large business organizations, among others.

Methods of Technology Transfer

Technology transfer can take place using the following instruments.

1. Licensing- An agreement between the owner of the technology (Licensor) and the receiver (Licensee) which gives the right to use the technology developed or owned by the transferring individual or company for a specified time period is known as licensing. The two broad categories of licensing include the one which grants exclusive rights to use the technology and another which grants non-exclusive rights wherein the owner reserves the right to further transfer the technology to other company apart from the receiver. It may also include the right to sub-license, permitting the licensee to grant someone else the right to use the technology.
2. Joint Venture Agreement- The company executes a joint venture agreement with respect to technology transfer for a particular business with a vision to incorporate long-term cooperation between the parties, motivation of all participants in the successful transfer and to incur lower costs as compared to working independently.
3. Franchising- It is one of the most preferred methods of transferring technology. The companies generally transfer technical know-how or skill involved under this type of agreement.
4. Original Equipment Manufacturer- It is a kind of sub-contracting agreement wherein a foreign company transfers a relevant portion of its technologies and a local company manufactures according to the specifications in the agreement. Such agreement enables local companies and firms to absorb technologies and restructure their production mechanism. 

5. Buy-Back Contracts- It is a form of agreement between stakeholders from developing countries and large foreign companies, wherein a foreign company supplies industrial equipment in exchange for profits derived from the sale of raw materials or goods produced. This kind of technology transfer is often used in the construction of new plants and other related business.

It is interesting to note that a considerable amount of knowledge and technology exists today that enables the development of approaches and can effectively plan and implement business processes. What needs to see the light of day is a well-funded and potent mechanism for executing technology transfer between the stakeholders in order to ensure uninterrupted economic advancement.

By Shreya Pandey

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Technology Licensing: Pros and Cons

Sep 20, 2021 | Technology Transfer

Technology Licensing is a contractual arrangement in which the licensor’s Intellectual Property (IP) such as, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property may be transferred to a licensee for a specified period of time. A Licensing Agreement involves two main parties, namely the licensor (party that owns concerned IP) and a licensee (party that enters into contract to use IP). The consideration in the form of royalty is one of the important clauses to be finalised before executing the license agreement between the parties involved.

Technology Licensing is an essential tool for companies that are smaller in size, or do not have the R&D resources that their competitors possess, to stay relevant in a particular industry. In such cases, licensing helps them to close the gap with their competitors by allowing them to gain access to the resources and innovations that they need^[1].

Difference between License and Assignment

Licensing and Assignment are different modes of technology transfer. Assignment is when the assets or IP is permanently transferred by the owner (i.e. assignor) to the buyer of the IP (i.e. assignee), by way of sale or transfer. This results in a one-time payment of consideration or a lump sum payment of royalty for the IP, by the assignee. The assignor transfers all rights, including title over the asset, to the assignee.

Licensing on the other hand involves the owner of the intellectual property (i.e. licensor) permitting the a third party including company or an organisation (i.e. licensee) to use the IP as per the terms of a licensing agreement, while maintaining ownership, resulting in continued earnings in the form of a licensing fee.

Technology Licensing can be done in the following different ways:

1. Licensing
2. Assignment
3. Joint venture (JV)

As mentioned earlier, licensing is an act of providing authorization by the licensor to a third party to use the licensed asset, as per the terms and conditions of the licensing agreement. A License Agreement is important as it enables the patent holder to provide the required permissions for an entity with the resources to bring his ideas to fruition.

An assignment is when the licensor transfers wholly, or in part, their right, title and interest in their technology.

In a JV, a new JV Company is formed and the requisite assets such as the patented technology are either licensed or transferred to this JV. Both companies contribute assets to such a venture, and the company giving the technology is both licensor and licensee in this case.

The licensor agrees to transfer his rights of the patented intellectual property that they developed, for a duration determined by the license agreement. During this time, the licensee is entitled to benefits and has rights to the patent’s interest. A patent license must be in writing to be legitimate, according to Section 68 of the Patent Act[2] .  It was in the case of PVR Pictures Ltd. v. Studio 18^[3], that the Delhi HC held that term sheet agreement shall not amount to a license agreement. A licence agreement can aid in the development of a mutually beneficial commercial partnership. Unlike, when a patent is sold or transferred to another party, the licensor retains ownership of the patented innovation.

Technology Licensing enables an organisation or any other party to utilise some technology that may otherwise be protected by intellectual property safeguards, such as a patent, copyright, etc.

Why should one license? There are notable benefits of doing so. Firstly, in the case of licensing, there is very little requirement of coordination between the two parties, and is similar to a commercial transaction involving a buyer and a seller. Secondly, the licensees can determine what technologies they want to license before paying for it, saving them money that would have otherwise gone into R&D. Thirdly, the transaction is instantaneous, which gives the company control over the technology much faster than if they were to develop it in-house.

In a Technology Transfer, the assets that get transferred include know how, methods, techniques, products etc, along with registered IP, such as, patent, copyright, design, trademark etc. Payment may be in the form of a lump-sum royalty, a running royalty (depending on volume of production), or a combination of both.

A Technology Transfer (TT) agreement may be:

• Exclusive
• Non-exclusive

 Exclusive Licensing: The licensee has an exclusive right to use the IP, as per the terms of the licensing agreement. This agreement is such that even the licensor is not allowed to use the licensed asset for the duration as specified by the license agreement. Exclusive license may be issued on either a territorial basis (for instance, India only) or on a global basis (for the entire world).

Non-Exclusive Licensing: In non-exclusive licensing, the licensor may license out their assets to multiple licensees at the same time. Unlike an exclusive license, all licensees are permitted to use the license as per the terms of the license agreement. The licensors are also free to use the assets that they licensed to others.

There are different kinds of technology licenses. Licenses may be availed to get all the IP rights that are necessary to reproduce, make, use, market, and sell products based on a type of technology (e.g., a license to develop a new software product that is protected copyright or any other form of IP protection). A license may be procured to get the IP rights necessary in order to create and market a product that complies with a certain technical standard or specification.

For example, a group of enterprises have agreed on a technical standard to ensure interoperability of devices and owners of IP essential to practice the standard, pool their IP rights and license it to anyone who wishes to use the standard on reasonable and non-discriminatory terms.

Ericsson and Oppo are two companies who entered into a Global Patent license agreement. This agreement covers a cross licensing agreement covering 2G, 3G and 4G patent portfolios from both the companies. Besides, cross-license, the agreement also includes business cooperation on a number of projects related to 5G such as device testing, customer engagements.

The case of Dunlop India Ltd. v. Forech India Ltd^[4] involved a license for making conveyor belts, based on a license agreement between the two parties. In GE Plastics v. Commissioner of Customs, Mumbai^[5], a JV with Indian Petrochemicals Corporation Ltd. (IPCL), a technology licensing agreement was in question.

 The following are the pros and cons of Technology Licensing:

Pros:

• It enables a company to enter a new market very quickly. Additionally, financial and legal risks are minimised when technology licensing is used.
• Licensing also enables companies to overcome any stringent tax barriers or any other hindrances that would otherwise increase the costs if they opted to develop their own technologies.
• Licensing can also be used for the acquisition of technology from outside the region through arrangements such as cross-licensing agreements/ grant back clauses.
• Licensing also is a major tool for enterprises in developing nations, to make use of comparatively lower licensing rates and to make profits without spending significantly on R&D.

Cons:

• Licensing a technology  to an external company results in the weakening of the licensor’s hold over the technology itself.
• Licensing a technology also results in lesser profits as compared to directly leveraging the technology oneself.

 Conclusion

Licensing is a useful tool for companies to compete in an effective manner. However, they must be well aware of the pros and cons mentioned above. They must also take special care to use licensing only when they need it, as it may create a recurring dependence on external organisations to develop technologies for them. It may not be an effective strategy, if companies are attempting to differentiate themselves from their competitors in the market space.

In conclusion, if a firm wants to take their rivals head on, and do not have the time or resources to develop their own technology, licensing is the most practical and cost-effective tool they can use to remain competitive.

By: Aditya Datha

Symbiosis Law School, Hyderabad

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[1] Solomon Moreira, When Licensing New Tech Is Better Than Building It In-House, Harvard Business Review- https://hbr.org/2020/06/when-licensing-new-tech-is-better-than-building-it-in-house

[2] Patent Act, 1970

[3] [2009 SCC OnLine Del 1878: (2009) 41 PTC 70]

[4] CS (OS) No. 382/2012, Delhi HC

[5] Final Order No. 388/2004- NB(A)

The Role of Patents in Technology Transfer

Oct 13, 2014 | Technology Transfer

Technology transfer in simple words means a process wherein owner of the technology transfers its skills, knowledge, and know-how to another party. In return owner of the technology often gets royalty which is determined based on various parameters, such as, market value of the technology, the effort needed to implement technology and initial investment etc. However one of the extremely important parameter that is to be taken into consideration is whether the technology has legal protection in the form of patent or not, though there might be possibility of protection in the form of trademark, copyright, design as well.

If worked out well, technology transfer is an extremely effective way to commercialize the patented invention. It plays an important role as a catalyst for the further development of technology and patents play a very vital role in case of technology transfer because patent is one of the best ways to protect a technology. Technology transferred without even filed for a patent is a very risky affair. At least a patent application for the technology should have been filed before negotiating on technology transfer for the reason that after grant of the patent, the certificate obtained from the patent office serves as a proof of ownership. A Patent also confers certain statutory rights to the patent holder that the technology transfer process.

Technology transfer happens by means of executing an agreement between owner of technology or Patentee and the buyer. Practically speaking, taking a patent to the level of technology transfer is a very big challenge where strength and value of the patent shall be assessed vigilantly and at the same time it is important for the patent holder to examine capacity of the buyer to manufacture, market and sell his patented invention. Technology transfer is beneficial to the patentee because he gets a channel to commercialize his invention and still have ownership of the patent with him. For the buyer, getting access to patented technology can give him cutting edge over his competitors.

Though the process of technology transfer is not as simple as it sounds, there are various success stories. As reported by The Chronicle of Higher Education, in academic research in the 2011 fiscal year, Northwestern University earned the most of any institution reporting, with more than $191-million in licensing income. The revenue mainly came from the invention related to new breeds of wheat, a new drug for the treatment of HIV, and from longstanding arrangements over enduring products like Gatorade.

Having a patent is one of the essential pre-requisites before transfer of technology though there are several other factors that determine fate of the invention to be commercialized by means of technology transfer. Well negotiated agreement between patentee and buyer can lead to a real profitable and symbiotic relationship.

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