Transfer of Technology and Patent Rights

Shivendra Nath Mishra

Introduction

A patent is a legal record conceding its holder the restrictive option to control the utilization of an
invention, as gone ahead in the claims of the patent, inside a restricted zone and time by preventing
others from, in addition to other things, making, utilizing or selling the innovation without approval.
Patents might be conceded to ensure new creations, includes an innovative advance and are
equipped for modern applications. The patent owner also has the right to assign the patent, license
the patent, to act in the event of an infringement of his right. The applicant for a patent also enjoys
certain rights even before the patent is granted to him. The increase in competition in international
trade, as well as the increase in global trade, show that large and medium-sized enterprises must
protect their innovations, their products, and whatever exploitable results of their activities.

Technology transfer (TT) is a process whereby an industrial actor appropriates a technology from a
public actor or another private company, most often to commercialize it. Such a process involves the
transfer of tangible or intangible assets from one entity to another. TT has become a strategic element
of open innovation because it allows manufacturers to benefit from research carried out by partners,
public or private, in their ecosystem. In simple words, Technology transfer is the process of the formal
transfer to industry of discoveries resulting from university or private research to commercialize them
in the form of new products and/or services. Technology transfer is a key element in the
competitiveness of companies.

The transfer can give rise to a financial transaction, and materialize in different ways (patent
purchase, cooperation, recruitment or "hostile" methods). The two main partners are generally
organizations, commercial companies or public organizations. But we can also consider that these are
two distinct fields of application; in this case, the transfer of technology is similar to the transposition
of a concept, of an idea, from its typical application to a field comprising similarities, but for which this
implementation constitutes a novelty. In all cases, the technology constitutes an innovation for the
purchaser, the owner already mastering it.

For normative and political reasons, it is still often and only new technologies that are transferred.
Indeed, knowing that technology transfer was largely institutionalized during the years 1980-1990, we
must understand this sphere of activity within the framework of innovation policies and the Oslo
Manual of the OECD to measure this last. In this context, there is a strong emphasis on the
importance of technology and the company as the sole engine of the economy and therefore of
competitiveness. Teaching or learning a trade is not generally considered to be a transfer of
technology.

Does the transfer of technology follow a well-defined process?

“The diffusion and transfer of technologies is a major pillar that supports the patent system.” This
quote, taken from a text by WIPO (World Intellectual Property Organization), specifies the importance
of the link between patents and technology transfers. The expressions technology license, licensing,
transfer contract, express the various forms that the transfer of technology can take, more especially
in the field of business, commerce and commercial industry. If one takes into consideration the
meanings of the word "technology", it is very simplifying to understand by transfer of technology only
a commercial agreement between the owner of a patent (or any other source of the property or
commercial law) and a purchaser of all or part of this patent (or rights of use).

For academic research, technology transfer is an operation that consists of -

 transmitting the knowledge resulting from research, formalized or not in the form of a patent (s) or
registered property rights, to another research centre, public or private, intended to pursue it for
industrial development purposes; or

 st
1 year BBA LLB Student ,Chanakya National Law university Patna [Authored on (16.03.2021)]

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 transform research into industrial innovation, by selling its discoveries to a company governed by
public or private law

In general, a technological research step is necessary before exploiting the technology in question.
Technology transfer is a source of funding for scientific research. It is part of the valuation of research.
It is considered that today around 10 to 15% of the research capacity of companies is "bought" from
outside. Faced with the ever-increasing complexity of the technological environment, the TT helps
manufacturers to diversify their innovations, share the risks of research, strengthen their internal
expertise, accelerate the marketing of their products, etc.

Both public and private actors have understood the importance of Technology Transfer in their
development and growth. They have thus become better and better structured over the years to
professionalize their approach. Many countries such as France have created dedicated structures
and public authorities like SATT (Technology Transfer Acceleration Companies) or France Brevets,
like the Tech Transfer structures existing in the United States for example. Companies have better
aligned their internal resources to accelerate the acquisition of outside technologies and bring them to
market quickly. On the other hand, the ecosystem around the licensing of intellectual property rights
has only grown stronger and dedicated digital platforms, powerful patent analysis tools (Patent
Analytics), the emergence of intermediaries (brokers ) has established.

Although open innovation and TT are widespread and “trendy”, it is a particularly complex activity with
a high failure rate. Many factors come into play: cultural differences between partners, their strategies
and individual visions, which are sometimes incompatible, their financial expectations, etc. It is
therefore illusory that all situations obey the same codified process. However, some methodologies
allow both protagonists (the one who buys the technology and the one who sells it) to build the
confidence necessary to develop a strong, fair and sustainable transfer agreement. These
methodologies will make it possible to analyze the technical, financial and legal aspects of the TT to
optimize the chances of reaching an agreement.

Among these factors, we can cite the creation of industrial property, the time and cost of development
or even the need to invest in a manufacturing unit. These are all factors that will considerably impact
the valuation of the technology transferred and which, moreover, may change over time. For example,
concerning the creation of industrial property, it is essential to know the chain of rights, that is to say,
to know who owns the technology if it is possible to exploit it without having recourse to third party
licenses, who will have the rights to the improvements made. There are practical tools that allow you
to list and evaluate these different parameters and that help to set up a robust methodology allowing
you to exchange and negotiate with your partner.

There are three main key elements of the Technology transfer process. The first element is trust,
without trust, it is impossible to seal a lasting agreement. The second is transparency, associated with
a clear strategy. Finally, the third is to take into account all the factors that will impact the value chain,
from the moment the assets are transferred until the moment of their valuation (on the market for
example). Professionals who work in the world of TT have the particularity of having very diverse
profiles and training. In general, they combine their technical training with a good knowledge of
patents, negotiation and contracts. There is no proper education in the licensing and TT sector.

Technology Transfer Contracts

For a very long time, the industry was the monopoly of a limited number of countries, but in recent
years there has been a diffusion of capacities and technologies to new countries. Suddenly the
commercial relationship is not limited to the transmission of a thing but to contracts which result in a
transfer of technologies. Practices had to be reformed because technology cannot be transferred in
the same way to a customer having or not having technical competence.

Technology transfer is a relatively common practice for a foreign company wishing to enter the
international market or any particular country. Technology transfer is often organized within the
framework of a joint venture and the foreign company agrees to transfer part of its technology to the
other company which will allow it to sell its products in that market( for example-Indian market).

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From the moment we witness a massive transfer to countries that are in the process of developments,
traditional contractual figures are no longer sufficient. We are also faced with the fact that some
partners do not have the currencies allowing the acquisition of goods or materials. Hence the
implementation of commercial operations which are compensation contracts.

Like In India, the Reserve bank of India guides the programmed endorsement to all businesses for
foreign innovation cooperation arrangements subject to-

 The sum of an amount not surpassing the US $ 2 million.

 Royalty was payable being restricted to 5 % for domestic deals and 8 % for international,
subject to a complete installation of 8% on deals more than 10 years period.

Payment of royalty up to 2 % for export and 1 % for domestic deals are permitted under the
programmed course on the utilization of trademark and brand name of the foreign partner without
technology transfer.

On account of TT, payment of royalty subsumes the payments of royalty for utilization of brand name
and brand name of the foreign partner. Payment of royalty up to 8 % for international and 5 % on
homegrown deals by completely possessed auxiliaries (WOS) to seaward parent organizations is
permitted under the programmed course with no limitation on the span of royalty payments. Any
remaining proposition for foreign innovation arrangements not gathering the boundaries for
programmed endorsement is considered on merit by the Project Approval Board (PAB). This is led by
the secretary, department of Industrial Policy and Promotion.

Let us dwell for a moment on the question of the transfer of information protected by secrecy, in
particular know-how. In the event of the transfer of patented technology, this is generally not sufficient
in itself to develop a product or a commercial solution. Also, this technology transfer often involves the
simultaneous transfer of know-how relating to this technology, in particular allowing the assignee or
licensee to understand how it works and therefore the success of the collaboration project. However,
this know-how cannot be protected by intellectual property law but, in certain cases, if the conditions
are met, by the law of unfair competition. Consequently, the drafting of the technology transfer
contract must be the subject of particular attention concerning the transfer of know-how to allow its
holder to be able to exercise the law of unfair competition in the event of a breach of secrecy.

What precautions should be taken when drafting a contract?

First of all, it is necessary to provide a broad definition of know-how, in particular, so that any
confidential and useful technological information is properly included in the scope of the know-how as
provided for in the contract. The definitions present respectively in the Joint Venture contract and the
technology transfer contract must be consistent.

Also, the communication of know-how from the assignor to the assignee must be controlled and
recorded to be able to prove, if applicable, that the technology transfer has indeed taken place. If the
technology concerned is particularly strategic, the intervention of notaries may be recommended to
obtain notarized proof of the transfer. At the very least, the means of communication of know-how
between the parties must be defined in the contract, such as email addresses or identifiers allowing
access to databases, etc. The members of the licensee's team having the right to have access to the
know-how must also be identified in the contract.

To allow protection by the law of unfair competition, the confidentiality of the know-how must be
protected by the implementation of reasonable measures, such as the creation of a database access
code, recording download history, inserting confidentiality clauses in employment contracts or signing
confidentiality agreements, drafting specific non-competition clauses for experienced engineers and
managers, as well as the establishment of internal organization rules for companies.

In the event of disputes relating to the transfer of know-how, the courts will require evidence to qualify
the transferred know-how information. Thus, the applicant will have to prove the existence of this
know-how, by establishing that the conditions specified above are met, namely that the information

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was protectable, unknown to the public, that it had a commercial value and that the holder had taken
appropriate confidentiality measures. The defendant may rebut this qualification by proving, for
example, that the technology was known to the public. The court will make its decision based on all of
this evidence.

The difficult issue of attribution of property in the event of an improvement is important for the parties
to decide in advance the rules regarding the attribution of ownership in the event of an improvement
in know-how and the right to file a patent on this improvement. To protect the interests of the assignor
or grantor, it is recommended to provide for the need to obtain his or her consent or that of both
parties in the event of a patent being filed by the partner or by the Joint Venture, especially when it
comes to of an innovation created from the transferred know-how.

Finally, technology transfer contracts often involve the provision of consulting and training services
from the transferor to the transferee. In this case, it is recommended to distinguish the fees or charges
according to the different objects of the contract. This will make it possible, in the event of patent
invalidation, to be able to recalculate the amount of technology transfer fees.

In general, the drafting and negotiation of a technology transfer agreement should not be carried out
lightly, and the supervision of the transfer of know-how must be anticipated to allow adequate
protection of the ceding company.

Technology transfer contracts also carried significant risks for foreign companies, due to some rules
that imposed protective measures on domestic companies and invalidated clauses providing for
different rules.

Conclusion

Patents assume a significant part as a catalyst for the further advancement of Technology and it plays
an important part in an occurrence of a transfer of technology since It is probably the most ideal
approaches to secure technology. Transfer of technology and its licensing have assumed an essential
part altogether in the improvement of the business sector and the coming of the innovation and
technology which in outcomes help in the advancement of the economy of the country and the
development of the country and its citizen. If we say from the Indian perspective, India as a
developing nation needs to deal with the innovation improvement and technology transfer and needs
to make a structured procedure containing the development of new workplaces identified with the
transfer of technology and to make young people mindful of the advantages identified with the
transfer, by setting up the predetermined colleges and from now on expanding the speed of the
technology transfer and specialized innovative work in a technical perspective.

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