What is a Technology Transfer Agreement?
The knowledge and information that lies behind a Technology can be legally transferred from one entity to another by executing a Technology Transfer Agreement. Such an agreement can vary depending on the nature of the mutual understanding between the parties, i.e., it can be a technology transfer licensing agreement, an assignment of Intellectual Property Rights agreement, a consultancy agreement, or a collaborative research agreement.
Regardless of the understanding between the parties, the primary purpose of such agreements remains the same, i.e., to share the Technology. Technology Transfer Agreements facilitate innovation and economic development by acting as enablers for the commercialization of new and valuable technologies.
Which Statutes do they cover?
To execute a legally valid Technology Transfer Agreement, it must be in accordance with the following primary statutes in India:
Indian Contract Act, 1972
First and foremost, it must be consonant with the laws laid down under the Indian Contract Act, 1972, without which the Agreement would either be void ab initio, voidable, or void altogether.
Intellectual Property Rights Statutes
In most cases, the Technology being transferred is usually protected under either the Patents Act, 1970, the Trade Marks Act, 1999, the Copyright Act, 1957, the Designs Act, 2000, or any other Intellectual Property Rights Act. In such cases, the law lays down certain procedures to be followed in case of transfer of ownership of that particular Intellectual Property from one entity to another. For example, as per the Patents Act and the Trade Marks Act, any Patent or Trademark must be assigned by executing an assignment deed with valuable consideration and recording the same with the Indian Patent Office and/or the Indian Trade Marks Registry.
The Competition Act, 2002
It gives the owner of the Technology the right to exercise his/her rights in case any person or entity is found violating his/her rights in the Technology. Such a clause can be inserted within the framework of a Technology Transfer Agreement to protect the interests of both the Parties and to prevent anti-competitive practices.
How to Draft a Technology Transfer Agreement?
To draft an effective Technology Transfer Agreement, it becomes necessary to conduct a thorough portfolio assessment of all the aspects of the Transfer.
First and foremost, most Technology Transfer Agreements are usually drafted based on a Term Sheet that lays down the fundamental aspects of the understanding between the Parties. It becomes imperative to identify this Term Sheet and use it as a guide while drafting the entire Agreement. Once the groundwork is laid down, the next step would be to identify the different Intellectual Property Rights attached to the Technology. Identifying the Intellectual Property Rights and calculating their valuation (click here to know more about IP Valuation) beforehand gives a better understanding of the scope of the Technology, along with illustrating the rights and liabilities with respect to maintenance of such Intellectual Properties in the Agreement.
After which, the next step would be to draft the Agreement in accordance with the specific needs of the Parties involved. If the technology in question comprises multiple elements or is in the development stage, the Technology Transfer Agreement could be drafted to incorporate multiple Phases, such as the Pilot Phase, the Development Phase, and the Commercialization Phase. Such Phases would help the Parties ease into their respective rights and liabilities more systematically. Similarly, the consideration could also be divided into multiple trenches tied to the completion of certain phases for the assurance of the Transferor and to avoid being burdensome for the Transferee.
What are the Key Clauses of a Technology Transfer Agreement?
Apart from the case-specific clauses, a Technology Transfer Agreement must incorporate the following clauses:
- Definition Clause: this clause is pertinent to define the most important and recurring terms of the Agreement, it gives clarity to the Parties who shall execute their responsibilities and liabilities as per the clauses of the Agreement.
- Transfer Clause: This clause forms the crux of the entire Agreement by stating the nature, scope, and elements of the transfer.
- Consideration Clause: This clause states the main consideration for the transfer of the Technology. It can also include any royalties (as the case may be) for any future payments to be made.
- Rights and Liabilities Clause: This clause lays down the specific rights and liabilities of each party involved in the transfer of the Technology. Such a clause becomes important in a large-scale Technology Transfer where the transfer will be spread out over the course of time.
Apart from these, incorporating standard clauses such as confidentiality, warranty, indemnity, governing law, jurisdiction, dispute resolution, non-solicitation, non-competition, and the like will tie the entire Technology Transfer together.
Technology Transfer Agreements are foundational tools in the modern economy that enable the spread of innovation and the commercialization of research. By structuring them thoughtfully and aligning them with applicable legal frameworks, stakeholders can not only protect their interests but also create collaborative ecosystems that drive technological growth.
