Negotiating agreements

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					Business Coach                                                                                         Technology Transfer

Negotiating agreements
Factors in technology transfer deals                                       Small and Medium-Sized Enterprises Division
                                                               World Intellectual Property Organization
The sale and purchase of the exclusive rights to a patented        party will also play a role (e.g. size, technological capacity,
technology or of the permission to use a given technology          etc.). On the whole, as a company develops and improves
or know-how, takes place through legal relationships bet-          its technological capacity, its ability to absorb new tech-
ween the owner of the exclusive rights or the supplier of          nology also increases, as does its negotiating power and
the know-how, called the “transferor”, and the person or           capacity to manage technology developed by others. As a
legal entity which acquires those rights or that permission        result, companies with the capacity to effectively integrate
or receives that know-how, called the “transferee”.                new technology developed by others may require less
The nature of the relationship between the two parties             assistance from the transferor to absorb the new tech-
and the type of agreement that will result from a technology       nology and learn how to use it properly.
transfer negotiation will depend on a number of factors            Technology transfer agreements may involve different
including some of the following:                                   players, including large multinationals, small enterprises,
   The complexity and the level of development of the tech-        public sector bodies, or any other entity or individual
   nology that is to be acquired;                                  seeking to acquire or sell new technology or technological
   The actual needs of the recipient;                              information. What is crucial is that both parties perceive
                                                                   the agreement as beneficial to their company and/or institu-
   The technological capacity of the transferee and ability
                                                                   tion. Neither must feel that the other party has obtained a
   to use and/or adapt the technology being purchased;
                                                                   better deal and/or that the agreement is unfair. The secret
   The relevance, availability and cost effectiveness of
                                                                   to the success of technology transfer agreements is that
   alternative technologies;
                                                                   each party perceives the other as a partner in a fruitful
   The price to be paid (in cash or kind) by the recipient,
                                                                   collaborative process.
   Other proposed terms and conditions for transfer, such
   as support offered during and after transfer in absorb-         In many circumstances, strategic alliances between com-
   ing and adapting the new technology, or rights over             panies may include a technology transfer agreement, and
   improvements or adaptations made by the recipient;              are generally useful for allowing a business to meet its
                                                                   objectives, while maintaining the flexibility to adapt quickly
   The negotiating power of both parties (which will, in
                                                                   to technological developments, as appropriate. Strategic
   turn, depend on variables such as size, technological
                                                                   alliances that are well constructed help partners pool ex-
   sector, demand for the technology, number of compe-
                                                                   pertise, enter new markets, share financial risks and get
   titors, etc.);
                                                                   products and services to market faster. Strategic alliances
   The type of relationship envisaged between the two
                                                                   can be tricky. Partnerships foster mutual benefits, but the
   parties (e.g. long-term, short-term or one-off purchase
                                                                   alliances exist only as long as they are advantageous to
   of products/services.);
                                                                   both parties. Yet, in recent years, the concept of gaining a
   Issues concerning product liability, indemnity, warranty,       marketplace advantage by teaming up with another com-
   etc.; and                                                       pany whose products or services fit well with one’s own is
   Whether technical support and training for use of new           being adopted by an increasing number of businesses.
   technology and related equipment is required.                   In many situations, a strategic alliance may be a prelude
Many of the above factors will influence the ability to nego-      – a sort of a trial phase before committing – to a longer-
tiate a mutually beneficial agreement by the two parties.          term relationship of a joint venture or an eventual merger
In many cases the external context (e.g. laws, competitive         or acquisition. In each of these situations, however, both
context, demand, etc.) will be crucial in determining the          sides to safeguard their respective interests must ade-
outcome of the negotiations. The characteristics of each           quately address the intellectual property issues.

                             Asia-Pacific International Molecular Biology Network
 The Asia-Pacific International Molecular Biology Network brings together the leading minds and institutions in the region to work
 towards ensuring that the economies in the Asia and the Pacific Rim will find themselves always at the cutting edge of new
 developments in biotechnology, and not as by-standers. For more information, contact:
                                IMBN Secretariat, Bio-MAX Institute, Seoul National University
                                              Seoul 151-742, Republic of Korea
                              Tel: 82-2-872-8016; Fax: 82-2-882-6702; Website:

58      TECH MONITOR           Jul-Aug 2009
Technology Transfer                                                                                        Business Coach

                                                              Technology transfer
                                                       Definition of arrangements                                   Intellectual Property Office of the Philippines
Technology transfer registration                                  Prohibited clauses (Section 87, IP Code)
The signing of Republic Act 8293, otherwise known as              1. Those that impose upon the licensee the obligation
the Intellectual Property (IP) Code, on 6 June 1997 liberal-         to acquire from a specific source capital goods, inter-
izes regulations on technology transfer registration (TTR),          mediate products, raw materials and other technologies,
particularly the rate of fees or royalties, and strengthens          or of permanently employing personnel indicated by the
intellectual property rights protection in the Philippines.          licensor;
The Code provides for voluntary licensing. Recordal with          2. Those pursuant to which the licensee reserves the
the IP offices of agreements that involve transmission of            right to fix the sale or resale prices of the products
rights is necessary. However, registration is no longer re-          manufactured on the basis of the licence;
quired where the agreement conforms with the require-             3. Those that contain restrictions regarding the volume and
ments of the law under Sections 87 and 88.                           structure of production;
                                                                  4. Those that prohibit the use of competitive technologies
Voluntary licensing                                                  in a non-exclusive technology transfer arrangement;
Difference between TTR policies and Chapter IX of the IP          5. Those that establish full or partial purchase option in
Code on voluntary licensing are given in the table below:            favour of the licensor;
       Coverage of the law                         TTR policy (old law)                 Chapter IX of the IP Code on
                                                                                           Voluntary Licensing
 Parties                                Only those between domestic                All technology transfer arrangements
                                        companies and foreign or foreign-
                                        owned companies
 Subject matter                         Industrial property                        Intellectual property
 Registration requirements              Mandatory                                  Not required except in the following
                                                                                   1. Requests for exemption from
                                                                                      Sections 87 and 88 of the IP Code;
                                                                                   2. Recording of trademark licence
                                                                                      arrangements with the IPO; and
                                                                                   3. Other legal purposes.
 Focus of evaluation                    Restrictive business processes,            Anti-competition and trade
                                        royalty fees
 Policy on royalty                      Requires extensive evaluation of           Liberalized
                                        fees, if beyond 5% of net sales
 Effects of non-registration            Unenforceable on third parties             Unenforceable (Sec. 92 of the IP

Definition of technology transfer arrangement                     6. Those that obligate the licensee to transfer for free to
                                                                     the licensor the inventions or improvements that may
‘Technology transfer arrangement’ refers to contracts or
                                                                     be obtained through the use of the licensed technology;
agreements (and their renewals) involving the transfer of
systematic knowledge for the manufacture of a product,            7. Those that require payment of royalties to the owners
the application of a process, or rendering of a service              of patents for patents which are not used;
including management contracts; and the transfer, assign-         8. Those that prohibit the licensee to export the licensed
ment or licensing of all forms of intellectual property rights,      product, unless justified for protection of the legitimate
including licensing of computer software, except computer            interest of the licensor such as exports to countries
software developed for mass market. Section 87 of the                where exclusive licenses to manufacture and/or distri-
IP Code covers the prohibited clauses which are adverse              bute the licensed product(s) have already been granted;
to competition and trade.                                         9. Those that restrict the use of the technology supplied

                                                                                  TECH MONITOR          Jul-Aug 2009    59
Business Coach                                                                                       Technology Transfer

    after the expiration of the technology transfer arrange-      On the other hand, Section 88 of the IP Code contains
    ment, except in cases of early termination of the             provisions that need to be included in voluntary licence
    technology transfer arrangement owing to reason(s)            agreement as follows:
    attributable to the licensee;
10. Those that require payments for patents and other             Mandatory provisions (Section 88, IP Code)
    industrial property rights after their expiration or ter-     1. That the laws of the Philippines shall govern the interpre-
    mination of the technology transfer arrangement;                 tation of the agreement and in the event of litigation,
11. Those that require that the technology recipient shall           the venue shall be the proper court in the place where
    not contest the validity of any of the patents of the tech-      the licensee has its principal office;
    nology supplier;                                              2. Continued access to improvements in techniques and
12. Those that restrict the research and development acti-           processes related to the technology shall be made
    vities of the licensee designed to absorb and adapt the          available during the period of the technology transfer
    transferred technology to local conditions or to initiate        arrangement;
    research and development programmes in connection             3. In the event the technology transfer arrangement shall
    with new products, processes or equipment;                       provide for arbitration, the Procedure of Arbitration of
13. Those that prevent the licensee from adapting the                the Arbitration Law of the Philippines or the Arbitration
    imported technology to local conditions, or introducing          Law of the United Nations Commission on Interna-
    innovation to it, as long as it does not impair the              tional Trade Law (UNCITRAL) or the Rules of Conci-
    standards prescribed by the licensor; and                        liation and Arbitration of the International Chamber of
14. Those that exempt the licensor from liability for non-           Commerce shall apply and the venue of arbitration
    fulfillment of his responsibilities under the technology         shall be the Philippines or any neutral country; and
    transfer arrangement and/or liability arising from third      4. The Philippine taxes on all payments relating to the
    party suits brought about by the use of the licensed             technology transfer arrangement shall be borne by the
    product or the licensed technology.                              licensor.

                                International Design Registration System
 Member states moved on 24 September 2009 to simplify the international design registration system by suspending
 the earliest of the three Acts that govern the Hague Agreement concerning the International Deposit of Industrial
 Designs. This decision will streamline the administration of the Treaty, which offers the possibility to protect designs
 in several countries by filing one single application (in one language with one set of fees in one currency – Swiss
 francs). The Hague system also simplifies the subsequent management of industrial design rights. The decision
 was taken at an Extraordinary Meeting of the Contracting Parties to the 1934 (London) Act of the Hague Agreement
 on the sidelines of the WIPO Assemblies’ meetings from 22 September to 1 October 2009.
 The Hague Agreement concerning the International Deposit of Industrial Designs of November 1925 consists of
 three different Acts, namely the London Act of 1934, the Hague Act of 1960 and the Geneva Act of 1999. At a meeting
 this week, the 15 signatories of the obsolete 1934 London Act decided to freeze that Act from 1 January 2010.
 This decision will reduce the complexity of the system and will focus greater attention on the 1999 Geneva Act
 which enhances the existing system by making it more compatible with registration systems in countries where
 protection of industrial designs is contingent on examination to determine the acceptability of an application. The
 Geneva Act also introduces a modified fee system, the possibility of deferring publication of a design for up to 30
 months and the ability to file samples of the design rather than photographs or other graphic reproductions. The
 latter features are of particular interest to the textile and fashion industries.
 Under this decision, as from 1 January 2010, no new designations under the 1934 (London) Act may be recorded
 in the International Design Register. Designations under that Act made before that date will not be affected. It was
 unanimously agreed that the next step would be to terminate the 1934 (London) Act.
                                          For further information, please contact:
                                                  Media Relations Section
                                         World Intellectual Property Organization
                                            Tel: +41 (22) 338 8161 or 338 9547
                                                   Fax: +41 (22) 338 8280

60      TECH MONITOR           Jul-Aug 2009