Technology Transfer Agreement

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Technology Transfer Agreement

A Technology Transfer Agreement is created to transfer intellectual property rights or know-how from one organization to another. The most common way of transferring technology is through a license agreement whereby the licensee gets the right to use the technology for a fixed period of time for a particular fee. The agreement may also take the form of a know-how agreement which involves the transfer of information or skills.

The agreement generally contains details of the technology being transferred, the mode of transfer, the duration for which it is being transferred and the consideration to be payable for the same.

When Do You Need a Technology Transfer Agreement

A technology transfer agreement is needed when an organization wants to transfer its intellectual property or know-how to some other organization. The agreement will lay down the method through which the intellectual property is to be transferred and the duration for which such transfer will be valid.

This purpose of the technology transfer agreement is to lay down the terms and conditions under which the technology will be transferred. The consideration for the transfer can be a lump-sum amount or royalty payment or a mixture of both as decided by the parties. The agreement will also specify if the license is an exclusive one (solely given to the licensee) or non-exclusive.

Inclusions in a Technology Transfer Agreement

The agreement must clearly state the names of the parties between whom the agreement is entered into. This will include the party who is transferring the intellectual property rights or know-how (known as the transferor) and the party to whom these rights are being transferred (known as the transferee). The date on which the agreement is entered into must also be mentioned along with the territory in which the agreement is enforceable.

The technology transfer agreement must clearly state the technology and the rights that are being transferred. The territory in which these rights will be exercised and the duration of the agreement must also be specified.

Apart from this, the agreement must clearly mention under which law it will be governed and how the agreement shall be terminated. The manner in which the agreement is to be modified should also be described.

How to Draft a Technology Transfer Agreement

The following is the process to be followed while drafting a technology transfer agreement: 

  • First a preliminary draft should be created known as “Heads of Agreement”.
  • This draft should have a summary of the key commercial as well as technical details to be negotiated upon between the parties.
  • The parties must decide on the mode and extent of transfer. While deciding the extent of the transfer, the parties must determine exactly which intellectual property rights are being transferred.
  • These rights can also be mentioned as a schedule to the agreement.
  • Once the negotiations are done, the final agreement must be drafted keeping in mind all the important clauses that need to be covered under the agreement.
  • The agreement must be reviewed thoroughly to ensure that the interests of both the parties are protected.

Benefits of a Technology Transfer Agreement

  • It helps the licensor gain royalty income from the intellectual property that is licensed.
  • It helps the licensee gain a commercial advantage over its rivals by getting access to the intellectual property rights.
  • Transfer of technology is an important way of gaining access to the latest technology available in the developed countries.
  • The public gains the most from the available manufactured goods and the jobs that result from it.

Consequences of Not Having a Technology Transfer Agreement

  • Without a technology transfer agreement in place, a dispute between the parties could end up in court and lead to a legal mess.
  • The extent of the rights being transferred to the licensee will not be defined and this may create misunderstandings in the future.

Key Clauses in a Technology Transfer Agreement

The following are the key terms of a technology transfer agreement:

  • Product / service definition
  • Technical know-how
  • Rights and licenses
  • Technology transfer
  • Territory and sub-licensing
  • Commercial production
  • Payment of consideration
  • Obligations of the licensor
  • Obligations of the licensee
  • Representations and warranties of the licensor
  • Product liability and indemnity
  • Improvements and inventions
  • Inspection and information
  • Confidentiality
  • Duration of the agreement
  • Indemnification and damages
  • Modification of the agreement
  • Assignment or other transfer
  • Termination of the agreement
  • Consequences of termination
  • Governing law and jurisdiction
  • Dispute resolution and arbitration
  • Notices

What Happens When You Violate a Technology Transfer Agreement

Generally, technology transfer agreements have a clause that talks about the actions to be taken when a party to the agreement breaches the clauses of the said agreement. An arbitration clause is present in most agreements and states that if a clause of the agreement is breached or if any dispute arises with respect to the terms of the agreement, the matter will be resolved by arbitration. The clause mentions where the arbitration proceedings will take place i.e. seat of arbitration, the language in which the proceedings shall be conducted and the manner in which the arbitrators shall be appointed.

Alternatively, any other form of dispute resolution such as mediation may also be mentioned in the agreement.

The agreement can also mention that all disputes arising out of the agreement will be subject to the exclusive jurisdiction of a specified court.

Sample of a Technology Transfer Agreement

If you require a template of a technology transfer agreement, you can download a sample here.

Download Technology Transfer Agreement Template

Technology Transfer Agreement

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