Vital Components of Technology Transfer Contract

Technology Transfer Contract has Following Components which are given below :

1. Technology collaboration Agreement – It is a specific mechanism of technology transfer. In India it has been an important mechanism. Technology Transfer Agreement is a legal agreement enforceable by courts of law. Keeping in view interest of buyers

2. Patent and Secret Technology – Every transfer of technology through whatever mechanism has the following components of affect transfer : Patent and knowledge of the process or the secret knowledge, which the owner shares with the buyer. Knowledge means know how which is useful, secret, novel and provides valuable information including associated technical and other information.

3. Trademark – Although this is not a part of technology and not an integral part of transfer. Trademark from the buyer’s point of view identifies product quality including certain continuation of product features. From the seller’s point of view trademarks identify exclusive source thereby serving as a repository for goodwill, a repository which is protected from the unfair competition of imitators.

4. Brand  – Very often technology transfer also include brand.

5. Brand Name – Very often technology transfer also include brand name of the product which facilitates identification of the product by the consumer easily and thus the job of marketing by the seller also becomes easy.
6. Royalty, Management and Technical Fees – Technology transfer is made on specific payment, royalty for patent and various fees for management technology and technical fees. Royalty is paid for patented knowledge which is normally a proportion of the sales value. Management and technical fees could be a lumpsum to be paid in one installment or in a number of installment. There is also a separate payment for trademark and brand name.

7. Duration – Technology transfer agreement is normally for a specific period, for example – five years.

8. Establishment of R & D – The seller of technology is expected to help the buyer establish R & D facilities.
9. Performance Guarantee – Performance guarantee by the seller is very important from the point of view of the buyer since it goes into the roots of the technology transferred. It ensures that technology transferred will be able to produce expected quality products at expected costs. This is particularly important in a large number of industries where product purchases are entirely hosed on their functional quality such as engineering products, pharmaceuticals and chemicals.
10. Design Conference – It is normally between the proposed buyer and seller to understand the nature of technology and it’s components which is expected to be transferred. This conference provides a beginning for effective negotiations on both sides.

11. Restrictive Practices – One should be careful about restrictive business clauses such as export restrictions, restriction on sources of imports other than those specified by the seller of technology since such restrictions will affect the earning of the technology buyer.

12. Latest Technology – Technical collaboration agreement should, to the extent possible, provided for transfer of the latest version of the technology.

13. Training of Labour Force – Training is regarded as an important channel through which TNCs impart synergistic ownership specific advantages to the host country nationals. Training tends to raise both technical and managerial capacity of the host Country, enabling it to apply knowledge and skills without assistance. There is also a spill over effect of this on labour mobility and it increases overall productivity
Training programmes may be carried out within the country or overseas. Within the country, this may take the form of on the job training, training in a formal institution or an institution established by TNCs. Training abroad is normally restricted to specialised areas and limited to the top management cadre.