Do you have an idea? Does it benefit a business? Have you assessed the value of your idea and   do you think you can commercialise it and sell it?, asks Geethalakshmi R., CEO and Managing Partner, Associated Business Attorneys.


Though simple, an idea carries an asset value and to properly evaluate it we need to ask the right questions.

Transfer of technology

Technology transfer is a term used to describe a formal transfer of new discoveries, innovations, creativity, modules. Simply put; ideas that result from an action that is exclusive from so many actions a person or entity could do. An idea that has ingredients such as research, experiments, testing, implementations, can prove to be an example of excellence in some form, thereby carving a commercial value by itself.


Transfer of technology helps spawn new businesses, create industries, open new markets and spread new business relations globally. It leads to new products, new systems and improves our quality of life.  With new cancer treatments, faster modems and environmentally friendly metal processing technology transfer has come a long way.

Steps in technology transfer

In brief, technology transfer essentially includes the basic concept of preparing the technology in question to become viable for commercialisation. Here, while concentrating on raw technology converted into commercially viable technology, there are steps usually adopted by agencies who promote commercial entity for the subject technology.

The agencies appointed for securing the commercial potential for the property maintain the procedures, which in brief would be:

  • The disclosure of invention document containing the complete information about the invention, or discovery
  • Record keeping and management of all the documents
  • Evaluation and marketing of the invention
  • Prosecution of intellectual property for the invention
  • Negotiation with the probable buyer of the invention
  • Drafting of the License Agreement
  • Management of the active licenses

There is also the need to apply the relative rules, regulations, legal formalities and comply with the policies concerned for the technology.

Commercial transfer and acquisition of technology

The sale and purchase of the exclusive rights to a patented invention, the permission to use the invention, or of the know-how, takes place through legal relationships between the owner of the exclusive rights, or the supplier of the know-how, called the transferor and the person, or legal entity, which acquires those rights or permission, namely the transferee.

Those legal relationships are essentially contractual in nature, which means that the transferor of the technology consents to transfer and the transferee consents to acquire the rights, the permission or the know-how in question.

There are three principal legal methods that can be used to bring about a commercial transfer and acquisition of technology.

The sale: Assignment

The first legal method is the sale by the owner of all his or her exclusive rights to a patented invention and the purchase of those rights by another person or legal entity. When all the exclusive rights to a patented invention are transferred, without any restriction in time or other condition, it is said that an assignment of such rights has taken place.

The transferor is called the assignor and the other person or entity, the transferee, is called the “assignee.” When an assignment takes place, the assignor no longer has any rights in respect of the patented invention. The assignee becomes the new owner of the patented invention and is entitled to exercise all the exclusive rights to the patented invention.

The license contract

The second legal method is through a license, that is, the permission by the owner of a patented invention to another person or legal entity to perform, in the country and for the duration of the patent rights, one or more of the acts which are covered by the exclusive rights to the patented invention in that country.

When that permission is given, a license has been granted. The legal document evidencing the permission given by the owner of the patented invention is usually referred to as a license contract or, more simply yet, as a license. The owner of the patented invention who gives that permission is referred to as the licensor. The person or legal entity who or which receives that permission is referred to as the licensee. The license is usually granted subject to certain conditions which will be set out in the written document by which the license is granted to the licensee.

The know-how contract

The third of the three principal legal methods for the transfer and acquisition of technology concerns know-how. It is possible to include provisions concerning know-how in a writing or document that is separate from a license contract. Whenever provisions concerning know-how appear in a separate or distinct writing or document, that writing or document is normally called a know-how contract.

Geethalakshmi R

Through such provisions, one party, the supplier of the know-how, undertakes or promises, to communicate the know-how to another party; the recipient of the know-how, for the use by that other party. The know-how may be communicated in a tangible form. Documents, photographs, blueprints, computer cards, and microfilm, among others, are all illustrations of tangible forms.

Examples of know-how that could be transmitted in such forms are architectural plans of the factory buildings, the diagrams of the layout of the equipment in the factory, drawings or blueprints of machines, lists of spare parts, manuals or instructions for the operation of machines or the assembly of components, lists and specifications of new materials, labour and machine time calculations, process flow charts, packaging and storing instructions, reports on stability and environmental aspects, and job descriptions for technical and professional personnel. Such know-how in tangible form is sometimes referred to as technical information or data.

The know-how might also be communicated in an intangible form. Examples would be an engineer of the supplier of the know-how explaining a process to an engineer of the recipient or the manufacturing engineer of the recipient and witnessing a production line in the enterprise of the supplier. Another example would be training in the factory of the recipient, or at the enterprise of the supplier, of personnel of the recipient.

Sale and import of capital goods

The commercial transfer and acquisition of technology can take place with the sale, purchase and import of equipment and other capital goods. Examples of capital equipment are machinery and tools needed for the manufacture of products or the application of a process. Raw materials, for example, crude oil or phosphoric acid, can also be considered as capital goods in that although they are products in themselves, they may be necessary for the manufacture of another product, such as gasoline or fertiliser.

Also, intermediate goods, such as cotton or polyester fibre, or woven cloth and leather, which is to be cut and sewn into clothing, and parts or other components, such as tires, batteries, radiators and engines, which are to be assembled into an automobile, may be considered in the nature of capital goods in that they are needed in the manufacture of other products.

Franchising and distributorship

Commercial transfer of technology may also take place in connection with the system of the franchising or distributorship of goods and services. A franchise or distributorship is a business arrangement whereby the reputation, technical information and expertise of one party are combined with the investment of another party for the purpose of selling goods or rendering services directly to the consumer.

The goods in question may be durable, as in the case of automobiles or home appliances. They may be consumable in use, as, for example, prepared food or beverages. The services may extend to the rental of capital equipment, for example, automobiles, trucks or other power equipment, or to hotel operations, or dry cleaning facilities, or secretarial help.

The consultancy arrangement

The help of an individual consultant or a firm of consultants that will give advice and render other services concerning the planning for and the actual acquisition of, a given technology can be useful, if not indispensable, for such enterprises, entities and governments that wish to acquire technology from enterprises in other countries.

In such a business arrangement not only is help received in acquiring the technology but the experience gained and the lessons learned in engaging and working with the individual consultant or firm of consultants will be valuable knowledge that can serve to better carry out future projects.  Design and engineering services are a typical example.

The turnkey project

In certain instances, two or more of the business arrangements, and the legal methods that they reflect, can be combined in such a way as to entrust the planning, construction and operation of a factory to a single technology supplier, or to a very limited number of technology suppliers.

Thus, the turn-key project may involve a comprehensive arrangement of certain of the legal methods, whereby one party undertakes to hand over to his client, the technology recipient, an entire industrial plant that is capable of operating in accordance with agreed performance standards.

More usually, the turn-key project involves the undertaking by one party to supply to the client the design for the industrial plant and the technical information on its operation. In the latter event, supplementary arrangements might also be made for the acquisition of rights to the technology, for civil engineering work and for provision of technical services and assistance concerning the construction of the plant, the purchase and installation of equipment, raw materials or parts and components, training, and supervision of the operation of the plant, at least in its initial stages.

It is called a “turn-key” project because the end result is to “turn” over to the client the “key” to the door of the industrial plant. That is a symbolic way of expressing the completion of the tasks agreed to between the parties.

Joint venture arrangements

There are two fundamental forms of joint venture, the equity joint venture and the contractual venture. The equity joint venture is an arrangement whereby a separate legal entity is created in accordance with the agreement of two or more parties. The parties undertake to provide money or other resources as their contribution to the assets or other capital of that legal entity.

On the other hand, the contractual joint venture might be used where the establishment of a separate legal entity is not needed or where it is not possible to create such an entity. This may be the case where the project involves a narrow task or a limited activity, or, for a limited time, or where the laws of the country in which the business operation is to be conducted do not recognise the ownership of property by foreigners. The relationship between the parties will be set forth in the contract or agreement concluded between them.




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