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Enabling Transfer of Technology (ToT) Agreements for Drones & Unmanned Aerial Vehicles (UAVs)

 > Business Laws  > Enabling Transfer of Technology (ToT) Agreements for Drones & Unmanned Aerial Vehicles (UAVs)

Enabling Transfer of Technology (ToT) Agreements for Drones & Unmanned Aerial Vehicles (UAVs)

The term ‘Transfer of Technology’ essentially connotes a system where technology is transferred from one entity to the other. Such kinds of transfers are either commercial or non-commercial in nature. Technology transfer, as per the common parlance, is a process where commercial technology is disseminated. Through a commercial transfer, one envisages reaping profits from transferring the technology. Technology, under this concept, means the systematic use of knowledge or ‘intangible’ knowledge. In legal connotation, it refers to the use of all forms of commercial knowledge whether patented or unpatented, which forms the subject matter of the transaction. Therefore, semantically a technology transfer would mean the transfer of all forms of knowledge through an agreement between companies or entities.

A technology transfer agreement is a contract that is used by one party who intends to assign or license to another, registered industrial and intellectual property rights along with technical assistance and know-how. The intellectual property involved in a technology transfer contract includes patents, trademarks, design, and know-how. When industrial or intellectual property rights are slated to be transferred through the agreement, in such a case knowledge and exclusive rights are granted which are recognized as well as registered to manufacture the products. In a technology transfer agreement, a new IP may be created, or it is improved, or the existing IP is used by the parties. Hence, constant improvement in the contract is an exigent condition in a technology transfer agreement.

The technology transfer agreement is exponential in today’s contemporary period. With rapid industrialization and the continuous development of technology, it is apparent to disseminate the knowledge to succeed in a multilateral setting of the world. Transferring of technology is a Mondial business now and hence it is important to understand the tenets of the contract. With the transfer agreement, companies endeavor to enter a competition in various sectors of the market without actually having to develop internally in respect of technologies. Thus, this evinces lucrative growth. In pursuance of the same, we try to delineate various ingredients and clauses that must be incorporated for a viable transfer of technology agreement in respect of Unmanned Aerial Vehicles (UAVs)

Top Ten Important Clauses to be Incorporated under the Transfer of Technology (ToT) Agreement
Scope and Objective: The transfer of technology agreement must entail the scope and objective. This provision must delineate the overall description of overtures, strategies, technology, and the resources in transferring the technology. This clause must also include the matters which are exempted from license purview and must apprise with the responsibilities of the parties in the contract. While drafting the agreement, the language should be given the utmost importance. It should be drafted in such a manner that is easy to understand and is not arcane. It should also be precise, with simple language.

Territory and Exclusivity: It is important to note that, while making any kind of a commercial contract, it is indispensable to identify the territory or exclusivity of the contract. This simple term means the place and the parties to which the contract explicitly applies. Like other contracts, in a technology transfer agreement, the contract must \unambiguously identify the territory of the license granted and should also mention whether the license is ‘exclusive’ i.e., is a sole license or ‘non -exclusive’ i.e., can be granted to another party as well. In case the parties have chosen for the exclusive license, it is advisable to demarcate a proper territory that may prevent competition from similar entities that may have similar licenses in other territories. Hence the ‘limitation -clause’ can be included in this regard, depending upon the interests of the parties.

Intellectual Property: As already mentioned, the intellectual property included in a technology transfer agreement entails patents, trademarks, designs, and know-how. In times of incessant competition in the global commercial market, the swindling of technology and cloning intellectual property is rife. Hence, usually in a transfer of technology clause, the intellectual property clause is elaborated. An intellectual property clause is used in the agreement to enable the client as the sole owner of the intellectual property and protect the real owner from any third-party infringement. In an intellectual property clause, there are times when a new Ip is created or is improved or the existing Ip is used by the parties. In the case of exiting Ip’s an ‘improvement’ clause can be created. An improvement generally means changes or modifications, enhancements, additions, updates, revisions to the existing IPs. For lucrative growth, the improvements should not be made sub-licensable as it circumvents the exposure from competitive entities. This improvement can be made through the insertion of a ‘Grant–back clause’. Under the same, the licensee accords the licensor with the sole authority to the improvements made by the licensee on the licensor’s technology. This clause must be written in clear words.

Confidentiality: Usually, a technology transfer agreement involves know-how or sensitive information of businesses, whose breach may lead to huge financial losses for the licensee. Hence, it is paramount to entail certain strong confidentiality protection clauses in the agreement. While drafting the confidentiality clause, certain information which is already available in the public domain should be kept out of the purview of this clause. Further, this clause must specify the standard of care to be taken by the licensee in the handling of the data which might include provisions concerning the physical security, non-disclosure agreements with employees of the vendor, internal security protocols, etc. In addition, the contract should also specify the person to whom reasonable disclosures can be made. Finally, the agreement under this clause should explicitly specify the obligations and responsibilities of both parties in case of a breach. It should also specifically lay provisions to mitigate the customers ‘ loss due to breach.

Fees and Payment: In a technology transfer agreement, fees can be decided based on lump-sum payment or part-payments, or a combination of both. Further, the clause must include the mechanism for payment. There are multifarious benefits of setting a price mechanism, as it not only reduces the risks incurred by the person in case the patent is declared invalid but also doesn’t affect the calculation of part payments for other licensed patents. Usually, a lump sum amount is beneficial for the licensor in a technology agreement to avert later breach of information. In the case of the non-continuation of the agreement, the interest of the licensor is protected. The clause should also mention the schedule for such payments, late payments, information regarding currencies to be used along with the responsibilities of payment of taxes. The parties can also make the provision of the minimum payment, in case of any difficulties, if faced by the company in the future with the financial burden.

Warranties: Generally, no contract can be free of risks and consequences, and hence either it is exigent to protect one from the same. Therefore, a technology transfer agreement should contain provisions limited to warranties made, which includes that the licensor has absolute ownership over the transferred IP, the product of IP and the IP doesn’t violate the third-party rights to the best of knowledge of the licensor. Warranties generally include provisions related to limitation of liabilities in the form of a cap, or non-covering or consequential damages, personal injury, property damage, acts & omissions by employees, non-functioning, etc.

Term of the Agreement: The term of technology transfer is to be decided mutually by the parties. Certain rights like patents and know-how are subjected to statutory limits. Generally, the patent rights are granted from the date of grant of the license till the expiration of the statutory period, in India the period is 20 years.

Termination and Consequence: The purpose of the termination clause lays down the events which might lead to the termination of the service, by either party or one of the parties. The termination clause should expressly lay down the events and circumstances which might lead to termination of the service, by either parties or one of the parties.

Dispute Resolution: One of the fundamental clauses of an agreement is the clause that provides insights about dispute resolution. The clause aims to provide details regarding the procedure which will be used when a dispute arises between the parties. It is ingenious and feasible to add a clause that furthers the interests of both parties to avoid feud in the later periods of commercial contracts.

Miscellaneous Clause: There are certain aspects in a contract that are not categorized under any of the above clauses and hence can be placed under the category of the miscellaneous clause. These clauses refer to those provisions which are of some importance to inculcate a fair contract. Most of the times provisions related to periodical auditing or indemnity details or insurance clauses etc. are entailed under this clause.

The transfer of technology agreement is meteoric in the present market scenario. With increasing competition, hundreds of companies and new businesses are engaging in this agreement for both national and international handlings. One must be prudent with its drafting to avoid further risks of infringements or breach of security thereby resulting in a damaging loss. While drafting the contract, language and precision must be underscored, thoroughly. One must ensure simple, precise, and clear language that demystifies a clear intention of the transfer of technology agreement. A smidgen of ambiguity could be detrimental for the companies and their businesses. A valid and fair contract hones a conducive relationship between parties that realizes the goal of both parties successfully
Authored By: Adv. Anant Sharma & Anchita Saxena

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