WHAT IS TECHNOLOGY TRANSFER ARRANGEMENT?
Technology Transfer Arrangement refers to contracts or agreements, including renewals thereof, involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market.
The signing of Republic Act 8293, otherwise known as the Intellectual Property (IP) Code, on June 6, 1997 liberalizes regulations on technology transfer registration particularly the rate of fees or royalties and strengthens intellectual property rights protection in the Philippines. Voluntary Licensing has been provided by the Code. Recordal with the IP Philippines of agreements that involve transmission of rights is necessary. However, registration is no longer required where the agreement is in conformity of the requirements of the law under Sections 87 and 88.
Section 87 of the IP Code covers the prohibited clauses which are adverse to competition and trade.
Prohibited Clauses (Section 87, IP Code)
- Those which impose upon the licensee the obligation to acquire from a specific source capital goods, intermediate products, raw materials, and other technologies, or of permanently employing personnel indicated by the licensor;
- Those pursuant to which the licensee reserves the right to fix the sale or resale prices of the products manufactured on the basis of the license;
- Those that contain restrictions regarding the volume and structure of production;
- Those that prohibit the use of competitive technologies in a non-exclusive technology transfer arrangement;
- Those that establish full or partial purchase option in favor of the licensor;
- Those that obligate the licensee to transfer for free to the licensor the inventions or improvements that may be obtained through the use of the licensed technology;
- Those that require payment of royalties to the owners of patents for patents which are not used;
- Those that prohibit the licensee to export the licensed product unless justified for the protection of the legitimate interest of the licensor such as exports to countries where exclusive licenses to manufacture and/or distribute the licensed product(s) have already been granted;
- Those which restrict the use of the technology supplied after the expiration of the technology transfer arrangement, except in cases of early termination of the technology transfer arrangement due to reason(s) attributable to the licensee;
- Those which require payments for patents and other industrial property rights after their expiration or termination of the technology transfer arrangement;
- Those which require that the technology recipient shall not contest the validity of any of the patents of the technology supplier;
- Those which restrict the research and development activities of the licensee designed to absorb and adapt the transferred technology to local conditions or to initiate research and development programs in connection with new products, processes or equipment;
- Those which prevent the licensee from adapting the imported technology to local conditions, or introducing innovation to it, as long as it does not impair the standards prescribed by the licensor; and
- Those which exempt the licensor from liability for non-fulfillment of his responsibilities under the technology transfer arrangement and/or liability arising from third party suits brought about by the use of the licensed product or the licensed technology.
On the other hand, Section 88 of the IP Code contains provisions which need to be included in voluntary license agreement as follows:
- That the laws of the Philippines shall govern the interpretation of the agreement and in the event of litigation, the venue shall be the proper court in the place where the licensee has its principal office;
- Continued access to improvements in techniques and processes related to the technology shall be made available during the period of the technology transfer arrangement;
- In the event the technology transfer arrangement shall provide for arbitration, the Procedure of Arbitration of the Arbitration Law of the Philippines or the Arbitration Law of the United Nations Commission on International Trade Law (UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber of Commerce shall apply and the venue of arbitration shall be the Philippines or any neutral country; and
- The Philippine taxes on all payments relating to the technology transfer arrangement shall be borne by the licensor.