Technology Transfer Contract Under the New Law on Transfer Technology of Vietnam

Email: vinh@bross.vn

Overview

Technology transfer contract is probably the highest and most complex form of commercialization of intellectual property rights because technology transfer is a general concept with a broad connotation, which may include technical solution, process, know-how without or with medium, tool used to transform resources into products[1].

According to the 2017 Technology Transfer Law of Vietnam, there are 4 types of technologies subject to technology transfer agreement, including:

1. Technical know-how, technological know-how;
2. Technological plans, processes; technical solutions, parameters, drawings, technical diagrams; formula, software and database;
3. Solutions for production optimization and innovation of technology;
4. Machinery, equipment attached to one of the three types mentioned above.

Technology transfer transactions often contain intellectual property (IP) rights that may exist in form of technical solution namely invention, plant varieties, industrial design, business secret, and commercial identifiers typically as trademark (brand name). Therefore, in fact, technology transfer agreement may be seen in various forms such as independent technology transfer contract, agreement on technology transfer under a part of the other transactions namely, investment projects, capital contribution by technology, franchise agreements, transfer of IP rights; purchase and sale of machinery and equipment appending 3 types of technology transfer indicated at a, b & c above[2].

Current Situation of Technology Transfer

According to the National Center for Socio-economic Information and Forecast – Ministry of Planning and Investment (NCIF), the practice of transfer of technical know-how and assistance, subject of industrial property rights entered into and implemented little. In particular, as reported by the Ministry of Science and Technology (MoST), from 2007 to 2014, there were only 187 technology transfer contracts recorded in the localities, of which 137 contracts are technology process (73%), 140 technology know-how (75%), 145 technical assistance (77.5%), 134 regarding training and operation (71.5%) and only 25 titles of protection of industrial property rights being delivered. With respect to technology transfer related to foreign-invested enterprises (FDI), in general, foreign direct investment projects in Vietnam have not yet really invested in high technology which can create high added value for the economy.

According to the 2018 World Economic Forum report, ranking of countries in technology transfer viewed from FDI enterprises, Vietnam got 4.1 points, ranked at 89^th amongst the total ranked countries and ranked at 8th in the region, standing after Cambodia, the Philippines, Indonesia, Thailand, Malaysia and Singapore. Thus, Vietnam is assessed as a country with very low technology transfer efficiency from FDI and has a tendency to lag behind[3].

How to distinguish Transfer Technology Contract, IP License Agreement and Franchise Contract

Form, Content and Procedures for Registration of Technology Transfer Contract

Technology transfer transaction must be made in agreement in writing. The language of contract may be freely chosen by the parties. The content of a technology transfer contract must include the following principal provisions:

1. The name of technology to be transferred.
2. Subject of technology to be transferred, products created by the transferred technology, standards and technical specifications of the products.
3. Transfer of the right to own the technology or the right to use the technology.
4. Mode of technology transfer.
5. Rights and obligations of the parties.
6. Price and mode of payment.
7. Effective time and validity duration of the contract.
8. Definitions and terms referred to in the contract (if any).
9. Technology transfer plan and schedule, and location where the technology transfer is carried out.
10. Responsibilities to warrant the transferred technology.
11. Penalties due to contract violations.
12. Liabilities due to contract violations.
13.  Dispute settlement provisions and selected agency dealing therewith
14. Other contents agreed upon by the parties.

Except for domestic technology transfer contract (excluding technology transferred with state owned capital) that is not required to register, all technology transfer contracts, including transfer contracts of technologies restricted from transfer only become effective as of the time at which the certificate of technology transfer or license of technology transfer is granted.[8]

One of the terms you should pay attention is the price of technology transfer. As a general rule, the price in technology transfer contracts shall be agreed by the parties, however, to prevent transfer pricing[9] which lead to both causing tax losses and creating an unhealthy competitive environment, the law requires the price of the transferred technology shall be audited and complied with prevailing laws on taxations and prices in 3 following cases: (a) technology is transferred among the parties in which at least a party has state owned capital; (b) technology is transferred among the parties that have parent-subsidiary company relationship; (c) technology is transferred among the parties that have affiliate relationship as prescribed by the laws on taxations.[10]

An application for technology transfer contract registration consists of:

1. The application form for a technology transfer registration, which clearly specifies the parties’ responsibilities are to ensure the contents of technology transfer contracts in compliance with the relevant laws (as form enacted by the MoST).
2. The original or certified copy of technology transfer contract (in case of unavailability of the contract in Vietnamese, a notarized or certified Vietnamese translation of that contract shall be submitted).
3. A copy of Investment Registration Certificate (or Business Registration Certificate) of the parties
4. A certificate of verifying the legal status of representatives of contracting parties
5. A certified copy of written approval of competent agency about making decision on investment applicable for transferred technology using the State budget.

Within 90 days as of signing of technology transfer contract, the party that is obliged to register the technology transfer contract shall submit an request for grant of certificate of technology transfer to the MoST. Within 05 working days from receiving the request in full, the MoST shall review and issue the certificate of registration of technology transfer contract, or refuse, or demand to supplement and summount the irregularities (if any) along with reasons in writing.

Bross & Partners has experience in drafting, negotiating and registering technology transfer contract. If you have specific needs, please contact: vinh@bross.vn; phone 0903 287 057, 84-4-3555 3466; Wechat: wxid_56evtn82p2vf22; Skype: vinh.bross.

Bross & Partners, a renowned and qualified Patent, Design, Trademark and Copyright agent of Vietnam, constantly ranked and recommended by the Managing Intellectual Property (MIP), World Trademark Review (WTR), Legal 500 Asia Pacific, AsiaLaw Profiles, Asia IP and Asian Legal Business, is providing clients all over the world with the reliable, affordable contentious and non-contentious IP services including enforcement, anti-counterfeiting,  litigation regarding trademark, trade name, industrial design, patent, copyright and domain name.