With the immense growth of the pharmaceutical industry in the past few years, technology and knowledge transfer is but a natural effect. Several research-based pharma companies have leveraged technology transfer, local scientific and medical expertise to enhance a nation’s capacity to access novel medicinal products and improve health systems.
Technology transfer covers the complex value chain linking research to its eventual societal deployment. It commences with discovery of novel technologies at research centres, followed by disclosure, evaluation, and protection of the technologies. Next move includes marketing, potential licensing agreements and the development of products based on technical inventions. In the following article, we shall focus solely on the licensing agreements involved in this process.
| The handling of a technology transfer can greatly impact the success of a product’s development and, ultimately, of its commercial manufacturing. |
What is Technology Transfer?
World Health Organisation defines Technology Transfer as a logical procedure that controls the transfer of any process together with its documentation and professional expertise between development and manufacture or between manufacture sites. To put it simply, “Technology transfer” is the process by which existing knowledge, facilities or capabilities are exploited for fulfilling public or private needs. It helps build partnerships between developer and commercial manufacturer of a drug product.
It is a systematic procedure that is followed to pass the documented knowledge and experience gained during development and or commercialization to an appropriate, responsible, and authorised party. Technology transfer embodies both the transfer of documentation and the demonstrated ability of the receiving unit (RU) to effectively perform the critical elements of the transferred technology.
The development and transfer of knowledge and technology are critical to the success of the pharmaceutical industry. The transfer of technology is considered both fundamental and significant to the drug discovery and development process for any new medicinal entity. It is imperative to elucidate necessary information for technology transfer from Research & Development to the commercial manufacturer or another Research team collaborating on a common drug substance.
Technology transfer usually takes place between universities, businesses, and governments, either formally or informally to share skills, knowledge, technologies, manufacturing methods. This form of knowledge transfer helps ensure that scientific and technological developments are available to a wider range of users who can then help develop or market it. This transfer can occur horizontally across different areas or vertically by moving technologies, for example, from university research centres to contract-based researchers.
Purpose of a License Agreement
A license agreement, per Indian intellectual property law, grants permission to a third party to utilise or collaborate on an invention, a drug product in this case. Due to its confidential and sensitive nature, research in pharmaceuticals fall under the category of patents in IPR.
Patents are governed by Indian Patent Act, 1970 and it is necessary to have a license in the written form with respect to any patented product. Other than the black letter of law, both parties of a licensing agreement would only benefit from such an agreement. It ensures a standardized technology transfer planning with a secure procedure, details of knowledge transfer, and an established common language to smoothen the transfer process. In the event of any clashes with respect to the use of the knowledge transfer, the licensing agreement safeguards both parties from misuse of drug substance/drug product or wrongful accusations with respect to the same.
A technology transfer agreement can be between parties within India (Domestic), or between India and another country (International). Businesses that enter a Technology Transfer Agreement (Tech Transfer Agreement) typically have a licensor-licensee relationship but in India, they additionally enter a collaboration or joint venture (equity participation) agreement too.
| Technology transfer is a critical step in any drug development program, occurring for various reasons and at different development stages. |
Methods of Tech Transfer
There are primarily two methods of technology transfer classified by Mansfield:
Vertical Transfer
Vertical transfer of technology occurs when a transfer occurs between entities at different production or value chain stages. It usually occurs from a more advanced entity to a less advanced one, such as from the technology owner or innovator to the licensee. Some common examples of vertical transfer are:
- Transfer of technology from a research institute to a private company for commercialisation.
- Transfer of technology from a multinational corporation to a local firm.
- Transfer of technology from a parent company to its subsidiary.
Horizontal Transfer
Horizontal transfer of technology occurs when a transfer occurs between entities operating at the same or similar production or value chain levels. It may possibly be a technology transfer between competitors within the same sector or industry. Some common examples of horizontal transfer are:
- Sharing best practices between competing firms in the same industry.
- Research and development collaboration between companies operating in the same field.
- Acquiring intellectual property or technology from a competitor to enhance product offerings.
Importance of a Tech Transfer Agreement
In today's economy, a technology transfer agreement has become an essential factor for innovation and growth. It supports exchanges of knowledge and innovation between universities, enterprises, regional and national economies, as well as society in general, to benefit both parties. Technology Transfer enables organisations to cooperate, innovate and commercialise their ideas through facilitating the transfer and licensing of a wide range of IPRs enabling them to drive Economic Growth and exchange resources. Ultimately, a well-structured Tech Transfer Agreement is essential for various reasons, including:
Promoting Business Relationship
Universities significantly benefit from tech transfer drives. It enhances their research capacities and lifts the standing of the institution, its researchers, and their advancements. This, thus, draws in top workforce ability and improves the probability of getting significant award subsidizing.
Providing the flexibility of coverage of different types of IP
Technology transfer is crucial in providing the flexibility to cover different types of intellectual property (IP). It enables organisations to leverage various IP rights for commercial and competitive advantage. By facilitating the transfer and licensing of different types of IP rights, technology transfer broadens the possibilities for collaboration, innovation, and commercialisation.
Addressing trans-national issues
Technology transfer plays a crucial role in developing many developing countries, primarily because most rely on foreign countries for new product knowledge. Limited resources lead to these nations often acquiring technology from international markets. Without adequate technological development, a nation may lag and miss out on economic growth and competitiveness opportunities. Therefore, technology transfer becomes a means for developing countries to bridge this gap and catch up with more technologically advanced nations.
Essential Elements of Technology Transfer Agreement
While the specific terms and conditions can vary depending on the context and the parties involved, there are some common elements such as the following:
Parties Involved – Licensee and Licensor
This acts as the opening clause of the technology transfer agreement and includes details about the parties that have entered into this agreement. The licensor is the person transferring the technology, while the licensee is the person receiving the transferred technology. The clause must include details such as the officially designated names, registered addresses, laws under which the company has been incorporated, authority for entering into the agreement, relevant contact information, etc.
Description of the Intellectual Property being Transferred
The description clause is also known as the clause which provides the purpose of the technology transfer agreement. It explains why the agreement is entered into. Within this clause, the parties are expected to provide a clear and detailed description of the intellectual property or technology being transferred, including the relevant details of the patents, copyrights, trademarks, trade secrets, know-how, software, etc. The parties must have a common understanding of technology to avoid future conflicts.
Grant License (Limits to the right granted)
This is the most critical part of the Tech Transfer Agreement. Through this clause, the licensee obtains permission to use the technology. It is important to draft this clause unambiguously, leaving no space for doubts or questions concerning the rights granted.
Royalties and Payment Terms
This clause details the mode of royalty payment, along with the percentage of the net sales or exports that shall be received as royalty by the licensor from the licensee. Other important information may be – payment structures, additional costs or expenses related to technology transfer, etc.
Confidentiality and Non-Disclosure
This clause details the confidential information the licensor shares with the licensee. That the technology and intellectual property include important information related to the manufacture, use, and development of the technology, it becomes essential for the licensor to incorporate a strong confidentiality or non-disclosure clause to prevent any infringement of sensitive information.
Limitation of Liability
An important clause, it defines the limitations of the agreement and addresses situations that make the licensee liable. It also addresses those situations or actions for which the parties cannot be held liable to pay damages, which helps limit the potential financial liabilities of the parties in case of breaches. It is crucial to consider the particularities of the technology and the jurisdiction of the technology transfer, considering the existence of specific enforceability limitations within certain jurisdictions.
Conclusion
According to Indian Government reports, India is 3rd largest market for APIs globally, is the largest provider of generic drugs, India’s pharmaceutical sector forms a major component of the country’s foreign trade, with attractive avenues and opportunities for investors, making it a hot bed for collaboration on technology knowledge transfer. A tightly drafted Tech Transfer Agreement would maximise the benefits of the knowledge transfer and add fairly to the economic growth of a nation.
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