A technology transfer arrangement (TTA) refers to contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or the 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 software developed for mass market). The Intellectual Property Code regulates TTAs to prevent abusive terms that could harm the local licensee and the economy. The Code lists prohibited clauses, which must not appear in a TTA, including: those that restrict the licensee from adapting the technology to local conditions or from innovating; those requiring payment for patents or other IP after their expiration; those that restrict the use of the technology after the expiration of the arrangement; those requiring the licensee to buy raw materials or equipment exclusively from the licensor or a designated source (tie-in), except where necessary for quality; those that establish full or partial purchase options in favor of the licensor; those obligating the licensee to transfer improvements to the licensor for free; those requiring payment of royalties to the owners of patents for unused patents; those prohibiting the licensee from exporting the licensed product unless justified; those restricting research and development; those that limit the licensee's freedom to set prices; and those requiring the licensee to submit to foreign law and venue in cases of dispute. The Code likewise sets mandatory provisions, notably: that Philippine law shall govern the interpretation of the agreement, with venue for litigation in the place where the licensee has its principal office; that the licensor shall be free from liability arising from third-party suits over the technology; and that the licensee shall be free to use the technology after the expiration of the arrangement. The consequence of non-conformity is significant: TTAs that do not conform to the prohibited and mandatory provisions are unenforceable, unless an exemption is obtained from the Documentation, Information and Technology Transfer Bureau of IPOPHL. So a technology transfer arrangement must avoid the prohibited clauses and include the mandatory ones, or it is unenforceable absent an IPOPHL exemption.
What a TTA Is
A technology transfer arrangement covers contracts transferring systematic knowledge for manufacturing, processes, or services, including management contracts and the licensing of IP rights and software (except mass-market software).
Prohibited Clauses
- Restricting the licensee from adapting or innovating, or from research and development;
- Requiring payment for IP after expiration, or for unused patents;
- Tie-in purchases of materials/equipment from the licensor (except for quality);
- Obligating free transfer of improvements to the licensor;
- Export bans without justification, and limits on the licensee's pricing freedom; and
- Submitting to foreign law and venue.
Mandatory Provisions and the Sanction
A TTA must provide that Philippine law governs with venue at the licensee's principal office; that the licensor is free from liability for third-party suits; and that the licensee may use the technology after expiration. Non-conforming TTAs are UNENFORCEABLE unless exempted by IPOPHL.
Practical Takeaways
- Avoid the prohibited clauses (tie-ins, post-expiry royalties, foreign venue);
- Include the mandatory Philippine-law, liability, and post-expiry-use clauses;
- Non-conforming TTAs are unenforceable absent an IPOPHL exemption.
Frequently Asked Questions
What is a technology transfer arrangement? A contract involving the transfer of systematic knowledge for manufacturing a product, applying a process, or rendering a service, including management contracts and the licensing of intellectual property rights and software, except mass-market software.
What clauses are prohibited in a TTA? Among others, restricting adaptation or R&D, requiring payment after IP expiration or for unused patents, tie-in purchases from the licensor, free transfer of improvements, unjustified export bans, price-setting limits, and submission to foreign law and venue.
What must a TTA include? That Philippine law governs its interpretation with venue where the licensee has its principal office, that the licensor is free from liability for third-party suits over the technology, and that the licensee may use the technology after the arrangement expires.
What happens if a TTA does not comply? It is unenforceable, unless an exemption is obtained from the Documentation, Information and Technology Transfer Bureau of IPOPHL.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.