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How is technology transferred?

By: Coral Navarro

December 5, 2022

The 4th industrial revolution has brought game-changing technological developments across all industries. In this era, technology transfer acts as a value driver encouraging the entrepreneurial technology ecosystem to participate in innovation and create synergies to promote new developments.

Intangible assets are crucial in the knowledge economy; they generate broader business models and improve collaboration and advancement in technologies. Intellectual Property (IP) protection enhances the commercialization of technologies by providing a solid market penetration strategy, recognition, and comprehensive control over your competitive advantage.

The market success of inventions drives innovation and secures investment toward new developments. This is possible due to technology transfer, the process that allows the transfer of technology and knowledge, such as inventions and scientific discoveries, from one organization or institution to another, enabling the development of new services and purchasable goods. How does it work and how can you make it a reality?

The following steps provide a comprehensive view of the process.

The first step is to analyze the technology and its fields of application, followed by selecting the adequate transfer method and defining a market strategy for its deployment. Finally, agreements for technology exploitation are negotiated.

Analise the technology and its IP rights

To analyze the content of the technology given a technology transfer process we first need a clear identification of its IP rights. It is crucial to know our assets, how they are protected, and their actual value.  An economic legal and technical evaluation of the technology will help to identify all the related IP rights, to see if they are adequately protected, and to obtain an objective value for further commercialization.

For example, if we are planning on transferring a digital platform, is it duly protected? Are other protection methods needed? What is the objective value of the technology? The analysis must cover all these aspects and show the platform IP rights, such as copyright, trade secret, and trademark, and their status.

Choose the transfer method

Now we shall look at the methods and mechanisms or types of agreements to transfer technology and knowledge.

-Direct Assignment or Direct Transfer: Consists of the complete transfer of proprietary technology that implies loss of ownership of the technology.

-License or Franchise Agreement: Involves the transfer of IP rights under established conditions, such as scope, term, and territory, in exchange for an agreed royalty without losing the ownership.

-Product Sharing Agreement or Joint venture: The development uses resources and technologies from the owner and an industrial partner, to develop a production process and the consequent sharing of the outcomes.

-Turnkey Agreement: When a developer agrees to complete the technology, under an initial investment, so that it is ready for use when delivered to the buyer.

-Spin-off company:  Creation of a company through which knowledge and technology and IP Rights are transferred by the parties, and research results are commercially exploited by both.

-M&A: Technology can be transferred in M&A transactions like any other asset of the company.

The methods for technology transfer can be divided into vertical transfer or horizontal transfer.

The vertical transfer is the method from the initial development up to the market. It allows transferring R&D activities into a commercial environment. It is a process that often involves the management of IP rights and may also require obtaining funds and know-how for the technology to develop into finished goods or services. For example. This is usually internal technology transfer. A good example is the creation of a Spinoff company to develop the technology.

Whilst horizontal transfer applies to a particular technology that already exists but can be available for different services or new applications in products. It corresponds to external technology transfer, for example, it could consist of a license agreement for product distribution.

Market Strategy & Commercialization

The market strategy must be based on the market interest in the technology, finding all possible product-market fits. With these fields identified, for each, we must review relevant competitors, possible interested parties, and strategic points such as barriers to market entry, economic viability in the market, and if legal authorizations to operate are required. With a market strategy, the next step is to connect with potentially interested parties, such as possible licensees and collaborators interested in our technology.

Negotiations & Agreements

Finally, we will enter into negotiations with the potentially interested parties which will, fortunately, end up with an agreement for the transfer and the technology’s further exploitation.

Depending on the phase of development of the technology, the economic return will differ, as the holder of the technology will have more or less power of negotiation. This implies that the market value of the technology is not going to be the same at the initial state of development as when the technology is ready to offer newly developed products.

Also, the IP protection level will affect the outcome of the benefit agreed upon. This is due to the difference in the value that an adequately protected IP portfolio offers, considering the risks of non-protected assets or the need for investment to continue with non-reliable or non-profitable developments.

Technology transfer is an open door for innovation and the development of revolutionary ideas. It helps to know the real value of technology and IP rights by their commercialization, allowing inventions and scientific and technological discoveries to hit the market and become profitable.

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