Contracts of International Technology Transference

 

Contracts of International Technology Transference

By Stilwell Tu (Tu Dingwu)

International Technology Transference contracts are always as complex as they can be, and different contracts may be a little different in content, but to some extend, such contracts shall at least cover the following points:

Ⅰ.Definitions

All the technical terms used in such contract shall be defined as detailed, idiographic, and unambiguous as possible. The reason being that the two parties may have different understanding of those technical terms due to their difference in language and culture background. Therefore, good definitions are useful to make such contract performed smoothly.

Ⅱ.Content and Scope of the Licensing

This part shall stipulate: (i) the type of rights licensed, (ii) scope of the licensing in territory, and (iii) the nature of licensing.

Sample

Subject to the terms and conditions hereinafter set forth, Licensor hereby grants to Licensee the right to:  

(a)Use the Trademark, on a non-exclusive basis, in association with manufacturing in and selling and distributing in and elsewhere in the world the products and services bearing the Trademark listed in the attached Schedule "A", which is incorporated herein by reference, as it may be amended from time to time, (said products and services bearing the Trademark or as to which the Trademark is affixed or in connection with which the Trademark is used hereinafter collectively referred to as the “Product(s).”  A list of the relevant trademark and service mark registrations and applications for registration of the Trademark, obtained by Licensor at its own expense, and as it may be amended from time to time, is attached hereto as Schedule "B" and is incorporated herein by reference.

(b) Use the Trademark in Licensee’s corporate, divisional and trading names.

(c) Benefit by Licensor’s goodwill and reputation symbolized by the Trademark.

Notwithstanding anything in this Agreement, expressed or implied, to the contrary:       

(a) Licensee shall not have the right to use the Trademark in connection with any products manufactured, distributed or sold to or through any competitor of Licensor.

(b)Licensee may not assign its rights or obligations under this Agreement to any other person without the express prior written approval of Licensor.  Licensor, however, shall have the right to assign its rights under this Agreement.

(c)Any and all use of the Trademark by Licensee inures to the benefit of Licensor and Licensee acknowledges that Licensor has all right, title and interest to the Trademark and reserves all rights thereto, specifically including, without limitation, all rights to license or authorize use of the Trademark.

Ⅲ.Terms of Price

The typical method to determine the price of licensing is LSLP principle.

Sample

Licensee shall pay Licensor an amount equal to [two] percent (2%) of the Net Sales Price of the Products sold by Licensee using the Trademark.

It is specifically agreed that:  

(a)the Net Sales Price shall be the gross selling price of each Product that Licensee sells, less sales discounts, returns and allowances, packing, freight and insurance charges that Licensee incurs in connection with the sale thereof, as indicated on the relevant invoices and less V.A.T.

(b) the first payment hereunder will be due and payable on [April 30], 2004 with respect to fees for sales of all Products on or before [May 30], 2004.  All subsequent payments hereunder are due and payable thirty (30) days after the last day of each accounting quarter with respect to fees for sales during such quarter.

(c) all taxes, including but not limited to income taxes, duties, fees and dues, including interest and penalties, and all other charges, whether or not in effect at the date first written above, which arise out of or by virtue of this Agreement or the operation of Licensee will be borne by, and be the responsibility of, the Party on whom legally levied.  For purposes of this Section 4(c), V.A.T., if any, applicable to the fee payments shall be considered levied on Licensee.  In addition, withholding taxes, if any, shall be considered levied on the recipient of any payment from the other Party, but shall be remitted to the applicable governmental authority by the payor and deducted from the amount otherwise payable to the recipient of such payment. The payor shall notify the recipient of any such withholding taxes, if applicable, and shall promptly furnish to the recipient a receipt evidencing each such withholding tax payment in a form sufficient to enable the recipient to obtain any tax credit to which it may be entitled under the laws of the country of its incorporation.

(d)all payments under this Agreement shall be in U.S. Dollars converted from Ramnimbi at the actual rate of exchange in effect published by the People’s Bank of China on the last day of the period for which payment is being made or in such other manner as Licensor may designate by due notice.

(e) all payments hereunder shall be made payable to Licensor at its principal place of business in Auburn, Indiana, or to such other person or at such other address as Licensor hereinafter may designate by due notice.

Ⅳ. Terms of Payment

Terms of payment are to cover currency, methods of payment, paying bank, times and detailed time of effecting payment. In practice, there are three forms of terms of payment: (i) paying once for ado, (ii) paying the agreed proportion deducted from the licensee’ profit, and (iii) paying both the accidence fee and the agreed proportion deducted form the licensee’s profit. Of the three forms, paying once for ado will make the licensee at great risk, whilst paying the agreed proportion deducted from the licensee’ profit will make the licensor tardigrade in getting benefit. So the most popular form is paying both the accidence fee and the agreed proportion deducted form the licensee’s profit.

Sample

Licensee will pay the royalties specified in Section 5.1 to Licensor within thirty (30) days after the end of each quarter calendar year for each Licensed Product which is shipped or invoiced by Licensee during such quarter calendar year.

Licensee will pay to Licensor all other amounts which Licensee is obligated to pay under this Agreement within thirty (30) days after Licensor submits its invoice for such amounts.

Licensee will make all payments to Licensor under this Agreement in United States Dollars.  Licensee will make all payments to Licensor hereunder by wire transfer to the bank account designated by Licensor in writing from time to time.

Ⅴ. Delivery of Technical Data

Delivering technical data is one of the main obligations of the licensor. Such article shall stipulate the content of the delivered technical data, time, place and method of delivering, risk transference of the delivered technical data, and ways of handling the problem when the technical data are not delivered and/or when there are defects in the delivered technical data.

Sample

Upon Licensee’s request, Licensor will promptly furnish to Licensee one (1) set of the Licensor Technical Information documents specified in Attachment A, including one set of documents specific to each Transferred Product currently being manufactured and sold by Licensor which the Licensee has firm plans to manufacture and sell.

If Licensor makes a change to a Licensor Technical Information document applicable to the Transferred Product which is being made or planned for production by Licensee, Licensor will deliver to Licensee one (1) copy of the changed document to enable Licensee to implement such change.

All documents which Licensor furnishes under this Article 3 will be in the English language.  All measurements in such documents will conform to the measurement system used in the original document prepared by or for Licensor.

Ⅵ. Improvement & Development of the Licensed Technology

This article often appears in the patent or know-how licensing contracts. The purpose of this article is to stipulate the ownership of the improvement and/or development of the licensed technology. In the sense of fairness, the party who improved and/or developed the licensed technology shall have the improved and/or developed part of the licensed technology. In practice, the article often stipulates that the two parties can use, free of charge, the improved and/or developed part of the licensed technology in the principle of reciprocity.

Sample

Licensee will promptly notify Licensor of any improvement in a Licensed Product (including improvements in product design and improvements in manufacturing procedures) which is based on Licensor Technical Information or a work of authorship protected by Licensor Copyright and which is developed by Licensee during the term of this Agreement, whether or not patentable.  Upon Licensor’s written request, Licensee will furnish detailed information regarding any such improvement to Licensor.

Licensee does hereby grant to Licensor a fully paid-up, permanent, irrevocable, nonexclusive, royalty-free right and license:(i) to use each improvement described in Section 12.1 and to practice the invention of any patent issued in respect of such improvement to make, have made, use, and sell any product; and(ii) to sublicense any other Affiliate of Licensor to use any such improvement and practice the invention of any such patent as stated in Section 12.2(a) above.

Ⅶ. Confidentiality

This article is of great significance in know-how licensing contracts, under which, keeping the licensed know-how in strict confidence is always the main contractual obligation of the licensee. Of course, if the contract is an exclusively licensing contract, the licensor is also liable for keeping the licensed know-how in strict confidence. The article of confidentiality usually covers the scope, term and method of confidentiality, and the penalty of breaching of such obligation.

Sample

During the term of this Agreement and thereafter, Licensee will not use or permit the use of any Licensor Technical Information for any purpose not authorized by this Agreement and will not copy or permit the copying of any work of authorship protected by a Licensor Copyright for any purpose not authorized by this Agreement.  Subject to the provisions of Section 9.2, during the term of this Agreement and thereafter, Licensee will hold in confidence, and will not disclose or communicate or permit to be disclosed or communicated to any other person, any Licensor Technical Information which is furnished to Licensee under this Agreement.  Licensee will also take or cause to be taken all reasonable precautions to prevent disclosure of Licensor Technical Information to third persons.

Licensee may disclose Licensor Technical Information to its employees, agents, and suppliers on a confidential basis to the extent that each such disclosure is reasonably necessary for purposes of manufacturing and selling Licensed Products or procuring goods and services required in connection therewith.  Before disclosing Licensor Technical Information to its Employees, agents and suppliers, however, Licensee will obligate such Employees, agents and suppliers by contract, in form and substance satisfactory to Licensor, to maintain the Licensor Technical Information in confidence.  Licensee will not have any obligation to hold in confidence any Licensor Technical Information which: (i) becomes publicly known or available by publication, commercial use or otherwise without breach of this Agreement by Licensee; (ii)    is known by Licensee at the time of receiving such Licensor Technical Information from Licensor; or (iii) is subsequently rightfully furnished to Licensee without a restriction on disclosure by a party having the legal right to make such an unrestricted disclosure.

If this Agreement expires or is terminated by reason of Licensee’s default or for any other reason, Licensee promptly will discontinue, and will cause its Employees, agents and suppliers to discontinue, the use of the Licensor Technical Information and will return, and cause its agents and suppliers to return, to Licensor, or Licensor’s designee, all documents or other tangible items, including all copies, which describe or incorporate the Licensor Technical Information and which were furnished to or otherwise came into the possession of Licensee during the term of this Agreement, and all notes, copies, facsimiles, summaries, and other documents or materials containing information relating to the Licensor Technical Information.

Of course, other clauses commonly seen in international commercial contracts shall be covered as well. Those clauses shall include, but not limited to, liabilities of breaching of the contract, governing law, language, counterparts, notice, modification of the contract, effective date, term of the contract, disputes resolution, and etc.