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Technology Transfer Transactions
In addition to transferring patent rights, as is
the case with a pure patent sale, a technology transfer often
involves transferring designs, prototypes, trade secrets,
intellectual property, even technical staff. In its broadest
sense, "technology transfer' means the transfer of ideas,
information, methods, procedures, techniques, tools, or
technology from the developers to potential marketers or
customers.
Depending on the nature of the transaction, technology transfer deals
can be structured in a number of ways. Sometimes a startup
corporation is formed and this becomes the container for the
transferred assets. Sometimes, the vehicle for
commercialization is a division of an existing organization. The
transaction can involve an outright sale of assets or a license
with up-front fee and ongoin g royalties.
Typical Technology Sectors
Technology transfers often take place in sectors where channels to market are
highly specialized or very expensive to establish. Any type of
complex technology can form the subject of a technology transfer. However,
they are very common in the medical/biotech sector where drug and
medical device developers transfer their technologies to large
manufacturing organizations so that they can gain access to established
brands, retail and specialist distribution channels and other
specialized routes to market.
Typical Organizations
Corporations, government bodies, startup companies and a wide
range of organizations are involved in technology transfers.
These transactions are most commonly associated with the offices
of technology licensing (OTL's) or strategic licensing groups
(SLG's) found within research laboratories, universities and
some high-tech corporations.
The transferor is generally a research and development
organization that does not have appropriate routes to market for
the technology in question. The transferee is generally a
corporation or startup with access to markets via sales,
marketing and distribution channels that is looking to expand by
sourcing new
products and revenue streams. |
| Common Concerns |
R&D laboratories and universities all over the
world often receive government funding to support their
activities. Government funding usually comes with strings
attached. Technologies developed under these funding
arrangements are frequently encumbered--restrictions are placed
on the sale and transfer of the resulting patents and
intellectual property. Many government funding programs restrict
the way resulting technologies are sold or licensed. Some
restrict assets from being transferred to foreign entities.
Others restrict outright sale but allow for licensing. As a
result of these funding programs, many technology transferees
are concerned about working within the guidelines and the nature
of the restrictions can drive the way the technology transfer
transaction is structured.
Technology transfers are sometimes the source of human resource
concerns for both the transferor and the transferee. As some
technologies are highly dependent on a core team of
scientists, researchers or engineers, the transfer involves
transferring individuals as well as assets. The terms of
the transfer, recruitment, remuneration and other human resource
issues need to be carefully managed in these transactions.
Confidentiality is a concern for many organizations involved in
technology transfers, especially where patents and trade secrets
are concerned. As a result, confidentiality agreements are
carefully negotiated by the parties and restrictions placed on
how sensitive information can be used.
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Transaction Process |
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The process from initiation to final closing can take 9 months
or longer depending on the size and complexity of the
transaction.
- Business plan. From the perspective of the transferor,
the process starts with the identification of the technology
to be transferred, estimation of the market
opportunity and identification of the type of partner and
business structure most suitable for successful
commercialization of this particular technology. Tynax
recommends the transfer process for the most complex
transactions starts with the preparation of what can best be
described as a "business plan" as it analyzes the entire
opportunity, strategy as well as tactical implementation
matters.
- Marketing materials. There's little point in approaching
a potential transferee until the materials have a good
description of the technology to be transferred and the
resulting business opportunity. As these materials will be
studied by both technologists and financial analysts,
they need to justify the opportunity from both technical and
financial perspectives.
- Create & circulate anonymous Tynax listing. The
listing summarizing the opportunity is syndicated to Tynax
brokers and potential candidates worldwide via the website
exchange, email and other channels.
- Approach transferee candidates directly. A list of
potential partners is drawn up and targeted sales activities
are directed toward these organizations--directly or where
appropriate through their agents and intermediaries.
- Presentations, demonstrations, questions & answers. When
a candidate has been engaged and wishes to investigate the
opportunity, technical specifications are exchanged,
meetings are held and the question & answer process can go
on for several months.
- Terms negotiated. In reality, the parties are
negotiating from the moment they initiate discussions,
however, the final terms are usually clarified and confirmed
after the technical questions have been answered.
- Term sheet agreed. The general terms of the
agreement are noted and exchanged and provide the lawyers
with the framework from which they can prepare the final
documents.
- Due diligence process. Depending on the nature of the
transaction, due diligence can involve analysis of the
patents, the technology, the marketplace, validation of
entire business opportunity and clarification of title to
the assets to be transferred.
- Final closing. When the legal documents are agreed
and the due diligence process completed to the satisfaction
of both parties, the transaction can close.
- Technology transfer takes place. Following
transfer, the process of commercializing the technology can
commence.
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Key Negotiation Points |
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If a license is involved with royalty payments determined by
future sales revenues, the parties negotiate a variety of
licensing issues:
- Scope of the license. Exclusivity, duration,
enforcement rights and other points can be important.
- Initial license fee. The amount of fee payable
up-front.
- Ongoing royalty payments. The royalty calculation
can be based on sales revenues, units, profi
 ts or other
criteria.
- Reporting & audit rights. As it's usually
necessary to measure the sales or other figures in order to
assess royalties, the licensor must be able to have access
to this information from the licensee, and to verify the
accuracy of the reported numbers.
- See
Licensing Transactions for more on the terms of the
license.
Where the transfer involves the formation of a joint venture
or startup company, these transactions can involve intense negotiation on a
number of issues:
- The nature and structure of commercialization vehicle.
In some cases the technology is transferred into a new
corporation or LLC. In others it may be transferred to
an existing corporate subsidiary or division. Joint
ventures can be created and the form of vehicle is a
critical part of the negotiation.
- Equity shares. Where a joint venture or new
organization is formed, the ownership and structure of the
capitalization table can be the source of some discussion
between the parties.
- Board of directors. The structure and make-up of the
board of directors involve important issues of power and
control.
- Management team. Appointment of the CEO and other
officers often involve some debate.
- Technical team. In a technology transfer, the
recruitment or transfer of the developers or experts in the
field can be critical to success.
Many of these arrangements involve marketing support from
either the transferor or the parent company to the transferee,
or both. The parties can negotiate advertising, promotional
support as well as distribution, sales, marketing and business
development.
As you can see, there can be numerous and substantive issues
to negotiate in a technology transfer transaction.
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| Why Tynax? |
Tynax has the technical expertise, the marketing channels and the
transaction expertise to broker complex technology transfer
transactions. Startup incubators as well as large corporations use
the Tynax exchange to search for new technologies and opportunities.
Through its team members and its association with
ASTECS, the Association of
Technology Entrepreneurs, Tynax has extensive startup expertise, a
unique methodology for structuring and managing startup companies and
access to a large number of venture capital, angel and corporate
investors.
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