Transfer of Technology - An Indian Perspective
Saurabh Anand
Senior Associate
K & S Partners

Technology transfer is the process of transferring scientific findings, knowledge, manufacturingprocess, technologies, processes etc. from one organization to another for the purpose of further development and commercialization. This article discusses the Indian scenario concerning transfer of technology.

One of the most acceptable and unambiguous definitions of "Technology Transfer" or in other words "Transfer of Technology" is the process by which "commercial technology" is disseminated from one industry to another, and/or among different economies. In common parlance, the said terms are often misconstrued to be limited only to the transfer of a patent with respect to a particular product, which is patented. Meaning thereby, the product of the technology is often fused with the technology itself. However, in actual commercial terms, technology is often considered to be a blueprint, which once obtained would promise better commercial output and it largely depends upon the industry. For instance, in mechanical industries, transfer of technology might include transfer of an end product, involving multiple IP rights.

However, for pharmaceutical industries, transfer of technology might include transfer of know-how of a process to obtain a product, which will not always be a fullfledged transfer of IP rights, as certain IP rights will be developed upon development of that particular product. Thus, getting a patent is not always a pre-requisite for initiating or rather indulging in a "Technology Transfer" arrangement. This dynamic model often creates multiple hurdles for a transferor to enter into such transactions, due to the vulnerability of the "technology" at the whims and fancies of the transferee. This is often observed in cases of transborder transactions, wherein the transferor who wishes to expand its footprint in a particular country, is hesitant to enter into such kind of arrangements due to the lack of confidence in the laws governing the importing country. However, at the same time such transfer of technology is often required to give a technological as well as economical boost to the importing country in an era wherein technology is changing overnight and the thrust of adopting to changing technologies is also increasing at the same pace.

At this juncture, the laws of the importing country play a vital role in preparing a ground to facilitate such transactions. Undoubtedly, strong IP laws play a crucial role for any transferor to prefer a particular jurisdiction over another, but simultaneously enforcement of such laws in order to protect the IP becomes the game changer. For instance, mere mention of provisions for remedies in cases of infringement would no doubt portray a positive image of the importing country and at the same time if such statutory provisions have actually been implemented by way of granting injunction or directing to pay for damages and so on, it definitely acts as a springboard for the transferor to actually start investing in such importing countries. Section 83 of the Indian Patents Act, 1970 which is in consonance with Article 7 of the TRIPS Agreement recognises this concept as under: General principles applicable to working of patented inventions. -

Without prejudice to the other provisions contained in this Act, in exercising the powers conferred by this Chapter, regard shall be had to the following general considerations, namely:-
  • that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;
  • that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;
  • that the protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;
Thus, the Indian Patents Act, recognises the twin-benefit of Technology Transfer, that is, encouragement of innovation as well as protection and enforcement of patent rights. In addition to IP laws, the strength of ancillary laws like contractual laws, regulatory laws and so on, play a critical role in aiding such transactions. Further, various Government initiatives like FDI, tax exemptions, fast approvals, digitalization and the like are other factors which provides the impetus for Transfer to Technology. For instance, the pharmaceutical sector is one of the key 25 sectors identified by the Government of India under the ambitious 'Make in India' initiative, which is likely to provide the necessary momentum to the sector in order to achieve its true potential. Following this, is the nod by the Union Cabinet for FDI up to 100 percent under the automatic route sector for manufacturing of medical devices subject to certain conditions. Further, the implementation of the Goods and Services Tax (GST) is expected to be a gamechanger for the Indian Pharmaceuticals industry as it will lead to tax-neutral interstate transactions.

Till date, the Government of India has undoubtedly taken multiples initiatives towards improvements in the pharmaceutical sector however, they are mainly restricted to just that and do not focus on the concept of technology transfer to reduce the amount of input in such an industry. For instance, in the Union Budget 2017-18, the Department of Biotechnology (DBT) received Rs.2,222.11 crore, an increase of 22 per cent, to continue implementing the Department's National Biotech Strategy. Later on, in an attempt to revive the active pharmaceutical ingredient (API) and the bulk drug market in India, the Government of India has proposed peak customs duty on the importing of APIs and also plans to establish mega drug parks to promote domestic production. It has also unveiled 'Pharma Vision 2020' aimed at making India a global leader in end -to-end drug manufacture. Approval time for new facilities has been reduced simultaneously to boost investments. The Government has also introduced systems such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority in order to deal with the issue of affordability and availability of medicines. Against this backdrop, it is imperative to note that the concept of technology transfer can greatly help in reducing the cost of R & D in this sector if the government also provides incentives for the same especially since there has been a six-fold increase in the cost of R & D in this sector since 2010.

The high cost of development and rapid obsolescence may prevent the transfer of technology and the patent holder may prefer direct exploitation or import of products over transferring the technology or know-how. Fear of competition also dissuades the transfer of technology or demands a high royalty for the transfer, but huge royalties may have a negative impact on the expenditure on R & D. In the case of India in the pre'70s era, technology transfer by the big MNCs did not support indigenous technological abilities, although post '70s, a large number of small and medium size firms have also been transferring their drug technologies to India, thus encouraging an atmosphere of competition in technology transfer.

The Ministry of Science and Technology has issued the guidelines "Instructions for Technology Transfer and Intellectual Property Rights", which would help in enhancing the motivation of scientists, research institutions and universities in projects funded by the Department of Science and Technology, Department of Biotechnology, Department of Scientific and Industrial Research and Department of Ocean Development. The salient features of the guidelines are limited to ownership, commercial exploitation, royalty, norms for private industry, royalty free licenses for the government as well as patent facilitating funds.

India at this point has an immense potential for becoming a booming ground to facilitate and nurture the benefits of technology transfer. However, there exists a dire need to address this with guidelines to govern the same. The goals of technology transfer will only truly be met and be expected to cater to the needs of the public if there is a greater involvement of the Government. Despite the above, Government of India is on the verge of opening Technology Transfer Offices, universities, institutions that will be funded by the Central Government and will act as mechanisms for transferring or exporting the research conducted and its outcome to the desired place. It is pertinent to note that some Indian institutes such as the National Chemical Laboratory, Pune, CSIR-CDR, have already been commercializing their research and havebeen successful in entering into technology transfer agreements vide which they have been licensed as technologies to industry.

It is only with adequate legal framework, guidelines and an increase of awareness that the issues of technology transfer can be encouraged. Although a number of Indian firms have been the receivers, a greater need of boosting this within the domestic markets is the need of the hour.

Rosegger. G "The Economics of Production and Innovation: An Industrial Perspective" (Oxford: Butterworth-Heinemann Ltd), 1996, p. 155-156