Why?


One of the ways to transform an R&D unit or company from a cost center into a profit center is to consider technology licensing options. This allows the R&D center to develop an additional income stream from its activities, without necessarily limiting the company’s own activities and business opportunities. More and more, companies are looking for innovations outside of their own markets, which generates opportunities for R&D-heavy industries to explore new opportunities.

The more functional terminology that is most often used is “technology transfer”, but I prefer “technology transactions” as this covers both the transfer of title and ownership on the one hand, and technology licensing on the other hand.

Process


When looking for potential technology transaction options, it is important to clearly define the process up-front, which generally includes:

  • the drafting of a memorandum that explains the motivations of the technology owner, the expectations, and a brief summary of the key contractual terms;
  • a due diligence process;
  • an NDA that is specifically aimed at these types of transactions;
  • when useful: a draft “testing agreement” under which terms a future licensee is able to test whether the licensed technology fits its needs; and
  • the negotiation and execution of a technology transfer or license agreement.

Competition / antitrust constraints


When drafting technology transfer or licensing agreements, it is important to review whether or not there would be any constraints from a competition or antitrust perspective. The EU, the US, Japan, and many other countries have developed specific legal frameworks aimed at avoiding anticompetitive behavior and effects of these types of transactions.

Tax incentives


Under the OECD BEPS initiative, licensing patents and innovative software may under certain circumstances allow companies to apply for a partial discount on corporate income taxes. Various countries, like Belgium, have already implemented “innovation income deduction” schemes to incentivize technology transactions.