The Crucial Steps Before and After Signing a License Agreement for Technology Transfer

A license agreement for technology transfer is often treated as the finish line – once signed, many assume the hard work is done. In reality, the signing is more like the midpoint. The activities that happen before the ink dries and the collaboration that unfolds after are what determine whether a technology transfer actually succeeds. Under the Patents Act, 1970, licensing is the formal legal mechanism through which a patent owner permits another party to use a patented invention. But patents alone rarely tell the whole story – most commercially valuable technologies come bundled with sensitive know-how, proprietary processes, and tacit knowledge that must be carefully managed at every stage of the transfer.

What does technology transfer actually involve? 🔗

Technology transfer is the structured process of sharing technological knowledge – including patents, manufacturing methods, trade secrets, and technical expertise – from one entity to another. As WIPO describes it, this goes beyond simply handing over documents; it involves the transfer of skills, processes, and know-how so that the receiving party can effectively use and build upon the technology. In India, such transfers are governed by a web of laws including the Patents Act, 1970, the Copyright Act, 1957, the Companies Act, 2013, and FEMA regulations for cross-border transfers, as outlined by KS&D Law.

The license agreement is central to this process. It defines the rights granted, the royalty structure, territorial scope, exclusivity terms, and dispute resolution mechanisms. But to understand technology transfer fully, one must look at what happens on either side of that agreement.

Pre-agreement activities: laying the groundwork 🔗

Before any license agreement is signed, both parties must engage in a series of preparatory steps. These are not formalities – they are foundational. Skipping or rushing through them can lead to disputes, failed transfers, and costly litigation later.

Protecting know-how before disclosure 🔗

Know-how is the practical, experience-derived knowledge that makes a technology work in the real world. It is often more commercially valuable than the patent itself because it is harder to replicate without guidance. According to WIPO, know-how qualifies for trade secret protection when it is secret (not generally accessible), substantial, and identified in a sufficiently precise manner. Before any disclosure to a potential licensee, the licensor must take active steps to classify and secure this information.

The primary tool for this at the pre-agreement stage is a Non-Disclosure Agreement (NDA) or Confidentiality Agreement. As noted by the UC Davis Technology Transfer Office, confidentiality agreements establish a legal record for preserving intellectual property and are generally designed to protect the confidential information of both parties. A potential licensee typically needs access to some of the proprietary details to assess the technology’s commercial value – the NDA makes that disclosure legally safe.

The NDA should clearly define what constitutes confidential information, restrict who within the licensee’s organization can access it, specify how that information must be stored and marked, and set a reasonable duration for confidentiality obligations – even after the main agreement ends, as Lexology advises.

Preparing comprehensive know-how documents 🔗

Once confidentiality is secured, the licensor must prepare a structured package of know-how documentation. This is not a single document but a collection of technical materials that captures everything the licensee will need to reproduce and operate the technology. It typically includes manufacturing specifications, process flow diagrams, quality control parameters, raw material requirements, testing protocols, and operational guidelines.

The completeness of this documentation package directly affects the success of the transfer. A poorly documented know-how package leaves the licensee dependent on the licensor for every minor operational question, slows implementation, and creates grounds for later disputes about what was actually transferred. The agreement itself must also clearly distinguish between terms like “technology,” “intellectual property,” “know-how,” and “confidential information” – as Lexology notes, failure to define these precisely is a common source of conflict.

IP audit and due diligence 🔗

Before entering negotiations, the licensor should conduct an IP audit – a systematic review of all intellectual property associated with the technology. This includes confirming patent ownership, checking for any co-inventors or joint ownership situations (especially relevant when research originates from academic institutions), and verifying that no existing licenses or encumbrances would restrict the proposed transfer. The licensee, for their part, will typically conduct their own due diligence, including a commercialization plan, before committing to the agreement – a standard requirement in most institutional technology transfer processes.

In India, when technology is being transferred across borders, additional compliance checks under FEMA and the Department for Promotion of Industry and Internal Trade (DPIIT) guidelines are required, particularly for sectors that do not fall under the automatic approval route.

Negotiating the license terms 🔗

With documentation in hand and due diligence complete, the parties negotiate the core terms of the license: whether it will be exclusive or non-exclusive; the geographic territory; the duration; the royalty structure (lump sum, milestone payments, running royalties, or a combination); sublicensing rights; improvement clauses; and representations and warranties from both sides. As Mondaq notes, the licensor must also be mindful of competition law boundaries – certain restrictive clauses, such as prohibiting the licensee from using rival technology or fixing resale prices, can render a technology transfer agreement anticompetitive and void under the Competition Act, 2002.

Post-agreement activities: making the transfer real 🔗

Signing the license agreement transfers legal rights. Turning those rights into a functioning operation is an entirely different task – and it is where most of the practical work happens. The licensor’s obligations rarely end at signing.

Technology demonstration 🔗

The first major post-signing activity is a formal demonstration of the technology. This involves the licensor showing the licensee how the technology functions in practice – at the licensor’s facility, at a pilot plant, or sometimes through live virtual demonstration. The purpose is to bridge the gap between written documentation and operational reality. No matter how detailed the know-how package, certain aspects of a process – viscosity adjustments, machine calibration, reaction timing – are best understood by observation.

This demonstration phase also allows the licensee’s technical team to ask specific questions and identify gaps in their current infrastructure or expertise before large-scale implementation begins. In the pharmaceutical sector, for instance, India Law Offices notes that technology transfer requires a planned, organised strategy with data documentation that covers all stages of development, manufacturing, and quality control.

Design and engineering assistance 🔗

After the demonstration, the licensor typically provides design and engineering assistance to help the licensee adapt the technology to their specific production environment. This can include reviewing plant layouts, recommending equipment specifications, advising on utility requirements (water, power, ventilation), and helping design quality control workflows.

This step is particularly critical in manufacturing-intensive industries like chemicals, pharmaceuticals, and engineering components. The licensee’s facility may need modifications – or the licensee may need to commission entirely new infrastructure – to accommodate the transferred technology. The licensor’s engineering team works alongside the licensee during this phase, often as part of an agreed Statement of Work (SOW). Real-world technology transfer agreements, such as those in the electronics industry, formally define the level of engineering effort – covering project management, quality assurance, documentation, and deliverable acceptance – to avoid ambiguity about what support is included.

Training of personnel 🔗

Technology does not transfer to machines – it transfers to people. One of the most critical post-agreement obligations is the training of the licensee’s workforce. This includes training production engineers, quality control teams, supervisors, and sometimes procurement staff. Training can take the form of structured programs at the licensor’s facility, on-site workshops at the licensee’s plant, or a combination of both.

The adequacy of training is often a source of post-transfer disputes. Agreements should clearly specify the number of training sessions, the duration, the seniority levels of personnel to be trained, and whether the licensor is obligated to provide refresher training if key personnel change. Gordon Feinblatt LLC advises that confidentiality obligations must also extend to employees and agents who receive access to proprietary information during training – separate confidentiality agreements with individual employees may be warranted depending on the sensitivity of the technology.

Certification support 🔗

In many industries, the licensee cannot legally sell or distribute a product until it has received regulatory certification or quality approval from the relevant authority. In India, this might involve obtaining approval from bodies such as the Central Drugs Standard Control Organisation (CDSCO) for pharmaceuticals, the Bureau of Indian Standards (BIS) for industrial products, or sector-specific regulators. The licensor – having already obtained these certifications for their own operations – is uniquely positioned to assist the licensee through this process.

Certification support can include providing technical dossiers, test data, and evidence of equivalence between the licensor’s original product and the licensee’s manufactured version. This support is particularly valuable in regulated sectors where demonstrating that the transferred process produces a product of identical specification to the original is a formal regulatory requirement. The Rapacke Law Group notes that WHO guidelines for pharmaceutical technology transfer specifically require systematic procedures and documentation to advance knowledge through the transfer chain, including regulatory compliance at every stage.

Ongoing technical support and improvements 🔗

Even after the technology is operational and certified, the licensor’s involvement typically continues through agreed-upon technical support arrangements. This may include troubleshooting assistance, updates when the technology is improved, and access to new know-how generated by the licensor during the license term. The license agreement must expressly address whether such improvements are automatically included in the original license or require separate negotiation.

Origiin IP notes that technology transfer agreements reduce research and development costs for the licensee by allowing them to leverage existing technology, while generating revenue streams for the licensor through royalties and other financial arrangements. But those mutual benefits are only realized when the post-agreement support structure is properly designed and executed.

Why both phases must be treated seriously 🔗

The pre-agreement phase protects the licensor – it ensures that valuable know-how is disclosed only under legal protection, that the technology is clearly defined, and that the parties enter the agreement with a shared understanding of what is being transferred. The post-agreement phase protects both parties – it ensures that the technology is actually implemented correctly, that the licensee can produce a compliant product, and that the licensor’s reputation and IP interests are maintained through proper use.

In India, where technology transfer plays a growing role in sectors like pharmaceuticals, automotive components, electronics, and clean energy, getting these activities right is not just a legal exercise – it is a strategic one. As iPleaders notes, well-structured technology transfer agreements have driven major industrial collaborations in India, from Hero-Honda to Maruti-Suzuki, precisely because they went beyond the contract and built operational capability on both sides.

A license agreement, no matter how well-drafted, is only as effective as the activities that surround it. The real measure of a successful technology transfer is not the signature on the agreement – it is whether the receiving party can independently and competently operate the technology long after the licensor has stepped away.

What do you think? If a licensee receives the know-how documentation and engineering support but the transferred technology consistently fails to meet certification standards, where should legal responsibility lie – with the licensor’s documentation, the licensee’s implementation, or the certification support process? And given that know-how is often more commercially valuable than the patent itself, should Indian law provide explicit statutory protection for know-how transfer obligations, separate from existing trade secret frameworks?

References

1. https://ipindia.gov.in/writereaddata/Portal/IPOAct/1_31_1_patent-act-1970-11march2015.pdf
2. https://www.wipo.int/en/web/technology-transfer/agreements
3. https://ksandk.com/information-technology/technology-transfer-regulations-in-india/
4. https://www.wipo.int/en/web/trade-secrets/tradesecrets_faqs
5. https://research.ucdavis.edu/technology-transfer/researchers-faculty/tech-transfer-process-overview/
6. https://www.lexology.com/library/detail.aspx?g=85491622-1579-4478-8fec-c2b3a4632879
7. https://www.lexology.com/library/detail.aspx?g=85491622-1579-4478-8fec-b2b3a4632879
8. https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9862
9. https://www.mondaq.com/india/patent/1481930/transferring-technology-and-licensing
10. https://www.indialawoffices.com/legal-articles/licensing-agreement-for-technology-transfer-indian-pharma
11. https://www.sec.gov/Archives/edgar/data/1274991/000095013010001364/dex1012.htm
12. https://www.gfrlaw.com/what-we-do/insights/technology-transfer-agreements-don%E2%80%99t-be-amateur
13. https://arapackelaw.com/intellectual-property/technology-transfer/
14. https://origiin.com/technology-transfer-agreement-and-its-important-clauses/
15. https://blog.ipleaders.in/technology-transfer-agreement-legal-regime-india/