TECHNOLOGY TRANSFER

Under the Law on Technology Transfer, “technology” is defined as “solutions, processes and know-how, which may or may not be associated with tools and means, to turn resources into products.” This definition may prove difficult to implement in practice.
The term "transfer of technology" refers to either the transfer of the right to own the technology or the licensing/sublicensing of the right to use the technology either by an individual or a corporation.


TECHNOLOGY TRANSFER

(April 2007 Update)


Technology transfer in Vietnam is currently regulated by Decree 11 detailing regulations on technology transfer dated 2 February 2005 (“Decree 11”). Decree 11 will be replaced by the newly enacted Law on Technology Transfer on 1 July 2007.

1. General Principles

Technology is not defined in Decree 11. However, the following list of technologies and objects related to technology are subject to Vietnamese laws on technology transfer:

*

Technological content belonging or attached to an object of industrial property permitted for transfer within a protected time period (including inventions, utility solutions, industrial designs, layout designs of integrated circuit and trade marks - see Chapter V.1);
*

Technological knowledge and know-how, technical solutions, technological processes, technical designs and drawings, formula, parameters, layouts, software attached to technology and other technological data;
*

Solutions for rationalisation of production or technological innovation;
*

Performance of services supporting the transfers (for example, services which enable the transferee to obtain technological capability to ensure the necessary standards of quality guaranteed in the original contract);
*

Equipment and facilities accompanying one or more of the transfers mentioned above;
*

Grant of franchise (defined as a "grant of a special commercial right") which involves a transfer of technology.

Under the Law on Technology Transfer, “technology” is defined as “solutions, processes and know-how, which may or may not be associated with tools and means, to turn resources into products.” This definition may prove difficult to implement in practice.

The term "transfer of technology" refers to either the transfer of the right to own the technology or the licensing/sublicensing of the right to use the technology either by an individual or a corporation.

In cases where objects of the technology transfer have already been protected as objects of industrial property, the legal requirements for the transfer of ownership rights and the right to use such objects must be satisfied before the transfer of technology can take place. The actual transfer of such industrial property rights is subject to intellectual property regulations and falls outside the ambit of the technology transfer regulations.

Under Decree 11, transfer of the following technologies is prohibited:

*

technologies which do not meet safety, sanitation, health or environmental standards;
*

technologies which adversely affect cultural, security or social safety;
*

technologies which are not technically, socially, or economically efficient; and
*

defence and security technologies generally prohibited by a competent authority.

The Law on Technology Transfer prohibits transfer of technologies which:

*

fail to satisfy the requirements stipulated by the laws on occupational safety, labour hygiene, protection of human health, and protection of natural resources and the environment;
*

create products causing harm to socio-economic development and having an adverse impact on national defence and security or social order and safety.
*

are not permitted to be transferred pursuant to a provision in an international treaty of which the Socialist Republic of Vietnam is a member; or
*

are on the list of State secrets, unless a provision of law provides otherwise.

2. The Technology Transfer Contract (“TTC”)

The contract is the basis for performance, ensuring the legality of the transfer of technology, and setting payments and methods to resolve disputes.

Decree 11

Under Decree 11, a TTC must be in writing and include the following:

*

The name and form of technology;
*

Name and address of the parties involved; and the names and positions of the respective representatives of the parties;
*

Objectives, contents, scope, characteristics, quality and results of the technology transfer;
*

When technology is accompanied by training, this training must be detailed. Including: content, trainers, duration, and place of training. The TTC must also specify that a certificate of completion will be awarded to those successfully completing training;
*

Powers and responsibilities of the parties in relation to transfers, assurances, guarantees, and environmental protections regarding the technology;
*

Price and method of payment;
*

Term of the TTC; and
*

Applicable law.

The TTC and accompanying documents must be in Vietnamese. When a party to the TTC is foreign the TTC may also be made in a commonly used foreign language. Both versions of the TTC are equally valid, but only the Vietnamese version is required by law.

To be included in separate parts of the TTC

*

When transferring more than one aspect of technology, these aspects must be included in a single contract.
*

Machinery, equipment, and technical facilities must be listed in the contract when accompanying the technology transferred.
*

A contract transferring a production line, equipment package, or an investment project with a provision for technology transfer must include a separate part of the contract specifically dealing with matters regarding the transfer of technology.
*

The transfer of rights to own or use industrial property must be made in a separate part of the TTC.

Law on Technology Transfer

Under the Law on Technology Transfer, the form of permissible TTAs has been broadened. TTAs can be agreed in a written contract, or other equivalent forms, such as telegram, telex, fax, data messages and other forms as permitted by law. The parties are also allowed to choose the language of the TTA. In the case of a transaction in Vietnam, a Vietnamese version is required. The Vietnamese and foreign language versions are of equal validity.

3. Duration of contract

Decree 11

The term of the TTC agreed upon by the parties shall not exceed 7 years (except for the objects of industrial property). In certain circumstances the relevant authorities will permit a longer term of up to 10 years. These circumstances are if the technology is of the utmost advanced nature and the transferor pledges to continue transferring improvements during the term; if the technology is of great significance to socio-economic development; or if the technology's product is of a new generation in the world.
In practice, the competent authorities may consider extending for a further 3 years upon expiry of the maximum 7 year term without assessing whether the transferred technology is of an advanced nature.

The law is silent as to whether parties to the TTC could apply for an extension after 7 years (or 10 years) in case of licensing of technology (as opposed to the sale of technology).

Law on Technology Transfer

Article 15.7 of the Law on Technology Transfer implies that the parties to a TTA can agree on the term of the TTA. Officials have confirmed that the Government does not intend to impose a maximum term on TTAs.

4. Governing Law

With effect from 1 January 2006, the new Civil Code allows the choice of foreign governing law for the TTC which involves a foreign transferor or a foreign transferee. However, in practice, the MOST tends to follow Decree 11, which provides guidance on technology transfer under the old Civil Code and specifies that Vietnamese governing law is mandatory (particularly for the purpose of registration).

Under the Law on Technology Transfer, the parties are allowed to agree on a foreign governing law together with other terms and conditions, as long as they are not contrary to Vietnamese law.

5. Registration

Decree 11

MOST is responsible for the registration of technology transfer contracts transferring technology from foreign jurisdictions into Vietnam with a payment exceeding VND1 billion (approx. US$62,500) and technology transfer contracts transferring technology from Vietnam to foreign jurisdictions. Provincial departments of science and technology (subordinate to the central government) are responsible for the registration of technology transfer contracts with a total payment value of less than VND one billion (approx. US$62,500) from foreign jurisdictions, and technology transfer contracts for domestic technology with a value in excess of VND500 million (approx. US$31,250).

Transfers of technology are subject to a registration procedure in the following circumstances:

1.

the transfer of foreign technology into Vietnam;
2.

the transfer of Vietnamese technology outside of Vietnam; and
3.

domestic transfers of technology within Vietnam where the value of the technology transfer contract exceeds VND500 million (approx. US$31,250).

Registration must take place within 90 days of executing the technology transfer contract. The contract shall be deemed to have been approved and become effective if MOST fails to make a written request for any amendment or addition within 15 working days of receipt of a technology transfer certificate. MOST will issue a certificate of registration in each case but it is not clear whether this certificate of registration is a pre-requisite to the validity of the technology transfer contract if MOST fails to respond within the prescribed 15-day period.

Where technology is transferred as part of the capital contribution in a foreign invested project, the technology transfer contract must be included in the investment certificate application file when submitted to the investment licensing authorities. MOST must consider and approve the technology transfer contract before an investment certificate is issued although registration of the contract need not take place until 18 months after the licence is issued.

Law on Technology Transfer

The Law requires that “restricted” technology transfers are subject to acceptance by the technology management authority (the “Technology Authority”) before the TTA is entered into by the parties, and then approved after the TTA’s execution. “Restricted” technologies include, inter alia, “national interest”-related technologies and technologies affecting human health or the environment. The Technology Authority has broad discretion to approve or refuse the TTA.

The Law provides the right (not obligation) of the parties to register on a voluntary basis with respect to non-conditional TTAs “in order to set the ground [for the parties] to enjoy incentives given in this Law and other relevant laws.” It would seem prudent for parties to register TTAs in cases where they want to enjoy incentives under the Law on Technology Transfer and other laws.

6. Price

Decree 11

The parties to a TTC may agree on the price where the transferee does not use State funds (or State funds form part of a minority share in the transferee).

Where the transferee does use State funds, the TTC must be submitted to the competent body making investment decisions for approval. Where the transferee uses numerous different sources of funding and items or parts of the project cannot be separated, then the TTC will only need submission to the competent body if State funds comprise 50% or more. Different interpretations could occur as to whether a joint venture project of a foreign partner with an SOE which owns 50% or more equity, is subject to this requirement.

When a transferee uses State funds among other sources of funding and its charter requires annual confirmation of revenue and expenses and the annual business plan must be unanimously approved by the board of management, then the transferee's board must unanimously approve the price and method of payment before registration.
Where the price for a technology transfer is agreed between parties to the transfer, common pricing strategies used are as follows:

*

a percentage of net selling price or a fixed amount per product;
*

a percentage of net revenue or of pre-tax profits;
*

a lump sum or installment payments; or
*

a combination of the above methods, or another agreed method.

Article 22.1 of the Law on Technology Transfer states that the parties are free to agree on the payment price for the technology transfer in the TTA. Payment may be made via:

*

a one-off payment or payments in instalments in cash or goods;
*

transfer of the value of the technology as a capital contribution to an investment project or to the capital of an enterprise as stipulated by law;
*

other payment methods as agreed by the parties.

Read More......