8. Technology Transfer:
Negotiation Strategies
Rowan Joseph
Patent Attorney, South Africa
Exchange Control Considerations
 S10 of Exchange Control Regulations, 1961 (as amended to June 2012):
 (1) No person shall, except with permission granted by the Treasury and in
accordance with such conditions as the Treasury may impose –
 (c) enter into any transaction whereby capital or any right to capital is
directly or indirectly exported from the Republic.
 (4) For the purposes of sub-regulation (1)(c) (a) ’capital’ shall include, without derogating from the generality of
that term, any intellectual property right, whether registered or
unregistered; and
 (b) ’exported from the Republic’ shall include, without derogating from
the generality of that term, the cession of, the creation of a hypothetic
or other form of security over, or the assignment or transfer of any
intellectual property right, to or in favour of a person who is not
resident in the Republic.
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Exchange Control Considerations
 South African Reserve Bank approval is required in terms of SA
exchange control regulations when foreign-owned IP is licensed to
a South African entity in return for royalty payments
 The exchange control considerations may affect the negotiations
 Regulations limit the potential for bargains
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Acquiring/Licensing IP from
Publicly-Funded Institutions
 Governed by the IPR-PFRD Act (similar to
Bayh-Dole Act)
 Subject to approval by NIPMO
 Office tasked with the management
and commercialisation of IP
generated by publicly funded R&D
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Considerations in IP
Licensing/Acquisition
 Implications for licensing out numerous
types of IP under one license
 Can be problematic to mix licenses of
patents and know-how
 Agreements not to compete or not to
acquire or use competitive technologies
 Such provisions may be illegal under
anti-competitive/antitrust laws
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Considerations in IP Licensing/
Acquisition
 Withholding taxes, transfer pricing and exchange control issues must be
considered when concluding international licenses
 Where regulatory approval is required, the license should include a
suspensive condition, suspending the “coming into effect” of the license
 International licenses between connected persons must levy an arm’s
length royalty
 Consideration must be given to implied licenses granted in terms of IP Acts
 e.g., according to s58 of the South African Patents Act:

“In default of an agreement to the contrary –

a license to make a patented article shall carry with it the right to
use or offer to dispose of or dispose of the patented article; and

a license to use or exercise a patented process shall carry with it the
right to make, use or offer to dispose of or dispose of the product of the
process.”
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Negotiation Process
 Attorney is usually present, depending on the complexity of
the technology
 Hostility depends on the parties in the negotiations - usually
not hostile and often very cordial
 Licensing process different for different institutions
 Innovus Instant Access™ Licensing – provides easy access to
selected cutting edge technologies in IP portfolio (similar to
Option Agreements offered by WARF at Univ. Wisconsin)
 Trial period <3 years, typically 6 months
 Free-of-charge full commercial license granted
 Licensing negotiations entered into thereafter
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Negotiation Strategy
 InnovUS insists on an upfront payment in addition to milestone payments
 Licensee must reach milestone targets, upon reaching a milestone the next
payment is due (e.g. creating a prototype, making a suitable advancement/
modification, marketing etc.)
 Royalty is due at launch of the product/company/technology
 Royalty payment is based on an industry benchmark, but always the result
of negotiations
 Royalty charged as a % of turnover minus tax
 For an exclusive license, full patenting costs are transferred to the licensee
and the exclusivity is given for a limited time period (head start provision)
 For non-exclusive licenses, university retains patent costs
 InnovUS Instant AccessTM approach puts university in better negotiating
position since the innovation has been tried and tested by the time of
negotiations
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Thank You
 Questions? Please contact Rowan Joseph
Rowan Joseph
rjoseph@vonseidels.com
www.vonseidels.com
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