Post on 18-Aug-2020
Technology Transfersby Mark Wu
IntroductionTechnological innovation has always been a fundamental
element in achieving progress as well as in keeping pace with the
competition. For centuries, however, one needed to develop one’s
own technology; the only other option that existed was to attempt to
steal the technology from one’s competitors. With the Industrial
Revolution and in particular, the Information Revolution, difficulties in
conducting business over long distances were greatly eased to the
point where a new option became available: to purchase technology
through a commercial transaction. Technology thus became a
commodity that could be easily traded back and forth between
competitors in a market system just like any other good.
For the past few decades, firms have willingly bought and sold
technology, giving rise to the concept of a technology transfer. Most
nations have subsequently developed regulations on technology
transfers within their nation; however, the regulations of one nation
differ, sometimes greatly, when compared to those of others. As a
result, confusion often arises when international transfers of
technology are attempted, and because of the vast complexities
involved in each nation’s regulations, technology is still not easily
transferrable across international borders. From purely an economic
standpoint, this is extremely inefficient in that these regulations
tamper with the functions of the free market. Therefore, it makes
sense to synchronize these regulations internationally; however this
process is a lot easier said than done. It is this process of developing
an international code of conduct on technology transfers that we shall
consider under this topic area.
History of Technology TransfersWhile technological advancement has been around since the
beginning of time, the idea of being able to directly transfer
technology across international borders is still relatively new. Prior
to the Industrial Revolution, it took years and at times, decades or
centuries, for a new idea to be transmitted to a different region.
Perhaps the most prominent examples of international technology
transfers prior to the eighteenth century took place along the Silk
Road. From such commercial exchanges, the technological advances
made in China concerning the printing press, gunpowder, coal, and
other goods were transfered to the Europeans.
Technology transfers, as we think of it in a modern sense,
basically evolved as advances were made in international travel
during the Industrial Revolution. Most of these industrial
technologies were developed in Great Britain, and by the mid-
nineteenth century, there was little doubt that Britain had become the
most technologically-advanced nation in the world. The subsequent
industrial booms which took place in Germany and the United States
both resulted because they were able to gain information through
technology transfers about advances that had been developed in
Britain in areas such as railroads and industrial organization and
productivity.
In Asia, some informal technology transfers occurred as
interaction between Asians and the European imperialists increased.
The first mass-scale technology transfer in the Far East occurred in
the late nineteenth century when after the Meiji Restoration, Western
technology was transfered to Japan. Japan began a rapid
industrialization period whereby the 1930s, it had gained almost
equal footing with the Western powers in most fields. All this
however was shattered by World War II.
After the war, Japan rebuilt by using a combination of the
technological know-how they had gained prior to the war and
technology transferred from outside sources, mainly from the United
States. Through such transfers, the Japanese gained insights into the
technology necessary to compete in first, textile-related industries.
The next big wave of transfers concerned technology in the
automobile and electronics industry; here, Japan quickly incorporated
these ideas and developed industries of their own, which have now
become the preemminent in the world.
The newly-industrialized economies of East Asia also developed
rapidly as a result of technology transfers. While some claim that
during the colonial era, the NIEs gained some technology through
informal transfers from their colonial masters, the brunt of such
transfers has taken place after World War II. Again much of this
technology was acquired from the Americans (who in most instances
willingly supplied it to their allies) and from the Japanese, as their
nation quickly rebuilt itself. In the process of acquiring technology,
the NIEs took over the textile industry from the Japanese and today,
we see a continuation of this pattern as this technology is being
transferred once more, this time into Southeast Asia.
Today, the Pacific Rim is filled with instances of technology
being transferred across international borders. Textile technology is
being transferred into southern China, low-level electronic technology
is being transferred from the NIEs to places such as Malaysia and
Thailand, computer technology is being transferred from Japan to the
NIEs, and Japan and the U.S. exchange technology on areas such as
supercomputers and biotechnology.
The most highly-publicized incident regarding technology
transfers in recent years has been the U.S.-Japanese venture to build
the F- plane.
The possibility of technology transfers has quickened the pace
of international development in recent history. During the Industrial
Revolution, Britain, because it had to invent all its technology and
could not acquire it through transfers, grew at only 1.5% per year. By
contrast, it took Japan less than thirty years to rejoin the ranks of
industrialized nations, and in southern China, an area currently
receiving large numbers of technology transfers, growth now exceeds
over 10% per year.
The Nature of a Technology TransferHow does a technology transfer occur? Theoretically, it is no
different than any other business transaction. A supplier offers a
good (technology) on the market that a buyer desires to purchase.
They negotiate the price and other conditions involved in the
transaction, making sure that no regulatory laws are violated in their
deal. The supplier then provides the good to the purchaser under the
conditions that they have negotiated.
Practically, however, four main options are available to a
developer of technology who wishes to transfer it abroad. The first
means is to export the technology embedded within goods or services.
An example of such would be the transfer of military technology
through sales of fighter planes or transfer of computer hardware
technology through sales of computer parts.
A second option is for the supplier of technology to license the
technology. Under this option, the supplier can license the right of
access to the technology individually to each purchaser. Suppliers
tend to prefer this option to the first one, since the supplier can
separately negotiate each individual contract and design the contract
such that it fits the individual situation. The supplier is therefore free
to take into account any specific attributes of the relationship when
negotiating the contract. Host nations tend to usually endorse this
method of transfer as well. This is because once the licensing has
been approved and the transfer has occurred, the supplier is no
longer involved in the transaction and the host nation will be able to
fully control this technology without the foreign presence of the
supplier.
A third means of technology transfer is through transfering the
technology to a subsidiary in the host country that the supplier fully
owns. Technology transfers, of this fashion, are inherently linked to
the issue of foreign direct investment. A company, besides investing
capital in a foreign nation, would also be investing its technology. As
an example to illustrate this type of transfer, suppose Hitachi of Japan
decides to establish a subsidiary in Singapore in a foreign direct
investment. Hitachi then transfers its technology over to its
Singaporean subsidiary and in this manner, technology is supposedly
transferred between the two nations. This option, by far, allows the
supplier to retain the greatest control over the technology transfer
since the subsidiary is fully-owned by the supplier, who can
essentially dictate the conditions. But, it also can create problems. In
the case of our example above, since Hitachi can control both ends of
the operation, it is also free to control the degree of its technology
transferred from Japan to Singapore. They may be reluctant to fully
transfer its technology since it might not be in their long-term
interests for the Singaporeans to gain this technology or may not
transfer the technology to the degree that they had originally
announced. In fact, in this instance, Shizuhiko Ishikawa, secretary-
general of the Japanese Chamber of Commerce and Industry in
Singapore, concedes that the current rate of transfers is still “not so
good.”
Finally, technology can be transferred through a joint venture.
Under this method, a joint venture is established in which the supplier
and the purchaser are both partners and it is through this joint
venture that the technology is then transferred. An example of this
would be Volkswagen’s decision to establish a joint venture in China.
Volkwagen then supplies this joint venture, Shanghai Volkswagen
Limited, with advanced techniques and equipment from Germany on
low gas consumption, prompt steering and breaking reactions, and
other aspects of automative technology. On a positive note, this
option incorporates both some aspects of licensing (since the supplier
is licensing the technology to the purchaser through the joint venture)
as well as aspects of foreign direct investment (since the supplier still
continues to play a presence in the transfer through the joint
venture). However, this option results in higher costs than the others
since besides the usual costs involved in the technology transfer,
additional money must be spent on management of the joint venture
by the two partners. The other drawback is that this means of
technology transfer also seems to be slower. One study shows that on
the average, firms will wait only six years after a technology has been
developed before transfering it abroad to a fully-owned subsidiary
while it will wait an average of thirteen years before transfering it
through a joint venure.
The point here is not to debate which of these four methods is
better than the others, but rather to illustrate their differences. That
is to say that when considering technology transfers, we should not
think of them only as an aspect of foreign direct investment or in
terms of licensing, but both of these constitute the broad category of
a “technology transfer.”
In some ways, our theoretical illustration of a technology
transfer provided earlier is exactly just theoretical. In reality, a
market does not really exist solely with the intention to allow people
to buy or sell technology. Rather, arrangements on technology
transfer usually are included as part of the details that need to
formulated in an international business transaction. Rarely do people
enter into a transaction just to transfer technology; usually some
larger business interests are involved in which technology transfer
may be one of the many (and perhaps the main) interest.
Incentives in Engaging in TransfersWhy then would people want to engage in a technology
transfer? What interests are at stake? For the party acquiring the
technology, the transfer represents an opportunity to catch up with
the others. By gaining knowledge of the latest state-of-the-art
techniques, it is now able to compete on equal footing; without such
knowledge, its techniques and products would most likely be inferior
to those possessing such technology. Developing countries, in
particular, view technology acquisition as an essential component in
their quest to join the ranks of the developed world.
Suppliers are sometimes willing to provide the technology
simply because of the financial gains involved in the transfer.
Technology is an extremely valuable product in today’s world and
people are often willing to pay huge sums to gain access to knowledge
that they themselves do not know. In many instances, however, it is
not in the interests of the supplier to engage in a technology transfer.
By doing so, one is essentially revealing one’s secrets and potentially
losing an advantage that one once held over the party acquiring the
technology. However, in almost all instances, benefits from other
factors manage to outweigh the negative losses that the supplier will
suffer in terms of technological superiority. For example, Volkswagen
might not wish to share its automative technology with the Chinese.
However, the benefits that it would gain from having cheaper Chinese
labor and from gaining access to the potentially huge Chinese market
outweigh this reluctance to share its technology; it therefore
establishes this joint venture in which it provides the Chinese with
technology but feels it is gaining more than an adequate exchange in
return.
Regulatory Problems in TransfersBecause technology is such a valuable asset and because it
correlates closely with a nation’s development, nations have been
established a large number of laws regulating technology transfers so
as to insure that their own national interests are being met in such
transfers. To summarize this legislation for each nation would take
up much more space than this update allows; therefore I have
provided generalizations of these regulations under two general
groupings: those of the host country and those of the home country.
It is your responsibility to thoroughly research the regulations of your
nation regarding technology transfer and to provide the other
participants at the conference with a summary of the regulations of
your nation.
Legislation in the host country, or the country receiving the
technology, deals mainly with balancing two main factors. On the one
hand, it must provide some degree of legal protection for the rights to
the technology. By granting such rights, the host country grants
virtually monopolistic rights to the developer of the technology and
forces its own native firms to enter into bargain with the developer
and supplier at a competitive disadvantage. On the other hand, it
must also legislate to protect the interests of its own native
enterprises. The host country will choose to balance these two
factors in the best possible way so as to achieve its main objectives
which are typically as follows: (1) to attract new technology; (2) to
use and expand its own native production capabilities; (3) to employ
and instruct its own citizens in the new technology so as to further
future technological development; and (4) to try to close the
technological gap with other nations. Nations often choose to
exercise its regulatory influence through taxation policies. Nations
may charge a principal tax on technology transfers which often
results for a substantial portion of the transaction costs involved in
the transfer. Those nations seeking to encourage inbound transfers of
technology may reduce or withhold these taxes for a transfer. By
doing so, the cost of a technology transfer has been lowered and as a
result of these lowered costs, parties are more inclined to transfer
technology to the host country. Nations also may choose to regulate
questions over about control over a technology transfer. For example,
China mandates that in a joint venture technology transfer, the
chairman of the board of the joint venture must be Chinese while the
vice-chairman is to be named by the foreign partner. Measures such
as this are done so to ensure that its own citizens will be able to gain
some degree of free access to the technology and that the foreign
owners of the technology do not retain full control and refuse to
diverge any of it.
The other type of regulatory laws on technology transfers
involve those drafted by the home country, or the nation in which the
technology originates. One example of this is the United States’s
Export Administration Act. Under American legislation, in order to
export any non-military technology, one must have been granted a
general or validated license from the government. Nations that
export technology often use technology transfers as a tool of their
foreign policy and regulate that technology can be transfered only to
certain nations. Similarly, it may reprimand another nation by
regulating that no technology may be exported to it. For example,
upon discovering in June, 1991 that China had sent newly-developed
M-11 missiles to Pakistan, the United States banned all high-
technology transfers to China; these sanctions were only recently
lifted on 21 February. Oftentimes nations will also place constraints
on technology transfers in order to protect its own domestic markets
or on grounds of national security interests.
The problem is that each nation has its own unique set of laws
and its own perceptions of what the proper role of government
regulation of technology transfers ought to be. This, of course, leads
to international disputes on these regulations. For example, a nation
with more liberal regulations may find the high government
interference laws of another nation to be discriminatory and demand
that they be removed. The other nation may disagree and argue that
its heavy regulatory stance is necessary in order to protect its
developmental interests. Hundreds of these nitpicky disagreements
of government regulations such as these exist today, thereby
hampering the flow of technology transfers throughout the world.
Other ProblemsDisputes about international technology transfers however do
not concern solely government regulations. One of the major causes
of international problems in such transfers involves the issue of
industrial property rights. In most market economies today, there are
four general ways to protect one’s industrial property rights: patents,
copyrights, trademarks, and trade secrets. An industrial property
right essentially grants the possessor of the technology the exclusive
right to use that technology within a certain defined geographic area
for a certain length of time. Since the industrial property right makes
it illegal for others to imitate or use this technology for a certain
length of time, the possessor can publicly disclose its new innovation
and does not have to worry about conducting contractural protection
for its technology. This cuts down the costs of developing and
protecting technology significantly.
However, the problem lies in that some people claim that the
protection of industrial property rights is insufficient in certain
countries. Part of the problem might lie in the fact that in some
nations, the idea of industrial property rights is still a very new idea
and the government might still be adjusting in its enforcement
measures. China, for example, has only had laws concerning patents
and trademarks for the past twelve years (though some claim that on
paper, the Chinese laws appear better than those of the Americans).
But, the bigger problem lies in the accusation that the weak
enforcement of industrial property rights is an intentional oversight
on the part of some of these governments, so as to provide some of
their own native corporations an opportunity to imitate such
technology without much consequence. As a result, some people are
very reluctant to engage in technology transfers to certain parts of
the world out of fear that should their technology be transfered to
that country, it would be imitated throughout the country because of
inadequate protection of industrial property rights by the government
of that country. From the suppliers’ viewpoint, these concerns appear
very legitimate and it seems that such accused nations ought to adopt
more stringent protection measures. However, some of these
accused nations would counterargue that their measures are
adequate enough and that these accusations of improper protection
represent intentional bias and an excuse on the part of some of these
suppliers for withholding technology from their country.
Another problem concerns that of currency convertibility.
Corportations sometimes engage in technology transfers in certain
countries only to become frustrated in discovering that the financial
rewards of their transaction are limited because they have a difficult
time converting them back into other currencies on the international
market. This experience occurs most frequently in transactions
involving former Communist nations or underdeveloped nations. This
inability to convert local currency fairly to reflect its worth on the
international monetary market impedes technology transfers with
those nations.
Focus of the DebateAs you should have gathered by now, a large number of
problems exist concerning international technology transfers. You
are most likely familiar with some of them; if not, just take our word
that lots of little disputes like the one involving Japanese technology
transfers in Singapore (used in an example earlier) exist. The
problem is that each one of these needs to handled separately in a
treaty (re)negotiation, and that while some of these disputes may be
interesting to look at, there are just too many to handle in our
conference. Feel free to become familiar with some of them to use as
examples in our discussions; however, I wish to stress that our
discussion should not become bogged down over one specific incident.
In other words, we will not spend an entire afternoon just discussing
Japan and Singapore, as important or interesting as the issue might
seem.
The idea of treaty convergence represents one way of helping
resolve international problems in technology transfers, but this
process is just too lengthy and too extensive for us to emulate in a
four-day conference. Rather, we shall stress a second approach to
resolving such problems. This approach rests on the idea of a
unilateral convergence toward a universal norm on technology
transfers. In other words, problems could be greatly avoided if
nations could come to agreement on a certain general set of
expectations on technology transfers that could be applied as
standards to any transfers between these nations.
The United Nations Conference on Trade and Development
(UNCTAD) has taken the lead in attempting to draft an International
Code of Conduct on Transfer of Technology. Their first draft was
written in Geneva on October 16, 1978; each subsequent year, a
committee has met to try to resolve problems with the draft. Our
session will attempt to produce such an international code for
technology transfers between those nations involved in the HPAIR
conference. UNCTAD, however, has been less than successful in its
attempt to draft a code. Disputes still exist over thirteen years later
over phraseology and ideas in certain sections of the code. Therefore,
if UNCTAD and GATT have not been able to produce a code over the
course of thirteen years, there is no reason to expect that after four
days, the nations at the HPAIR conference will agree on a code.
However, our purpose is to attempt to draft one.
Since we will emulating UNCTAD to a large extent, it would be
ideal to provide each of you a copy of the draft Code of Conduct on
Transfer of Technology that UNCTAD has produced in an appendix to
this update. Unfortunately, copies of this draft code no longer
circulate. (The United Nations itself could not find a copy when I
stopped by in New York, and the only copy that I could find was on
microprint for which there are no machines available to make
reproductions in New England.) In this update, I have retyped certain
sections of this code for your reference; however, if any of you can
obtain copies, please let me know.
The UNCTAD draft Code of Conduct is intended to serve as a
model for your reference only, and the copy that we draft at the
HPAIR conference does not need to resemble it at all in content
(though it should somewhat resemble it in form). One important point
that you should keep in mind when reading contents of the UNCTAD
code is that it was drafted in 1978. At this time, there was still a
popular movement among underdeveloped and developing nations to
establish a New International Economic Order (NIEO). The idea of a
NIEO was profoundly influenced by radical dependecy theorists and
their critique of the structure of international capitalism. To
summarize their intentions in a very general fashion (which is in some
ways unfair since their rationale is extremely complex), they sought to
reshape the framework of the international capitalist system by
allowing increased Third World control of their own economies, giving
Third World nations an increased voice in international economic
regimes, and reducing the costs associated with development. This
influence of NIEO ideas is heavily reflected in the 1978 draft which I
have retyped in part and you should bear this in mind when reading it.
In general, while UNCTAD’s draft document has provided a good
framework for an international code, it has been criticized for being
too slanted in favor of developing nations. Some think that it is
unrealistic to think that the developed nations will adhere to what is
stated in the document; others also note that little in terms of
enforcement mechanisms is listed in the draft copy.
All this is to say that in the following sections concerning
specific issues in international technology transfers, when parts of the
UNCTAD draft code appear, you should read it with a critical eye.
The draft code is meant to serve only as a model; note the parts of it
which you disapprove of and would alter as well as those parts you
like and would want to incorporate in our code.
Focus of the DebateAny international code on technology transfers must address
certain questions which are discussed below. Each one of these
subsections does not necessarily represent a “problem,” but rather an
issue on which the conference participants must reach a consensus.
You ought to think about what your nation would seek to phrase each
one of these sections of the code.
In general, developed nations would place a high priority on
insuring that the technology that they develop is protected within
each nation and is not easily transferrable illegally. The emphasis
here is more on high regulatory measures. Developing nations on the
other hand, give highest priority to making sure that technology is
both accessible and easily transferrable at a low cost. NIEs are in the
trickiest position—they continue to be recipients of technology
transfers but also transfer technology themselves to developing
nations. Therefore, they are concerned with establishing a system
with good regulation but where these rules do not impede their
access to high technology.
Principles
Before beginning work on the content on any code, the first
thing that must be done is to see whether we will be able to establish
the principles behind the code, from which we will then seek to draft
a code.
The UNCTAD draft Code of Conduct was able to arrive at the
following preambulatory clauses stipulating their general beliefs on
the issue of a technology transfer.
Preamble 1
1. Recognizing the fundamental role of science and technology in the socioeconomic development of all countries and in particular, the acceleration of the development of developing countries;
2. Believing that technology is a part of the universal human heritage and that all countries have the right of access to technology, in order to improve the standards of living if their people;
Believing that the access of all countries of all countries, particularly developing countries, to technology on mutually acceptable and mutually advantageous terms should be facilitated;
4. Recognizing the need to facilitate an adequate transfer and development of technology so as to strengthen the scientific and technological capabilities of all countries, particularly the developing countries, and to cooperate with the developing countries in their own efforts in this field;
5. Desirious of promoting international scientific and technological cooperation in the interest of peace, security and national independence and for the benefit of all nations;
6. Striving to promote and increase of the international transfer of technology with an equal opportunity for all countries to participate irrespective of their social and economic system and of their level of economic development;
7. Recognizing the need for the developed countries to grant special treatment to the developing countries;
8. Drawing attention to the need of having an unrestricted improved flow of technological information and in particular of information on the availability of alternative technologies and for the selection of appropriate technologies suited to the specific needs of the developing countries;
Their document also included a chapter which stipulated the
objectives and principles of their document, parts of which I have
copied or paraphrased.
The Code of Conduct is based in the following objectives and principles:
Objectives
1. To establish general and equitable standards which should form the basis of the relationships among parties to transfer of tecnology transactions, taking into
consideration their legitimate interests, and giving due recognition to the special needs of developing countries for the fulfilment of their economic and social development objectives.
2. To encourage transfer of tecnology transactions, particularly those involving developing countries, under conditions where bargaining positions of the parties ot the transaction are balanced in such a way as to avoid abuses of a stronger position and thereby to achieve mutually acceptable agreements.
3. To faciliate and increase the international flow of tecnological information . . .
4. To faciliate and increase the international flow of proprietary and non-proprietary tecnology for strengthening the growth of the scienitific and technological capabilities of all countries, in particular the developing countries.
6. To faciliate the formulation, adoption and implementation of national policies, laws and regulations on the subject of transfer of technology by setting forth international norms.
Principles
1. The Code of Conduct is universally applicable in scope . . .
3. The separate responsibilities of parties to transfer of technology transactions, on the one hand, and those of governments when not acting as parties, on the other, should be clearly distinguished.
4. Mutual benefits should accrue to technology supplying and recipient parties in order to maintain and increase the international flow of tecnology.
6. Respect by parties and governments for appropriate protection of industrial property is necessary in order to provide incentives for research, invention, development, disclosure and transfer of technology.
7. Technology supplying parties when operating in a recipient country should respect the sovereignty and laws of that country.
8. Each technology transaction is an individual case and the transfer of technolgy is an on-going and sequential process. Flexibility in the technology transfer process is necessary and . . . should not be unduly restricted.
Among some of the general principles that you will have to
decide are:
• Is access to technological innovations a universal right that
should be available to all, as the drafters of the UNCTAD Code
believe, or is such access not a right but a privelege that one does not
have to possess? In other words, are we to place technology on the
same plane as food, clothing, and other human necessities or does it
belong more with other commodities such as electronic products or
timber?
• If you believe that technology is a universal right of mankind,
to what degree should governments and international regimes involve
themselves to make sure that they are distributed throughout? How
cheap and how easy should we make access to technology?
• Should developing countries be granted special treatment in
technology transfers or should all nations be treated essentially the
same? If we are to make categories about the economic conditions of
nations, how should these be drawn? Possible ideas are developed
and developing, a more extensive classification of developed, newly-
developed, developing, and underdeveloped, GATT categorizations, or
UNCTAD categorizations.
• What are the objectives in drafting such a code of conduct?
Is it only to facilitate technology transfers between nations? Or is it a
more radical idea of attempting to create a more equitable
distribution of technical information throughout?
In general, you must first decide how your nation and you
yourself feel about technology transfers as a principle before
proceeding.
Definitions and Scope of the Document
The second issue that we must address in drafting our code are
issues of the definitions involved in the code and the scope to which it
should apply. In other words, how are we to define a technology
transfer? Do we wish to limit ourselves to only certain types of
transfers? How do we define who is a supplier of technology and who
is an acquirer of technology? At first, it might seem rather obvious,
but if you examine the UNCTAD code, you shall see that such
definitions are not so easily arrived at. For example, you must decide
whether we should include only private corporations as a supplying or
acquiring party or whether these terms apply more broadly to include
governments and non-governmental organizations. Then again, we
must also decide how to deal with multinational corporations, regional
organizations, and international organizations and whether to include
them in our definition.
Finally, there is the question of how broadly this document
should apply? Should it apply to all technology transfers between the
nations at the HPAIR conference? Or should a more limited
application be adopted in which case some situations are exempted
from the standards established in the code of conduct?
Again, the UNCTAD draft code is provided below to provide you
with some possible ideas about both structure and content.
A. For the purposes of the Code of Conduct
1. An "international transfer of technology" occurs when technology of a proprietary or non-proprietary nature and/or rights related thereto is transfered across national boundaries from a supplying party to an acquiring party.
2. The term "party" means any person, both natural and juridicial, of public or private law, either individual or collective, including corporations, companies, partnerships, and other associations and organizations, whether owned, controlled or created by individuals, juridicial persons, Governments, regional or subregional organizations, or any combination thereof, when it engages in international transfer of technology.
3. The term "acquiring party" means the party which obtains a license, purchases, or otherwise acquires technology in a particular transfer of technology transaction.
4. The term "supplying party" means the party which licenses, sells, assigns or otherwise provides technology in a particular transfer of technology transaction.
5. The term "technology acquiring country" means the country where the technology provided by the supplying party is to be utilized.
B. Transfer of technology is the transfer of production, management or marketing technologiesby any means and does not extend to transactions involving only the sale of goods.
C. Transfer of technology transactions are transactions, arrangements or agreements between parties, irrespective of their legal form, which have as their purpose or as one of their purposes the licensing or assignment of industrial property rights, the sale of any other type of transfer of technical knowledge, and the supply of technical services.
D. The Code shall apply to such international transfer of technology transactions, which are entered into between parties who do not reside or are not established in the same country, and shall also apply to transfer of technology transactions between parties which are residents of or established in the same country if at least one party is a branch, subsidiart, affiliate or is otherwise controlled by a foreign entity or when it acts as an intermediary in the trnasfer of foreign owned technology.
National Regulatory PrinciplesThe heart of the document deals with standardizing government
regulation of technology transfers. This deals with the big question of what principles should be reflected in governmental regulations of technology transfers.
Among some of the questions that you will have to answer are:• To what extent should governments interfere in drafting
legislation about technology transfers?• What sort of general standards should be generally expected
about industrial property rights and their enforcement in each nation?• To what degree ought technology transfers be taxed? Should
there even be a universal standard for taxation policy among the HPAIR conference participants or should this matter be left for each individual nation to address as part of their fiscal and development policies?
• To what extent is a government allowed to protect the interests of its native corporations and citizens with regards to technology access and when is overstepping its bounds?
• To what extent should governments be allowed to regulate ownership in joint ventures of a technology transfer?
UNCTAD’s Chapter 3, reproduced in part below, deals with this issue:
Chapter 3. National Regulation of the Transfer of Technology Transaction
3.1. In exercising their right to adopt laws, regulations, and reules, and policies with respect to transfer of technology transactions, States may adopt such measures as evaluation, negotiation, registration and renegotiation of agreements and arrangements
involving transfer of technology transactions within the framework of applicable international law, treaties, and agreements.
3.2. In exercising this right States should act on the basis that:
A. These measures should:
1. Recognize that a close relationship exists between technology flows and the conditions under which such flows are admitted and treated;
2. Promote a mutually created beneficial and favorable economic and legal climate for the international transfer of technology.
4. Allow and encourage transfers of technology to be negotiated and to take place under mutually agreed, fair and reasonable terms and conditions;
5. Ensure effective protection of industrial property rights and other rights of parties involved in the transfer of technology.
Ensure an equitable balance between the needs of economic and social development, particularly of the developing countries, and the rights granted by industrial property;
6. Take into account the differing factors characterizing the transaction, such as local conditions, the nature of the technology and the scope of the undertaking.
3.3. States should apply the provisions of paras. 3.1 and 3.2 when adopting and implementing measures on finance and technical aspects of technology transactions and on organizational forms and mechanisms dealing with:
Financea. Currency regulations on foreign exchange payments and remittances;b. Conditions of domestic credit and financing facilities;c. Transferability of payments;d. Tax treatments;e. Pricing policies;
Technical aspectsf. Technology specifications and standards for the various components of the transaction;h. Use of local and imported components;
Organizational forms and mechanismsi. Regulation of the flow and effects of the transfer of technology;j. Terms and conditions and the duration of transfer of technology transactions;k. Loss of ownership and/or control of domestic acquiring enterprises;l. Regulation of foreign collaboration arrangements and agreements that could displace national enterprises from the domestic market;
Regulatory Situations
The crux of our debate will most likely center around the
following question: in what practices and arrangements involving
technology transfers should parties be prevented from engaging?
Why would agreement on this matter be so difficult? First off,
unlike the earlier parts of the document which incorporates mainly
carefully-crafted (but sometimes ambigious) phrases, this section of
the code of conduct designates specifically what constitutes a
violation of the code. It is much more likely that other countries will
notice and protest such violations when they are implicitly designated
as being illegal in an international document that the country
engaging in such a violation has signed. Also, nations that engage in
practices which are a violation of a “good” international technology
transfer principles will most likely attempt to keep such a practice off
the list by using a more crafty rationale.
Among some of the practices that the UNCTAD code proposes
to ban are the following:
Chapter 4. The Regulation of Practices and Arrangements Involving the Transfer of Technology
4.2. Parties involved in transfer of technology transactions shall not make use of the following practices and arrangements, whether written or not:
1. Restrictions after expiration of arrangementRestrictions on the use of the technology after the expiration or termination of the arrangement, or after the know-how has lost its secret character independently of the acquiring party.
2. Payments and other obligations after expiration of industrial property rightsRequiring payments or imposing other obligations for continuing use of industrial property rights which have been invalidated, cancelled, or have expired.
3. Grant back provisionsRequiring the acquiring party to transfer or grant back to the supplying party, or to any other enterprise designated by the supplying party, imporvements arising from the acquired technology, on an exclusive basis or without offsetting consideration or reciprocal obligations from the supplying party.
Listed below are other possible examples of unacceptable
practices regarding technology transfers that have been frequently
proposed in the past.
- Restricting the use of the technology after the agreement has
expired or after the technological know-how has lost its secrecy due
to situations unrelated to the acquiring party.
- Requiring payment or imposing other obligations for the
continued use of industrial property rights after those rights have
expired, been cancelled, or invalidated.
- Requiring grant-back provisions. The following example shows
such a situation: A transfers technology to B. B then makes
improvements either to the technology, or perhaps uses the
technology to make improvements in the industry. A then demands
that B transfer or "grant-back" to A these improvements.
-Restrictions which prevent the acquiring party from adapting
the imported technology to local conditions or to introduce
innovations in it.
- Restricting the acquiring party from undertaking research to
absorb and adapt the imported technology to local conditions.
- Requiring that certain trademarks be used by the acquiring
party.
- Requiring the acquiring party to use personnel designated by
the supplying party. One proposed exception to this situation is in
that this should be allowed during the time it takes to ensure the
efficient transmission of the technology and to
train local personnel on how to use it.
- Making limits upon the usage of technology after it has already
been imported.
- Requiring the acquiring party to accept additional technology,
inventions, goods, services, etc. that it does not want or restricting
the acquiring party's sources for obtaining technology, goods,
services, etc. as a condition to the technology transfer. This type of
agreement is known as a tying arrangement.
- Restricting the acquiring party from doing research in
connection with new products, processes, or equipment related to the
technology transfer.
- Restricting the acquiring party from entering into sales or
agreements related to similar or competing technologies.
- Use of quality controls by the supplying party, except perhaps
when the product bears a trademark.
- Price fixing, or requiring the acquiring party to charge a
certain price for certain transactions.
- Requiring the acquiring party to grant exclusive sales or
representation rights to the supplying party.
It is of course up to you to decide whether each one of these
ought to be deemed unacceptable and whether there are more
situations that you might wish to designate.
Other Provisions
There are of course other possible provisions that you might
wish to include in an International Code of Conduct. One such
possibility is a section dealing with specificities on special treatment
for developing nations (if you decide that there ought to be special
treatment). Another is a section dealing with means to settle disputes
over technology transfers, such as through arbitration or through
international courts. This decision is left up to you and your fellow
participants as to how comprehensive you might wish for the
document to be.
ConclusionTechnology transfers are playing an increasingly important role
in today’s world. Yet, internationally, there is still a general lack of
accepted standards as to how a technology transfer ought to be
conducted. The issues behind drafting such a code are extremely
complex, as the United Nations attempt over the past thirteen years
have shown. Your task is to come to the conference well-researched
in your nation’s principles and practices in technology transfers so
that we can attempt to arrive at common agreement about standards
concerning transfers between HPAIR conference participants.
Whether or not we are successful depends on your skills in
communicating and compromising.
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