Owners of intellectual property (IP) like patents, proprietary industrial processes or scientific formulate, inventions or computer software, possess a valuable commodity. The owners of these IP objects are willing to sell rights to exploit their IP to enterprises in Viet Nam, so long as their ownership rights, including the right not to have secret information disseminated and the right to receive agreed royalty payments are respected and enforceable.
By licensing the right to use IP, the owner does not want to see a piece of valuable property or proprietary info slip away to be exploited by others. Protections must be in place to encourage technology transfers into Viet Nam and promote development of the nation’s industrial capacity, particularly in high-tech fields.
As domestic enterprises develop their own technology, e.g., inventions, medicines, processes, and software, they, too, will want to have such IP protected and license its use to others, either inside of Viet Nam or abroad.
Along with protecting IP ownership rights, the law surrounding technology transfers should encourage the practice. The law needs to remove barriers and recognise the right to use transferred technology is an asset of an enterprise, equal to cash capital or land use rights, suitable to representing part of the legal capital of the enterprise.
The Civil Code has for some time recognised a particular type of licensing agreement called a technology transfer contract. But as part of Viet Nam’s comprehensive programme of legal reform in this year’s run-up to WTO membership and more open trade, a new Law on Technology Transfer has been circulating in draft form for some time and is sure to be formalised by 2006.
The new law will promulgate a comprehensive legal framework for technology transfers and replace Decree 45/1998/ND-CP on Technology Transfer and implementing regulations considered overly restrictive despite revisions in 2002 -03.
Government Decree 59/2002/ND-CP appeared in July 2002, followed by Circular 11/2002 of the Ministry of Science and Technology (MST). Under these regulations, the requirement that technology transfer contracts be approved by the ministry was replaced with a less stringent registration requirement in many cases, including domestic technology transfers, and technology transfers from abroad into Viet Nam with respect to projects not funded by State-owned capital.
To encourage technology transfers into Viet Nam by foreign investors, the law has allowed the transferred IP to constitute a portion of the legal capital of the enterprise. Decree 27/2003/ND-CP abolished the restriction that such proprietary technology not exceed 20 per cent of legal capital. This was a positive step towards creating more favourable conditions for technology transfers.
The Government also recently unveiled Decree 11/2005/ND-CP, further easing technology transfers and timed as a sort of stop-gap measure in this year of hoped-for WTO accession. It eliminates limits on technology transfer royalties in agreements between non-State enterprises, further facilitating transfers between private enterprises, whether at home or from abroad.
However, the Decree perpetuates some shortcomings by fixing the duration of technology transfer agreements to a maximum of seven years (or 10 years in special cases where technology is in the “high-tech” or “high socio-economic efficiency” category). This may be inadequate, as royalties should be paid as long as the technology is licensed and still in use. In other words, term of the licence is a matter to be agreed upon between the parties to the technology transfer agreement.
The latest decree also addresses the issue of franchising, acknowledging that the licensing of proprietary technology, just like the licence to use trademarks or trade dress associated with a brand name, is a necessary aspect of a franchise. However, franchising is now being addressed in separate laws, and another area of confusion and overlap is looming.
The draft Law on Commerce, which should reach its final form this year, includes a section regulating franchising. It appoints the Ministry of Commerce to manage such business activity. Its oversight has the potential to overlap with the authority of the MST to regulate technology transfers for the purposes of franchising. — VNS