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| The Role of Intellectual Property in Development a |
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时间：2010/12/1 16:38:00 |
Chapter 3
The Role of Intellectual Property in Development and
WIPO’s Development Cooperation Program
Objectives of Developing Countries
Industrial Property and Development
Industrial Property Protection and Development
Inventions, Technology and Development
The Promotion of Innovation
Introduction
A Global Approach to Establishing Innovation and Invention
Support Structures or Services
Implementing and Managing Innovation and Invention Support
Structures and Services
Innovation Center or Innovation Support Network
Licensing and the Transfer of Technology
Introduction
The Commercial Transfer and Acquisition of Technology
Negotiation of Licensing Agreements
Remuneration
Types of Intellectual Property Licenses
Government Control of Licensing Agreements
Copyright and Development
The Development Cooperation Program of WIPO
Introduction
Objectives
Development Cooperation in Relation to Intellectual Property
The WIPO Worldwide Academy
162 WIPO Intellectual Property Handbook: Policy, Law and Use
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 163
Objectives of Developing Countries
3.1 The general long-term objective of developing countries remains the establishment of a
sound development base. This includes progress towards agricultural self-sufficiency and the
stimulation of commercial and industrial activity. Industrial policies continue to emphasize the
establishment of small-, medium- and large-scale industries in priority sectors, and commercial
policies to promote a better balance of exports between raw materials, which tend to predominate,
and finished, manufactured products as well as services. At the same time there is a continuing
drive to obtain maximum economic benefits for developing countries from their enormous
resources in indigenous creation, arising from traditional knowledge and indigenous arts, creative
crafts and folklore.
3.2 The aim of developing countries to adopt policies on science and technology that facilitate
their acquisition and use on appropriate terms remains present and important, as do the efforts to
improve infrastructures, whether legislative or administrative, and to develop the human resources
which operate intellectual property systems.
3.3 Recently, however, there has been an evolution of the conditions in which these
development aims are pursued. The numerous challenges of the new century call for new
approaches. One such challenge is in information technology, notably in the worldwide spread of
the use of the Internet, and all the issues it raises in copyright and related rights, as well as in fair
practice in industrial property, most urgently in the use made of domain names. Another challenge
is in the field of biotechnology, which has seen momentous breakthroughs in genetic engineering,
giving rise to questions that are not only biological and technical, but also human and ethical. The
use of traditional knowledge and genetic resources is also evolving in ways that particularly affect
developing countries: it should bring rewards to the societies that produce it as well as to the users.
3.4 Intellectual property in itself has always been an integral part of general economic, social
and cultural development worldwide, but these new challenges emphasize all the more how
globally interlinked national and regional intellectual property systems have become. Fresh
approaches to meet the challenges have become correspondingly global, with concerted action at
the national, regional and international levels to enable developing countries to participate in and
benefit from technological advances.
3.5 The framework of international legislative and administrative assistance to developing
countries has been strengthened by the Agreement on Trade-Related Aspects of Intellectual
Property Rights (“TRIPS”) administered by the World Trade Organization (WTO) in cooperation with
WIPO. Developing countries which are member States of WTO were given different periods of time
to adapt their intellectual property systems before being obliged to apply the TRIPS Agreement. The
last to be so obliged will be the least developed countries (LDCs) which have until January 1, 2006
(see chapter 5, The Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”)
and WIPO-WTO Cooperation): WIPO’s program of assistance and support to the LDCs in particular
has been intensified to help them meet this deadline, but other developing countries continue also
to be so assisted.
3.6 In keeping with the more integrated approach to intellectual property as a key feature
permeating society, WIPO has broadened its contacts and partnerships with all levels of society.
WIPO now maintains constant and increasing contact not only with policymakers at the
governmental level in the ministries immediately concerned, and with national intellectual property
164 WIPO Intellectual Property Handbook: Policy, Law and Use
offices, but also with other interested ministries, with non-governmental organizations concerned,
with business communities at different stages of development, with the creators of intellectual
property, with civil society interest groups involved in such questions as farming, public health and
preservation of the environment, as well as with the general public to promote awareness of the
wider issues and interests involved.
Industrial Property and Development
Industrial Property Protection and Development
Introduction
3.7 Industrial property has long been recognized and used by industrialized countries, and is
being used by an ever increasing number of developing countries, as an important tool of
technological and economic development. Many developing countries are aware that it is in their
best interest to establish national industrial property systems where they do not exist, and to
strengthen and upgrade existing systems which, inherited from their historical past, are no longer
adequately responding to new needs and priorities.
3.8 Countries have laws to protect industrial property for two main reasons, related to each
other. One is to give statutory expression to the moral and economic rights of creators in their
creations, and the other is to promote, as a deliberate act of government policy, creativity and the
dissemination and application of its results, and to encourage fair trading: this contributes to
economic and social development.
3.9 Industrial property rights make it possible for the creators of innovations (goods, processes,
apparatus, etc.) to establish themselves more readily, to penetrate new markets with a minimum of
risk, and to amortize the investments made in the research that led to the innovations in the first
place. In a practical sense, these innovations become the spearhead of some of the most advanced
technology. This is becoming more and more apparent in a modern world increasingly dominated
by technology.
3.10 For example, the right to obtain a patent for an invention encourages the investment of
money and effort in research and development; the grant of a patent encourages investment in the
industrial application of the invention.
Awareness of the Industrial Property System
3.11 No industrial property system, however well its basic laws are drafted and however
efficiently they are implemented, can make an effective contribution to economic and technological
development unless the system is known to, and used by, those for whose benefit it was
established. An industrial property system is established to serve the needs of traders,
manufacturers, industrialists, researchers, businessmen and consumers. The list of potential users
and beneficiaries is inexhaustible, and the benefits to be derived from an effective use of industrial
property cut across sectoral lines within an economy.
3.12 An essential task is to promote, among owners and users, as well as among potential
owners and users, of industrial property, within the government and in the private sector,
awareness of the nature of industrial property, and of how its main components can be developed
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 165
and successfully exploited in commerce and industry to enable the industrial property system to
serve better the national interest and national goals of development.
Patents and Patent Information
3.13 An equitable and modernized patent system, by providing recognition and material benefits
to the inventor, constitutes an incentive for inventiveness and innovative activity. It also creates a
favorable climate for the transfer of technology by means of the security it provides for the
patentee.
3.14 Patent laws require that an application for a patent for invention describe the invention with
such clarity and completeness of all the technical details that anyone having ordinary skill in the art
should, by merely reading the description, be able to carry out the invention, and that granted
patents for invention be published. In other words, at the latest when the patent for invention is
granted, the invention will be “disclosed,” that is, its essence and mode of exploitation will be
brought to the knowledge of anyone who wishes to know.
3.15 The utilization of information available through this disclosure avoids wasteful duplication of
effort and the multiplication of costs that research aimed at finding solutions to technical problems
can entail; it acts as an inspiration or catalyst for further inventions, and this contributes to the
advance of science and technology.
3.16 A state of the art search through patent documents will usually identify those solutions to a
technical problem that have been proposed in the past. Patent literature will often discuss
disadvantages and difficulties that can be avoided by using a particular process or design or will
discuss advantages or benefits of a particular process or design.
3.17 These advantages that may be derived from the information aspect of the patent system
can be gained if such use is adequately incorporated in the administrative infrastructure of the
countries concerned. In this respect it is essential that the patent system, and the patent
information aspect of it, be adequately understood and accepted as a necessary component of the
development efforts of the government. The awareness of the usefulness of the patent system for
technological development purposes and the existence of an adequate industrial property system
providing patent information services are essential elements. Equally essential is the need to
coordinate the said system and its patent information services with other branches of the
government administration related to aspects of technology transfer and technological
development.
3.18 In this connection, it is necessary that the development objectives of the country concerned
be reflected in the patent system of that country. In particular, the administration entrusted with
patent matters must have the required capabilities and the mandate for undertaking and achieving
the tasks and results provided for in the patent legislation. It may be mentioned that in many
instances the inadequate utilization of the patent system in developing countries is merely a
consequence of the lack of appropriate cooperation between the patent administration and the
other relevant governmental bodies. The existence of appropriate links with the various related
sectors could ensure the effective contribution of the patent system (patent laws and patent
administration) to the development process.
Utility Models
3.19 One of the main advantages of a patent system is the encouragement of indigenous
inventiveness and the stimulation of creativity among the peoples of the country. Such
166 WIPO Intellectual Property Handbook: Policy, Law and Use
encouragement and stimulation could result in a large number of inventive products some of which
might not, however, meet all the requirements for patentable inventions. Creativity of this kind
nevertheless deserves reward and should be encouraged. The protection of utility models serves
this purpose by providing for a type of industrial property with less stringent requirements and a
relatively short duration in comparison with a patent.
Industrial Designs
3.20 Many developing countries are extremely rich in traditional art and folklore which stimulates
creations of local craftsmanship. These creations usually fall within the ambit of the term “industrial
designs.” By providing recognition and material benefits for the creator of an industrial design, an
effective system of protection stimulates creative activity.
Trademarks
3.21 A well-selected trademark is an asset (in some cases, the most important asset) of
substantial economic importance to an enterprise because it enables that enterprise to establish a
market position, and goodwill in the marketplace, based on the trademark. Thus the effective
protection of trademarks is an important aspect of commercial activity in any given country.
3.22 The growth, indeed the very survival, of any company, depends essentially on their ability to
progress, not only in the national context but also internationally. As a result of the ever-growing
pace of technological development, competitors are constantly launching new products and/or
processes on a market which is in a perpetual state of change, improvement and renewal. Any
company unwilling to compete in the modern marketplace is therefore bound to become vulnerable
to challenges from national or international competitors in what it might have once thought was its
own backyard.
Inventions, Technology and Development
3.23 Inventiveness and creativity are features which have favored the differentiation of mankind
in the course of evolution from all other living species. The capacity to put these features to
productive use continues to be of fundamental importance within the social and economic
structures of human society. Indeed, the survival of any enterprise, organization, or even nation,
may be said to depend essentially on its capacity to keep pace with development and progress.
3.24 One of the most widely used measures of economic progress (whether for a country or for
an individual enterprise) is productivity, i.e. output per unit of input.
3.25 The principal significance of improved productivity is, of course, that it facilitates economic
growth. If less inputs are required to produce the same amount of output, the resources which are
liberated by the use of a more efficient process may be put to other productive uses, thus allowing
overall expansion of output and economic growth to occur.
3.26 One of the important elements in the sound management of a science and technology
policy based, inter alia, on encouraging invention and innovation is, undoubtedly, the patent
system. An efficient patent system contributes to the stimulation of innovation in three main ways.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 167
3.27 First, the existence of the patent system, with the possibility of obtaining the exclusive right
to work an invention for a limited period of time, constitutes an important incentive to inventive
and innovative activity.
3.28 Second, the limited period of time during which the holder of a patent is entitled to prevent
others from using his invention creates an environment which facilitates the efficient development
and utilization of patented inventions. It protects the inventor against uncontrolled competition
from those who have not taken the initial financial risk. It thus creates conditions in which risk
capital can be safely advanced for the transformation of an invention into an innovation. The
inventor will be at ease to further develop the invention into a final, commercially polished, product
or process that could be marketed and produce a benefit.
3.29 Third, the patent system provides the framework for the collection, classification and
dissemination of the richest store of technological information existing in the world today. In other
words it contributes to the dissemination of new knowledge since the right of the inventor to
prevent others from using his invention for a limited period is not granted freely. In return for the
grant of a patent, the inventor must disclose the details of his invention to society. Thus the
information contained in a patent is available for research and experimental purposes (although not,
of course, for commercial use) by all during the term of the patent grant. On the expiration of the
patent term the information falls into the public domain and is freely available for full commercial
use by all. The patent system thereby contributes to the evolution of the technological base of
industry.
Government Support for Inventive Activity
3.30 The responsibilities of governments towards their inventors do not end with laws and
treaties securing substantive protection of inventions. Their administration must be effective and
not over-expensive, in order to avoid unnecessary obstacles between an inventor and his legal
rights.
3.31 Certain countries have established special systems or structures to assist individual inventors,
small enterprises and non-profit-making organizations in obtaining protection for their inventions
and their effective management (for example, the payment of the various kinds of fee, free
consultancy services, etc.).
3.32 Some provisions contained in financial or tax laws creating favorable conditions for
inventors and inventive activity could be summarized as follows:
- reduced taxes in respect of income stemming from licensed patents and know-how;
- reduced fees for acquisition and maintenance of industrial property rights by individual
inventors;
- special loans or subsidies, including interest-free or low interest loans;
- grants for development of certain inventions and innovations;
- possibilities for concluding governmentally or publicly financed “research contracts.”
3.33 In an increasing number of countries, specialized governmental institutions have been
created to encourage inventive activity and also to promote the development, exploitation and to
168 WIPO Intellectual Property Handbook: Policy, Law and Use
some extent the commercialization of local inventions, by providing the inventor with the relevant
support.
3.34 For instance, in some countries individual inventors may get assistance and their inventions
may be tested in government-owned or government-financed research and test laboratories and
institutions. Usually it is done on a non-profit-making basis and in some cases repayment of the
expenses is required if the invention has been successful on the market.
Rewards and Recognition for Inventors
3.35 An important means of action by governments for promoting inventive activity is the direct
encouragement of inventors by public recognition. Non-material rewards (medals, diplomas) and
sometimes financial rewards are granted not only to meritorious inventors, but also to potential
inventors in the framework of youth science and invention contests. In some countries such moral
awards and celebrations have been established by governmental acts. Another important support
to inventors are exhibitions of inventions in that they highlight the inventions and facilitate the
establishment of contacts with industry. In several countries, government agencies — including in
some cases the industrial property administrations — organize or participate in the organization of
such promotion activities.
3.36 Education is an important factor in that process. In many countries the promotion and
encouragement of inventive activity among young people enjoys increasing attention. With a view
to creating better opportunities for development of those talents as early as possible, several
countries organize special exhibitions and contests for inventions made by schoolchildren, students
and young people.
Cooperation Among Inventors
3.37 However important government support to inventors may be, it is necessary for the
inventors themselves to realize better that they need to act collectively. They will be better heard,
and their wishes will be better satisfied, if they form associations, if they are active in those
associations and if their associations maintain closer relations with each other on the regional or
international level.
3.38 At the international level the cooperation between organizations of inventors is either
bilateral or in the framework of international organizations of inventors. Examples of international
organizations of inventors are the International Federation of Inventors’ Associations (IFIA), a global
organization, and the African Federation of Inventors’ Associations (AFIA), a regional organization.
The Promotion of Innovation
Introduction
3.39 At the beginning of our new millennium, worldwide economic development, with the
creation of employment, economic growth and the reinforcement of the industrial network, cannot
be realized without innovation at all levels. At the governmental level, innovation means effective
policies to attract foreign investment, to promote applied worked-oriented research, to create an
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 169
innovation and entrepreneurial culture, to facilitate the integration of new technologies and to
support small- and medium-sized enterprises (SMEs) and other creators in their efforts to innovate.
3.40 In fact, innovation is one of the key factors of the creation of new industries and the
revitalization of existing ones, in both developed and developing countries. A recent study found
that 20% of existing international trade relies on new patents. In a globalizing economy, the
competitiveness of industries can only be maintained by continuous innovation.
3.41 It is not only large, multinational bodies and the results of national or international research
and development programs that produce innovation or innovative products; SMEs and private
research activities not only contribute, but should become a major force behind the innovations
which promote economic growth. With the increasing complexity of market relations in the
globalization of international trade and commerce, support structures and services to facilitate the
transfer of technology or knowledge from creators to industry are of increasing importance.
3.42 The progress from an idea or initial research, to a marketable product or innovation is often
difficult, long and costly. Unfortunately, in many cases, inventions and innovations are considered
high-risk investment and do not obtain financial support easily. Consequently, the necessary
funding to develop innovation or inventions into marketable products is rare and naturally more
problematic in developing countries.
A Global Approach to Establishing Innovation and Invention Support Structures
or Services
3.43 Innovation is often influenced by the environment in which innovators work. Factors that
generate a favorable overall environment for inventions and innovation are:
- the state of science and technology;
- the legal, fiscal and general financial systems;
- the scientific and entrepreneurial culture;
- the technological and manufacturing infrastructure;
- human resources and their level of knowledge and education.
3.44 Specific factors that influence innovation are the relationships between universities, financial
institutions, governmental offices and industry networks among others. Furthermore, the
administrative and financial regulations governing the creation of new companies play an important
role.
3.45 Since these factors can be influenced by national policies, the establishment of support
services or a structure for invention and innovation should be considered as a governmental priority.
Also, national innovation support structures and programs for services should be seen as a unified
whole, with the main objective of increasing the capacity of society to generate inventions and
innovations, including the transfer of technology, both nationally and internationally.
3.46 Technology transfer does not only consist of the transfer of intellectual property rights: the
signing of license agreements, payment of royalties and transfer of intellectual property are only a
170 WIPO Intellectual Property Handbook: Policy, Law and Use
part of it. Unpatented know-how, ideas and suggestions often constitute information of
considerable use, however difficult to evaluate, and furthermore other factors, such as conferences,
meetings, and even personal relationships among technologists, make an important contribution.
The promotion of a combination of all these modes of transfer assists all forms of creativity.
3.47 However, an evaluation of the prevailing environmental factors influencing innovation in a
given country will be the first step to take to determine the innovation and invention structures and
services that can be implemented there to increase its competitiveness in local, regional and
international markets.
Implementing and Managing Innovation and Invention Support Structures and
Services
3.48 Promoting innovation is a national policy objective, which can be attained only if all the
economic players of a country participate in such a policy. Therefore, innovation support structures
should be considered a public service for innovative minds, entrepreneurs and SMEs, as are other
public services on offer, for example, health care or education. This public service should give
incentives to and reinforce inventors, innovators and SMEs investing their ideas and transforming
them into products, processes and technologies, which ultimately benefit society as a whole.
3.49 Innovation and invention support structures and services have to develop their own type of
management, with planning and policies depending on the circumstances prevailing in each
country. However, generally speaking, managing an innovation support structure needs the
creation of an efficient and autonomous organism approved by the national authority.
3.50 It could be an organization, whose operations should be accountable to public authorities
(for example, a board of governors or an executive committee, composed of representatives of all
stakeholders), with the flexibility and adaptation capacity of an independent organism. It would be
an organization for the development of new techniques and products and the valorization of
intellectual property rights.
3.51 This organism would have the mission of advising the national authorities on the global
environmental factors and the changes needed to set up innovation support structures, and notably
innovation centers able to bridge the gap between creators and the market. The persons involved
would have to prepare a technology development action plan based on evaluation of the
weaknesses and strengths of the local realities, and considering funding to support the
development phase, which could in some cases last several years.
3.52 This plan would have to be approved by all parties concerned. The first members of the
organization should be drawn from the local authorities and interested private business, and could
later be assigned to monitoring and providing budgetary and general oversight control of the
program. WIPO and/or other international partners could provide advisory assistance.
Innovation Center or Innovation Support Network
3.53 An important element of these innovation structures is an organism — or a network of
entities — which acts as the missing link on the one side, between researchers, individual inventors,
research centers and universities and, on the other side, SMEs, investors, industries and those who
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 171
finally will bring the new products or services to the market. The organism can be called an
“innovation center”: its mission would be to assist individual inventors (including university
researchers), SMEs, other creators and businesses to bring innovatory projects to completion. The
offer of services of the innovation center should facilitate the development of their inventive and
innovative ideas and assist them in commercializing or other dissemination on the market.
3.54 To realize that mission, the innovation center should offer certain major functions, in
addition to administrative services. These functions, which can be performed either with in-house
staff, a specialist network or through a cooperative structure (which last could be an attractive
option in developing countries), are to provide:
- an information and promotion program to answer questions from inventors, researchers,
entrepreneurs or anyone seeking adequate information on the necessary steps that have to be
taken to realize innovation or invention projects, and notably on managing intellectual property
rights;
- an evaluation program, including initial screening of submitted ideas or inventions to
determine acceptability for evaluation. The center should be able to do preliminary evaluation,
which provides expert opinions on the strengths and the weaknesses of an invention regarding its
novelty, technical feasibility and market potential;
- a business assistance program to take the chosen projects through all stages of their
development, including the market study, the technical research and development and prototypes,
the intellectual property management and the filing of applications for protection of rights, the
enterprise creation, the commercialization and decision-making, support to negotiate a licensing
agreement with a third party, the preparation of the business plan, counselling to SMEs on the preproduction
process, and help to individual creators to find industrial or other partners to
commercialize their invention or innovation;
- prototyping services, which could produce operational models for demonstration purposes
or organize pilot (test) production;
- a seminar and workshop program to generate knowledge in the community, in cooperation
with experts such as patent attorneys and intellectual property public relations officers, on the
evaluation and assessment of innovation and on the management of intellectual property rights;
- a brokering program of activities designed to acquire financial support for the development
and the commercialization of selected projects supported by the Center;
- assistance in creating smaller offshoots (spin-offs) of large organizations or companies,
particularly in countries where the industrial structure does not always have the capacity to
integrate innovations with a high content of knowledge, research and development.
3.55 In some cases intellectual property offices and private experts in this field tend to see
themselves as intermediaries, as examiners and attorneys only. They do not always realize their
potential as a major influence in the global economic context, in which they can promote a national
strategy to protect and valorize knowledge, inventions and innovation.
3.56 WIPO has established an online reference service that provides information on the activities
of and services offered by innovation centers worldwide. The site http://www.wipo.int/icdir may be
consulted.
172 WIPO Intellectual Property Handbook: Policy, Law and Use
Licensing and the Transfer of Technology
Introduction
3.57 One means for accomplishing economic development through the transfer of technology is
the commercial transfer and acquisition of technology. Of course, technology can also be
transferred and acquired by other than commercial methods. Personnel can be educated or trained
at research and development institutions, technical institutes or centers of higher learning. Such
personnel can in turn study books, periodicals or other publications on special scientific and
technical subjects, or read patent documents, and in that way acquire knowledge of specific
technology. But these methods will inevitably fall short of enabling those personnel or others to
apply that knowledge, especially the inventions described in patent documents, to manufacture
products, produce goods or render services.
3.58 This is true for two reasons. First, the exclusive rights to work an invention belong to the
owner of that invention. Without the authorization of the owner, others should not put into
practice the patented invention. Second, as has been mentioned, not all the knowledge — the
know-how — which facilitates or is otherwise useful for the working of the invention is set forth in
the description of the invention that is found in the patent document. Hence, it becomes necessary
to buy those rights, or to buy the permission to use the invention, or to buy the know-how that
enables the invention to be put into practice in the most efficient way.
The Commercial Transfer and Acquisition of Technology
In General
3.59 The sale and purchase of the exclusive rights to a patented invention or of the permission to
use the invention or of the know-how, takes place through legal relationships between the owner
of the exclusive rights or the supplier of the know-how, called the transferor — and the person or
legal entity which acquires those rights or that permission or receives that know-how, called the
“transferee.”
3.60 Those legal relationships are essentially contractual in nature, which means that the
transferor of the technology consents to transfer and the transferee consents to acquire the rights,
the permission or the know-how in question.
3.61 There are three principal legal methods that can be used to bring about a commercial
transfer and acquisition of technology.
The Sale: Assignment
3.62 The first legal method is the sale by the owner of all his or its exclusive rights in a patented
invention and the purchase of those rights by another person or legal entity.
3.63 When all the exclusive rights to a patented invention are transferred, without any restriction
in time or other condition, by the owner of the patented invention to another person or legal entity,
it is said that an “assignment” of such rights has taken place. That concept of assignment is
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 173
recognized in the laws of many countries. It applies also to the exclusive rights in utility models,
industrial designs and trademarks, as well as other objects of industrial property. For the sake of
simplicity, however, the further explanation of this legal concept will be confined to the principles
and characteristics of the assignment of the patented invention. Similar principles and
characteristics apply to the assignment of other industrial property subject matter.
3.64 The legal act whereby the owner of the patented invention transfers those rights to another
is evidenced by a writing in the form of a legal document generally referred to as an “instrument of
assignment of patent rights” or “assignment of patent rights” or, more simply yet, as an
“assignment.” The transferor is called the “assignor” and the other person or entity, the
transferee, is called the “assignee.” When an assignment takes place, the “assignor” no longer has
any rights in the patented invention. The “assignee” becomes the new owner of the patented
invention and is entitled to exercise all the exclusive rights in the patented invention.
The License Contract
3.65 The second legal method is through a license, that is, the permission by the owner of a
patented invention to another person or legal entity to perform, in the country and for the duration
of the patent rights, one or more of the acts which are covered by the exclusive rights to the
patented invention in that country. When that permission is given, a “license” has been granted. It
may be recalled that those acts are the making or using of a product that includes the invention,
the making of products by a process that includes the invention, or the use of the process that
includes the invention. The concept of “license” is also recognized in the laws of many countries.
It applies also to the exclusive rights in other objects of industrial property. Again, for the sake of
simplicity, the remaining explanations of the principles and characteristics of the license will be
limited to the patented invention.
3.66 The legal document evidencing the permission given by the owner of the patented
invention is usually referred to as a “license contract” or, more simply yet, as a “license.” The
owner of the patented invention who gives that permission is referred to as “the licensor.” The
person or legal entity who or which receives that permission is referred to as “the licensee.” The
license is usually granted subject to certain conditions which will be set out in the written document
by which the license is granted to the licensee.
3.67 One of the conditions will obviously be related to the payment by the licensee of money in
return for the license that is granted. Another condition might be that the invention will be used by
the licensee only for the manufacture of products destined for a specific use, as for example, the
manufacture of a pharmaceutical product for use by humans but not for use on animals. Another
condition might be that the licensee work the invention in certain factories only or sell the product
embodying the invention in certain defined areas only.
3.68 It is also possible that the conditions may relate to promises to be made or action to be
taken by the licensor. For example, the licensor may promise to defend in court a lawsuit brought
by a third person against the licensee in which that third person claims that the working of the
invention by the licensee violates the exclusive rights already conferred by the grant of another — a
separate or distinct — patent for invention which is owned by that third person.
3.69 In a number of countries, the legal form of the document evidencing an assignment or a
license contract and other formalities and requirements concerning an assignment or license are
prescribed by the patent law or by the commercial law. Thus, a requirement may be imposed that
an instrument of assignment of patent rights be executed in a particular manner, as for instance, it
may be required that the instrument be signed not just by the assignor but also by the assignee.
174 WIPO Intellectual Property Handbook: Policy, Law and Use
3.70 In addition, in a number of countries, the patent law may require that an instrument of
assignment of patent rights or a license contract be presented to the patent office for registration.
By the act of registration, the assignee or the licensee is recognized by the Government as the
transferee or holder of the rights transferred by the assignment or of the rights conferred by the
license contract.
3.71 The law may also require that the terms and conditions set forth in the instrument of
assignment or in the license contract be reviewed or examined and approved by one or more
designated governmental authorities. For instance, where technology is to be acquired from abroad
or where payments in foreign exchange must be made, the law might require the foreign
investment commission or the central bank or both to review and approve the provisions of the
assignment or the license contract.
The Know-How Contract
3.72 The third of the three principal legal methods for the transfer and acquisition of technology
concerns know-how.
3.73 It is possible to include provisions concerning know-how in a writing or document that is
separate from a license contract. It is also possible to include such provisions in a license contract.
In the case where the know-how relates to a patented invention or a registered trademark or
industrial design, the provisions are usually included in the license contract that deals with that
patented invention or other object of industrial property. This is particularly so when the owner of
the patented invention or other industrial property subject matter is also the developer and holder
of that know-how. For a variety of reasons, however, even in such a case, the provisions
concerning the know-how might be placed in a separate or distinct writing or document.
Whenever provisions concerning know-how appear in a separate or distinct writing or document,
that writing or document is normally called a “know-how contract.
3.74 Through such provisions, one party, the supplier of the know-how, undertakes or promises,
to communicate the know-how to another party — the recipient of the know-how, for the use by
that other party.
3.75 The know-how may be communicated in a tangible form. Documents, photographs,
blueprints, computer cards and microfilm, among others, are illustrations of tangible forms.
Examples of know-how that could be transmitted in such forms are architectural plans of the
factory buildings, the diagrams of the layout of the equipment in the factory, drawings or blueprints
of machines, lists of spare parts, manuals or instructions for the operation of machines or the
assembly of components, lists and specifications of new materials, labor and machine time
calculations, process flowcharts, packaging and storing instructions, reports on stability and
environmental aspects and job descriptions for technical and professional personnel. Such
know-how in tangible form is sometimes referred to as “technical information or data.”
3.76 The know-how might also be communicated in an intangible form. Examples would be an
engineer of the supplier of the know-how explaining a process to an engineer of the recipient or
the manufacturing engineer of the recipient witnessing a production line in the enterprise of the
supplier. Another example would be training in the factory of the recipient, or at the enterprise of
the supplier, of personnel of the recipient.
3.77 Know-how in intangible form relating to the demonstration of, or advice on, manufacturing
and other operations is sometimes referred to as “technical services.” Know-how in intangible
form relating to training is sometimes referred to as “technical assistance.” Where the know-how
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 175
in intangible form is to consist in the actual direction of manufacturing operations, or other
operations such as planning, or financial and personal administration, or marketing, it is sometimes
referred to as “management services.”
3.78 The possibility that the know-how to be communicated by the supplier to the recipient
might be disclosed, accidentally or otherwise, to third persons, is a very real concern to the supplier
of the know-how. The provisions concerning know-how in the contract will thus cover various
measures to safeguard against the disclosure of the know-how to unauthorized persons.
Sale and Import of Capital Goods
3.79 The commercial transfer and acquisition of technology can take place with the sale,
purchase and import of equipment and other capital goods. Examples of capital equipment are
machinery and tools needed for the manufacture of products or the application of a process.
3.80 Raw materials, for example, crude oil or phosphoric acid, can also be considered as capital
goods in that although they are products in themselves, they may be necessary for the manufacture
of another product, such as gasoline or fertilizer, respectively. So also, intermediate goods, such as
cotton or polyester fiber, or woven cloth and leather, which is to be cut and sewn into clothing, and
parts or other components, such as tyres, batteries, radiators and engines, which are to be
assembled into an automobile, may be regarded as capital goods in that they are needed in the
manufacture of other products.
3.81 Such sales and purchases of capital goods and their import into the country can be
considered, in a sense, technology transfer transactions. Contracts covering the sale and purchase
and the import of capital goods are sometimes associated with a license contract or with know-how
provisions or a know-how contract. In certain instances, provisions concerning the sale and
purchase and the import of capital goods may be found in the license contract or the know-how
contract itself.
Franchising and Distributorship
3.82 Commercial transfer of technology may also take place in connection with the system of the
franchising or distributorship of goods and services.
3.83 A franchise or distributorship is a business arrangement whereby the reputation, technical
information and expertise of one party are combined with the investment of another party for the
purpose of selling goods or rendering services directly to the consumer.
3.84 The goods in question may be durable, as in the case of automobiles or home appliances.
They may be consumable in use, as, for example, prepared food or beverages. The services may
extend to the rental of capital equipment, for example, automobiles, trucks or other power
equipment, or to hotel operations, or dry cleaning facilities, or secretarial help.
3.85 The outlet for the marketing of such goods and services is usually based on a trademark or
service mark or a trade name and a special décor (the “look”) or design of the premises. The
license of such a mark or name by its owner is normally combined with the supply by that owner of
know-how in some form, either technical information, technical services, technical assistance or
management services concerning production, marketing, maintenance and administration. The
owner of such a mark or trade name and know-how is called a “franchisor” or “licensor.” The
party to whom the license is granted and the know-how is supplied is called the “franchisee,”
“distributor” or “dealer.” The franchisee, distributor or dealer may own the premises or contribute
176 WIPO Intellectual Property Handbook: Policy, Law and Use
money and time as an investment in the business firm. Other aspects of the business relationship of
the parties to the contract, including sharing of the profits of the franchise or distributorship, will be
agreed to between the franchisor or licensor and the franchisee or distributor or dealer and set
forth in a document called a “franchise agreement” or “distributorship agreement.”
3.86 As in the case of an assignment, a license contract and a know-how contract, the law may
require that such franchise or distributorship agreements be registered and reviewed or examined
and approved by one or more designated government authorities.
The Consultancy Arrangement
3.87 The help of an individual consultant or a firm of consultants that will give advice and render
other services concerning the planning for, and the actual acquisition of, a given technology can be
useful, if not indispensable, for such enterprises, entities and governments that wish to acquire
technology from enterprises in other countries.
3.88 In such a business arrangement not only is help received in acquiring the technology but the
experience gained and the lessons learned in engaging and working with the individual consultant
or firm of consultants will be valuable knowledge that can serve to better carry out future projects.
3.89 As concerns planning, the advice or services may relate to the choice of the product to be
manufactured or improved upon and the technology to be used, to the investment required, to the
type of business organization or other relationships to be established, and to the suitability of each
for the objective or objectives to be attained.
3.90 The consultancy services might extend also to the implementation of a project. “Design and
engineering” services are a typical example. Such services concern the preparation of the plan for
the site of the plant, the design of the factory building, the design of machinery and other
equipment, the preparation of tender documents for the construction of the building or the
equipment and for civil engineering work, the evaluation of bids and advice on the awar,d of
contracts, the supervision of the construction of the factory, including the installation of the
equipment, the supervision of the start-up and testing of the equipment and making findings on
the state of performance of the process utilized, as well as giving advice in the initial period on the
operation of particular equipment or the entire factory.
3.91 One or more individual consultants or firms of consultants might be engaged to render the
services in question. Usually, however, such an individual or firm specializes in a particular type of
service, such as investment planning, design and engineering, environmental impact, marketing or
business organization and management. In a sense, the consultancy services are forms of
know-how. They can thus be considered within the framework of the know-how contract, more
particularly, the technical services contract or agreement.
The Turn-Key Project
3.92 In certain instances, two or more of the business arrangements, and hence the legal
methods that they reflect, can be combined in such a way as to entrust the planning, construction
and operation of a factory to a single technology supplier, or to a very limited number of
technology suppliers.
3.93 Thus, the “turn-key project” may involve a comprehensive arrangement of certain of the
legal methods, whereby one party undertakes to hand over to his client — the technology
recipient — an entire industrial plant that is capable of operating in accordance with agreed
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 177
performance standards. More usually, the turn-key project involves the undertaking by one party to
supply to the client the design for the industrial plant and the technical information on its
operation. In the latter event, supplementary arrangements might also be made for the acquisition
of rights to the technology, for civil engineering work and for provision of technical services and
assistance concerning the construction of the plant, the purchase and installation of equipment,
raw materials or parts and components, training and supervision of the operation of the plant, at
least in its initial stages.
3.94 It is called a “turn-key” project because the end result is to “turn” over to the client the
“key” to the door of the industrial plant. That is a symbolic way of expressing the completion of
the tasks agreed to between the parties.
3.95 Both the consultancy arrangement and the turn-key project arrangement have their
shortcomings. The first does not usually entail the responsibility of the consultant for the results. In
the second, the technology supplier or suppliers are so responsible. Neither the first nor the second
provides means for a continuing involvement of the technology supplier so that access to later
advances in its technology can be more readily facilitated. This is because neither contains a
commitment to the technology acquirer to provide further advice or services or to provide improved
or additional technology. Neither contains measures to provide money or other resources that may
be needed for further growth.
3.96 Because of these shortcomings and for other reasons, joint venture arrangements can be
more attractive means of industrial or commercial cooperation.
Joint Venture Arrangements
3.97 The nature of a “joint venture” is briefly referred to under “Territorial Franchises” in
chapter 2. The subject is further developed here as to the forms of joint ventures possible, and the
legal methods applicable.
3.98 There are two fundamental forms of joint venture, the equity joint venture and the
contractual venture.
3.99 The equity joint venture is an arrangement whereby a separate legal entity is created in
accordance with the agreement of two or more parties. The parties undertake to provide money or
other resources as their contribution to the assets or other capital of that legal entity. That entity is
usually established as a limited liability company and is distinct from either of the parties that
participated in its creation. That company becomes the owner of the resources that are contributed
by each party. Each of the parties in turn become the owners of the company, that is, each is said
to have “an equity” in the company.
3.100 Where one or more of the parties is a foreign enterprise or entity, such a party is, or such
parties are called a “foreign participant” or “the foreign participants.” The parties or participants,
as they are called, will agree on the purposes and functions of the limited liability company, the
proportion of the capital each will contribute to, and the share of each in the profits of, the limited
liability company, and on such other matters as its management, operation, duration and
termination.
3.101 On the other hand, the contractual joint venture might be used where the establishment of
a separate legal entity is not needed or where it is not possible to create such an entity. This may
be the case where the project involves a narrow task or a limited activity or is for a limited time or
where the laws of the country in which the business operation is to be conducted do not recognize
178 WIPO Intellectual Property Handbook: Policy, Law and Use
the ownership of property by foreigners. The relationship between the parties will be set forth in
the contract or agreement concluded between them.
3.102 The different legal methods for the commercial transfer and acquisition of technology can
be used in either form of joint venture arrangement.
3.103 An assignment of the exclusive rights to a patented invention, a utility model, industrial
design or trademark by one of the participants could constitute a portion of that participant’s
contribution to the capital of the joint venture company. It is also possible, of course, for one of the
participants to grant a license of a patented invention or other object of industrial property or to
supply know-how as part of that participant’s contribution to the joint venture company. More
commonly, however, such a license or the supply of know-how in one or more of its forms will be
the subject of one or more contracts made after the joint venture company is established. Those
contracts will be concluded between one of the participants as the transferor of the technology in
question and the joint venture company. Through such contracts the technology in question can be
transferred to the joint venture company which will thus acquire the means to enable it to carry out
its operations.
3.104 Whether one or more of the legal methods are used in the establishment of the joint
venture company, or whether one or more of those legal methods are used and when so as to
enable the joint venture to carry out its operations, will be matters for negotiation between the
prospective participants. The result of their negotiations will be reflected in the joint venture
agreement. The license contract, the know-how contract, the technical services or the technical
assistance contract, the franchise contract and contracts covering other commercial matters might
even form annexes to the joint venture agreement. They would be signed once the joint venture
company was established.
3.105 Needless to say the joint venture agreement, whether it be for the establishment of a
limited liability company or not, and the different contracts of the various legal methods that may
be used, must be concluded in accordance with laws and regulations applicable to such companies
and to the tax laws concerning those companies or to the laws relating to agency or partnership, as
well as to other economic laws, including laws relating to labor, sales of goods, insurance and
foreign economic and trade contracts.
Negotiation of Licensing Agreements
Introduction
3.106 Any technical licensing contract may be analyzed in respect of the following basic elements:
- the subject of the contract;
- the licensor’s obligations;
- the obligations common to both parties.
3.107 The following topics are typically the subject of the negotiations leading to the conclusion of
the license contract or which require special attention in drafting its provisions. These provisions are
discussed from the point of view of the licensing of patents but they apply also to the other forms
of intellectual property.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 179
Identification of the Parties
3.108 One of the first points of concern to the negotiators of the license contract will be the
identification of the entities or persons which or who will become the parties or, in other words, will
sign the license contract and become legally bound to carry out its provisions.
3.109 The objective in describing the parties to a license contract is to identify each of them with
sufficient certainty, so that their identity will not later become a subject of controversy.
3.110 This objective assumes particular significance in complex business transactions between
more than one entity or person on either side and between entities or persons in different
countries.
3.111 For example, one side in the negotiations leading to the conclusion of the license contract
may be a grouping of legal entities, all organized and located in one foreign country or each
organized and located in separate countries, but in either case, with a common ownership, control
or other interest. In such cases, it may be contemplated that the patent license will be given by one
of the legal entities in the group (or perhaps even by a legal entity outside the group) and that other
performances will be undertaken or received by one or more of the other legal entities in the group.
3.112 Similar questions will arise where the other side to the negotiations is likely to involve a
number of governmental authorities — ministries, commissions, bureaus or administrations or other
governmental units — or public entities, state enterprises or private entities, including those
established as a result of a joint venture with a foreign legal entity.
3.113 Further, consideration will have to be given to whether one document setting forth all the
terms and conditions and commitments should be prepared and executed between all the parties
on both sides or whether several documents, each containing distinct terms and conditions and
commitments, should be drawn up and signed by the different parties on each side.
Objectives of the Parties: Scope of the License
3.114 When the parties are negotiating a license contract, they usually proceed on the basis that
certain technology is necessary for the manufacture of a particular product or the application of a
particular process from which a product or other result is to be obtained. In other words, the
ultimate objective of the parties in concluding a license contract is the transfer by the licensor, and
the acquisition by the licensee, of a given technology and of the right to exploit that technology in
the making, or in the use or sale of a given product or in the application of a given process through
which a product or other result will be obtained.
3.115 Their objective will be reflected in a general way either in a preambular part of the license
contract, consisting of a series of provisions often referred to as “recitals” or “whereas clauses,” or
directly in an operative element of the license contract, consisting of a particular article entitled
“background information.”
3.116 The objective of the parties to the license contract will be expressed more specifically in
subsequent provisions that delineate the “scope” of the license contract. One set of those
provisions identifies the technical subject matter of the license contract (that is, the product or the
process, the invention or inventions and the know-how and technological advances, if any).
Another group of those provisions will determine which of the parties may perform one or more
acts of exploitation, designate the place or places where that act or those acts may take place,
establish the duration of the exploitation and specify the purpose or purposes for which the
180 WIPO Intellectual Property Handbook: Policy, Law and Use
technology may be exploited. Other provisions will prescribe the level of working of the invention
or inventions, specify the means, if any, to assist in the exploitation, fix the remuneration for the
exploitation and state the consequences of a failure of or of an interference with the exploitation of
the technology or with other commitments agreed upon.
Subject Matter
3.117 These provisions describe the product to be made, used or sold, or the process to be applied
and from which a product will be obtained and in turn used or sold; they will also identify the
invention or inventions included in that product or process, describe the know-how, if any, that is to
be supplied and identify the technological advances of one party or the other, and the conditions
under which those advances will be made available by that party to the other.
Identification of Product or Processes
3.118 Since the ultimate objective of the licensee concerns a product or process, one of the
provisions in the license contract will identify in concise terms that product or process. In the typical
case, that provision is set forth in the part of the license contract dealing with definitions.
3.119 The product might be identified somewhat broadly, as for example, “instruments for the
purpose of writing,” which would include, for instance, fountain pens, ball-point pens and felttipped
pens. The product might be defined more specifically, as for example, only one or more but
not all of those kinds of pens.
3.120 The process might be identified as a chemical formula according to which certain chemical
substances interact when a specified catalyst is introduced resulting in a specified product.
3.121 The title and the abstract included in the application for the grant of a patent for the
invention that is embodied in the product or the process may be a useful starting point in providing
the requisite information to describe the product or the process.
Identification of the Invention
3.122 The provision that identifies the invention or inventions included in the product or process
usually refers to the number of the patent for invention or the application for the grant of a patent
for invention, the country where the patent was granted or registered or where the application was
filed, the date of the patent grant or the filing date of the application, and in some cases the title of
the invention and the status of the application. Where the product or the process in question
includes a number of inventions, the relevant information in respect of each invention is usually
grouped together and set forth in a schedule attached to the license contract.
Description of the Know-How
3.123 Under the standard requirements of most patent laws, the description of the invention
claimed in an application for the grant of a patent for invention must disclose the invention in a
manner sufficiently clear, detailed and complete to permit a person having ordinary skill in the art to
carry out the invention. Some patent laws go further, and require also that the best mode
contemplated by the inventor for carrying out the invention be described. But those patent laws do
not extend to requiring a description of additional means that may facilitate the carrying out of the
invention. Such additional means may consist of the use of technical information and expertise
acquired through long experimentation with the invention.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 181
3.124 As regards the description of such know-how, technical information can be identified in
terms of the relevant documentation, as for example, diagrams of the layout of the plant, drawings
or blueprints of machines, lists of spare parts, manuals or instructions for the operation of machines
or the assembly of components, specifications of raw materials, labor and machine time
calculations, packaging and storing instructions and information on stability and environmental
aspects. Job descriptions can be drawn up for each expert whose technical or professional expertise
is needed. This information can be set forth in one or more annexes, appendixes or schedules
attached to the license contract.
Confidentiality
3.125 Know-how is acquired or developed by the licensor in the course of research and
development activities or through the application of industrial and business techniques in the
operations of the licensor’s enterprise. The know-how may often be the reason for the current
competitive position, if not superiority, of the licensor in the field of technology concerned. As
such, it is a valuable asset of the licensor to be preserved. At the same time, it is a resource which
the licensor is willing to part with in exchange for an agreed price from the licensee or others who
wish to use it. Its supply to the licensee is consequently the result of a bargain in which the price is
not just the payment of a monetary remuneration fixed by the license contract but also the
commitment by the licensee not to disclose that know-how to third persons except under certain
conditions or with the consent of the licensor.
Access to Technological Advances
3.126 The technological advance of immediate concern to the parties to the license contract will
normally be one which significantly or substantially affects, for example, in the case of a given
product, the volume of its production, the cost of its manufacture or the efficiency of its use, or, in
the case of a given process, the material conditions under which that process is applied, or the cost
of its application, or the efficiency of its application.
3.127 The parties might decide that the mutual exchange of information on technological
advances is in their best interests, and that each shall be free to exploit, free of charge, the
technological advance of the other. This is called cross-licensing. They might also decide that if
either party makes available the technological advance of the other to a third person for a
remuneration, then the other shall be entitled to share in that remuneration in some agreed manner
and amount. It is usually provided further that the party making the technological advance should
apply for patent protection. In the event that it does not elect to do so, the other party may apply,
in the name of either and at the expense of the party applying.
Limitations of the License and Anti-competitive Practices
3.128 The license can have several contractual limitations regarding permissible activities (to make,
to sell, the fields of use, etc.), restrictions to part of the claims on them as well as territorial or
quantity restrictions or limitations on the sale prices.
3.129 However, any provision conflicting with the prohibition of antitrust or anti-competitive
practices is usually to be considered null and void. The main requirement is that as a rule exclusive
intellectual property rights represent a pro-competitive monopoly for a limited duration only, so that
their owner should not exercise his right by abusing his monopoly, e.g., by imposing anticompetitive
obligations on the licensee. The most important forms of such abuse can be, for
example, tie-in clauses, export bans, minimum royalty clauses, exclusive grant-back, conditions
preventing challenges to validity and coercive package licensing. Tie-in clauses provide that the
182 WIPO Intellectual Property Handbook: Policy, Law and Use
licensee may purchase materials only from certain sources; grant-back clauses secure exclusive
rights to improvements in favor of the licensor.
3.130 Under the TRIPS Agreement Members agree that some licensing practices or conditions
pertaining to intellectual property rights which restrain competition may have adverse effects on
trade and may impede the transfer and dissemination of technology.
3.131 Nothing in the TRIPS Agreement prevents Members from specifying in their legislation
licensing practices or conditions that may in particular cases constitute an abuse of intellectual
property rights, with an adverse effect on competition in the relevant market. A Member may
adopt, consistently with the other provisions of the Agreement, appropriate measures to prevent or
control such practices, in the light of the relevant laws and regulations of that Member.
Territorial Exclusivity
3.132 Which of the parties to the license contract will be able, by virtue of its provisions, to
perform what act or acts of exploitation, in what territory or territories, and with what effects on
arrangements with third persons in relationship with the licensor or the licensee, who are also
interested in exploiting the technology, are distinct but related questions. They are related because
each concerns the exclusive right of the licensor under the patent for invention granted to the
licensor which will be the subject matter of the license contract. A decision on each of these
questions must be clearly reflected in the license contract.
Permitted Field of Use
3.133 A provision on the field or fields of use or activity specifies the purpose or purposes for
which the invention or the know-how may be applied. It serves to define the scope of that
application by the licensee. At the same time, depending on that defined scope, the licensor may
be able to grant a license or supply know-how to each of a number of other licensees, each
specializing in different applications of the invention or the know-how in question. That permits
the most practical way of exploiting the invention or know-how, given the capabilities of each
particular licensee.
3.134 In the long run, though, it may be desirable for the licensee to have the opportunity to
apply the technology for all purposes. The price asked for in that case, however, must be compared
to the lower price which may be asked for if a limited purpose is agreed to. The comparison
becomes all the more relevant if the licensee is not currently, nor in the future likely to be, in a
position to exploit the technology beyond the limited purpose.
Exploitation
3.135 The licensor expects that the licensee will not only exploit the invention and apply the
know-how but will do so to the fullest extent permitted by the terms and conditions of the license
contract.
3.136 The parties might wish to specify that the licensee will make, use or sell the product that
includes the patented invention or will apply the know-how in a certain manner with a view to
obtaining a certain result and to exploiting the technology at a certain level. The parties might wish
also to set forth the commitments of the licensor, the performance of which will assist the licensee
in achieving the expected manner and extent of working or other exploitation.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 183
3.137 The questions that usually arise in respect of the manner and extent of exploitation are
concerned with the following matters: the quality of the product, the volume of production, the
making of part of the product by third persons to be authorized by the licensee, the import of the
product to meet local demand in the absence of sufficient working in the country itself and the use
of the distribution channels of the licensor.
3.138 The licensee may seek an assurance that the know-how supplied will be adequate to attain
the objective agreed with the licensor. Such an assurance is referred to as a guarantee of knowhow.
In this context, a guarantee is an assertion that a given fact or event concerning the knowhow
exists or that a given performance will take place if the know-how is applied; that assertion is
accompanied by a promise that if the fact or event does not exist or the performance does not take
place, a correction will be made or some other act will be done in its place.
3.139 The guarantee provision of the license contract might be phrased in terms of the conformity
of the know-how supplied to the agreed description of what was promised to be supplied. It might
be phrased in terms of the results to be attained by the application of the know-how. It might be
phrased in terms of the suitability of the know-how to meet the technological requirements of the
licensee.
Settlement of Disputes
3.140 When non-performance is likely to or does occur, and there is no provision in the license
contract which fixes the agreed consequences in respect of that failure of performance, one party
might propose a solution that is satisfactory to the other. That solution might be the allowance of
additional time to render the performance or the substantial correction of the flaw or flaws in
question. It might mean that some other performance in lieu of the defective performance would
be acceptable. In these ways, an amicable way of settling the dispute between the parties could be
arrived at without recourse to legal remedies in the courts or other tribunals.
3.141 Normally, the law of the country where a given act or performance is to take place governs
the disputes arising out of that act or performance and the competent courts are the courts of that
country. In the case of a license contract involving a foreign licensor and a domestic licensee, the
law of the licensee’s country would be applicable and the courts of that country would be
competent since most, if not all acts or performances take place in that country. However, the
contract may stipulate, subject to possible limitations under the law of the licensee’s country, that
disputes arising under the contract will be subject to arbitration rather than to judicial proceedings.
3.142 Yet circumstances could arise when the party injured by the default in the performance of
the other is not offered a satisfactory solution. It could be also that the party alleged to have
defaulted, denies that there has been a failure to perform as agreed. In either event, some
machinery for the settlement of the dispute should be provided for before recourse is had to the
courts or other tribunals. Thus, recourse might have been to the advice of independent experts, or
the findings and recommendations of a group consisting of representatives of each side, or to
conciliation or to arbitration proceedings or, ultimately, to the courts or other tribunals competent
in the matter. In particular, a clause designating the WIPO Arbitration Center as the forum for
settling disputes may be added to a license contract.
Duration of the License Contract
3.143 The time-scale of a licensing contract, that is, its commencement, duration and termination,
must be stipulated in the contract. An intellectual property right can be licensed for the maximum
period of time during which it is in force (for patents, for instance, the maximum is generally
184 WIPO Intellectual Property Handbook: Policy, Law and Use
20 years). Shorter licensing periods may also be agreed upon and the parties may reserve the right
to terminate the contract with future effect in case of specified circumstances.
Remuneration
Introduction
3.144 The “price” or the “cost” of the acquisition of industrial property is dependent upon a
number of factors, including the nature and duration of the industrial property rights and the
technology and the relative bargaining power of the parties. The prospective transferor usually
makes a careful assessment in terms of value or the need for the particular technology, the
alternative technologies available, the prospect of technological advances and the likely production
and profitability of the potential transferee. The prospective transferor also makes detailed
projections of production and consequent income flow from other potential licensees or technology
recipients.
3.145 The potential transferee assesses the total payments likely to be made for a particular
technology and for advances in that technology against the profitability of the enterprise over a
period of time and also evaluates such payments in relation to costs of alternative technology or
payments made with respect to similar transactions.
Direct Monetary Compensation
3.146 Direct monetary compensation for industrial property rights or for technology may take
different forms: (a) “lump-sum payment”, a pre-calculated amount to be paid once or in
installments, (b) “royalties”, post-calculated, recurring payments, the amount of which is
determined as a function of economic use or result (production units, service units, sales of the
product, profits), and (c) “fees,” compensation for services and assistance rendered by technical or
professional experts, fixed at a specified amount or calculated per person and per period of service.
3.147 These forms of remuneration may be combined in a given industrial property license or
technology transfer agreement. In some instances, the lump-sum payment form may replace the
system of royalties altogether, while in other instances the two might be combined one way or
another, as where the licensee or technology recipient may elect to make a lump-sum payment in
lieu of one form of royalty or another. In other instances, the licensee or technology recipient may
be given the opportunity to elect to pay royalties on production units rather than on sales. The fees
for technical services and assistance may be determined separately, either stipulated in advance or
negotiated as rendered.
3.148 It is to be noted, however, as elaborated below, that under the laws in certain countries
governing the transfer of technology, the various rights or elements of technology may have to be
separately priced or valued and even made the subject of distinct licenses or agreements.
Lump-Sum Payment Compared with Royalties
3.149 The lump-sum payment is characterized by the fact that the obligation is fulfilled
immediately or fairly shortly. Further, the parties do not have to make continuous accounts or
control the calculation or the remittance, as in the case of royalties.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 185
3.150 The lump-sum payment, when compared with royalties, may or may not have certain tax
advantages. The continuous payment of royalties is considered to be income to the licensor or
technology supplier from the viewpoint of taxation and, as such, royalties are subject to income tax.
The single lump-sum payment, and even the lump-sum payable in instalments, may be considered
the counterpart to, or the financial result of, a sale or purchase operation, with the assignment or
transfer of the industrial property rights and the supply of the know-how considered analogous to
the sale of commercial goods. The licensor or technology supplier will also have to pay taxes on the
lump-sum payment. The single lump-sum payment, however, may be subject to a different (often
higher) tax rate than income in the form of royalties. Under some tax laws, it may be possible to
alleviate the higher or progressive rates on the lump-sum payment if it is split into instalments and
paid over several tax years and thus subject to lower tax rates.
3.151 Where a more or less single performance is the counter value, the lump-sum payment may
lead to results economically more justified between the parties. If, for example, unexpected high
sales are reached, especially under the influence of monetary fluctuations or other economic
circumstances, the system of royalties leads to unexpected and unjustified returns to the licensor or
technology supplier. Upon the payment of a lump-sum, the licensor or technology supplier would
receive only the counter value of the single performance which was thought justified at the time the
agreement was concluded.
3.152 On the other hand, the lump-sum payment may also entail risks for the licensee or
technology recipient if production or sales of the product lag behind expectation and if the
lump-sum payment is disproportional to the economic value of the performance of the licensor or
technology supplier.
Lump-Sum Payment and Royalties Combined
3.153 In many cases, the remuneration for industrial property rights or know-how is a
combination of a lump-sum payment and royalties.
3.154 The lump-sum payment is often treated as an initial payment for disclosing information that
enables the potential licensee or technology recipient to evaluate the technology. The actual initial
payment varies a great deal from transaction to transaction and may range from a small sum for the
delivery of initial technical information to a very large amount for sophisticated technology that has
required much research and development. In some instances, the initial lump-sum payment may be
viewed as a minimum payment or regarded as a down payment or advance against royalties.
Further, the licensee or technology recipient may be given the opportunity to make an additional
lump-sum payment, stipulated in advance or negotiated at the time of the election to make that
payment, in lieu of royalties, with a credit against the payment of the royalties already made.
3.155 In negotiating remuneration in the form of a combined lump-sum payment and royalties,
the licensee or technology recipient will need to evaluate carefully the total outflow and incidence
of the payments that may be likely for various combinations. The burden of interest charges, for
example, is important in determining the size of the lump-sum figure, while projections of
production estimates and of cash-flow from sales during the period of the license or agreement are
essential in assessing the percentage rate of royalties.
Fees for Technical Services and Assistance
3.156 Specific technical services and assistance, to be provided by the licensor or technology
supplier, may be necessary in connection with the transfer of the technology or the marketing of
the product under a trademark, and may have to be paid for separately.
186 WIPO Intellectual Property Handbook: Policy, Law and Use
3.157 The fees for specific technical services and assistance related to a patent or trademark
license or a technical know-how agreement include: (a) the cost of training programs for the
personnel of the licensee or technology recipients; (b) fees for technical services and assistance to
be rendered by technical experts of the licensor or technology supplier to the licensee or technology
recipient at the latter’s industrial plant during the period of the license or agreement; (c) fees for
technical services and assistance which concern machinery, equipment or other capital goods
needed in the utilization of the technology at the industrial plant of the licensee or technology
recipient.
Indirect and Non-Monetary Compensation
Income from Related Operations
3.158 The licensor or technology supplier may receive income from various operations. These may
be commissions on the sales of the product made on behalf of the licensee or technology recipient
through the distribution channels of the licensor or technology supplier, profits from the sale of the
product supplied to the latter under exclusive purchase arrangements, profits from the sale to the
licensee or technology recipient of related products which complete its marketing program, profits
from the sale to the licensee or technology recipient of raw materials, intermediate goods, parts or
other components and rentals from machinery, equipment or other capital goods released by the
licensor or technology supplier to the licensee or technology recipient.
Dividends
3.159 If the licensor or technology supplier assumes a financial participation in the enterprise of
the licensee or technology recipient or if they enter into a joint venture, the licensor or technology
supplier will obtain, in the event of successful commercial operations, dividends from the financial
participation. If an essential part of the commercial operations depends upon the industrial
property rights or technology of the licensor or technology supplier, there may be a direct
dependency between the amount of the royalties and the amount of the dividends: the higher the
royalties, the lower the dividends, and vice versa. The degree of participation and financial and tax
factors may dictate the relevant amount to be assigned to each and the formation of reserves or the
holding back of profits, which may lead to an increase in the value of the financial participation.
3.160 In this context, attention is directed to the laws in certain countries governing the transfer of
technology which treat as profits payments in respect of the price of industrial property rights or
technology made between a subsidiary and its parent, or between subsidiaries; or where there
exists economic unity or community of interests between the parties, or where effective technical,
administrative, financial and commercial management of the technology transferee is exercised by
the technology transferor; or where the technology transferor supplies raw materials or
intermediate products used in the process in an amount equal to more than a specified percentage
of the total cost of the product. Some of these laws also provide that in such cases the lump-sum
payment or royalties may neither be treated as a contribution to capital nor constitute shares in the
profits or in the capital of the enterprise of the licensee or technology recipient nor be deducted for
the purpose of calculating the tax on its income.
3.161 Under the laws in certain other countries governing the transfer of technology, although
royalties may be paid by the licensee or technology recipient to the licensor or technology supplier
even where the latter has a financial participation in the former, the amount of the royalty
payments must be reduced substantially in the event that the licensor or technology supplier has a
majority participation in the licensee or technology recipient; in addition royalty payments by a
wholly owned subsidiary to its foreign parent company are ordinarily not permitted.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 187
Cost Shifting or Sharing Measures
3.162 Certain cost shifting or sharing measures, for example, the expenses in maintaining or
defending rights under the patent or the trademark, that are adopted, may have the effect of
reducing the expenses of the licensor or technology supplier and increasing the cost to the licensee
or technology recipient of the technology transfer transaction.
Feed-back of Technical Information
3.163 The technical know-how of the licensee or technology recipient which is to be turned over
to the licensor or technology supplier can also constitute a form of income to the latter.
Acquisition of Market Data
3.164 The licensor or technology supplier may benefit from data provided by the licensee or
technology recipient concerning the marketing of the product in the local area, including new sales
promotion techniques, which may prove useful to the marketing of the product in other areas.
Cost Reductions and Savings to the Licensee
3.165 Some elements of a given technology transfer transaction may have the effect of reducing
the operating expenses of the licensee or technology recipient or otherwise lead to savings on the
part of the technology transferee.
3.166 Mention may be made of such measures as the utilization by the licensee or technology
recipient of the channels of sales distribution of the licensor or technology supplier, the use without
payment of the trademark of the licensor or technology supplier, access for the licensee or
technology recipient to information concerning improvements to existing inventions, developments
in know-how, new inventions of the licensor or technology supplier or rights in respect of such
technological advances, and the opportunity to benefit from the marketing information and other
technical services and assistance of the licensor or technology supplier.
Description of the Currency of the Obligation and of Payment
3.167 It is necessary to distinguish two aspects of the question of currency designation. The first
concerns the determination of the currency which will serve as the measure of the obligation to
pay, and the second relates to the choice of the currency in which payments will be made to
discharge that obligation. The currency of obligation and the currency of payment may be one and
the same, but may also be different, as is often the case in an international commercial transaction.
Currency of Obligation
3.168 The currency of the obligation in the case of the lump-sum payment may be the currency of
either the country of the licensor or technology supplier, or the country of the licensee or
technology recipient or a third country.
3.169 In the case of royalties, if the royalty amount is linked to the volume of production and does
not depend on the value of the unit produced, the currency chosen may be either that of the
country where production takes place or that of another country. If the royalty amount is linked to
sales, the currency chosen may be that of the country where sales take place. If export sales are
likely, more than one currency may be chosen — the currency of the country of the licensee or
technology recipient where production and domestic sales occur, and the currency or currencies of
188 WIPO Intellectual Property Handbook: Policy, Law and Use
the country or countries where the export sales are made. If royalties are linked to the profits of the
enterprise of the licensee or technology recipient, then the currency of the country where that
enterprise is legally organized may be chosen.
3.170 As concerns fees for technical services and assistance, the determination will most likely be
between the currency of the country of the expert and the currency of the country where the
services are performed; however, in the case of services performed by experts sent to the country
of the licensee or technology recipient, the amount of the fees will normally be determined in the
currency of the country of the expert, with payment in whole or in part in the currency of that
country and the remainder, if any, plus the portion attributable to living expenses and other facilities
in the country of the licensee or technology recipient.
3.171 Under the laws in certain countries governing the transfer of technology, it is provided that
the currency of the obligation must be currency of the country of the licensee or technology
recipient, though remittance abroad may be made in the equivalent foreign currency; whereas,
under the laws in some other of these countries, though the currency of the obligation may be
expressed in a foreign currency at least the expenses connected with the maintenance of experts in
the country of the licensee or technology recipient must be paid in the currency of that country.
3.172 Many factors may play a role in the choice of the currency of payment. These are whether
the currency of obligation can be utilized in the country of that currency by the licensor or
technology supplier, the inflation rate in the country of the currency of obligation, the stability in
the international money markets of that currency in relation to other currencies, the existence of
currency exchange controls in the country of the currency of obligation or where the income of the
licensee or technology recipient is generated, and the applicability of tax laws which may provide
special benefits for one party or the other.
Rate of Exchange
3.173 In the event of the currency of payment chosen differing from the currency of obligation,
the rate of conversion will normally figure as a provision in the license or agreement. Any one of a
number of different exchange rates may be selected; for example, the official rate established by
national or international monetary authorities, or an average of the said rates or a commercial rate,
such as the telegraphic transfer selling rate or other selling rate or other rate of a specified domestic
or foreign commercial bank.
Types of Intellectual Property Licenses
Introduction
3.174 The typical provisions of an intellectual property license are discussed above in general
terms. Some provisions are particular to the type of intellectual property being licensed. Some of
the more important of these provisions are listed below.
Patent Licenses
3.175 Under a patent license, the purpose of the contract is to authorize the use of an invention
protected by a patent. The patent involved is identified by stating the name of the country in which
it has been granted, together with its number. Generally, the technical subject matter of the
invention is briefly stated in the preamble or in the article defining terms used in the contract.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 189
Reference is also frequently made to a separate annex when the license concerns a number of
patents issued in differing countries. It is advisable to state exactly those countries in which patent
applications are still pending and to stipulate which of the parties is responsible for complying with
the administrative and legal formalities required for the upkeep of the patent.
3.176 A patent affords a set of exclusive rights: to use the invention, to manufacture it, to sell it
or place it on the market. Generally, a license provides an authorization for the licensee to carry out
all those acts.
3.177 A license may be an exclusive license, a sole license, a non-exclusive license or a simple
license. An exclusive license guarantees that the licensee will have no competition, not even that of
the licensor or of the latter’s subsidiaries. This must be stipulated in the agreement. A sole license
guarantees the licensee that the licensor will afford no licenses to other manufacturers within the
contractual territory. A simple license provides no guarantees in that respect, but simply constitutes
an authorization to use the invention. A non-exclusive license means that another license for the
creation has been granted in the contractual territory.
3.178 In such cases, it is recommended to include in the contract what is known as the “most
favored licensee clause.” Such a clause ensures that the licensee will enjoy the most favorable
conditions that may subsequently be granted to a second licensee (for the same territory). This
clause thus avoids any distortion of competition that would result from differing contractual
conditions for the supply of technology.
3.179 The right to sue infringers is normally the privilege of the licensor as owner of the patent.
However, an exclusive licensee can sue for infringement in the name of the patent owner.
3.180 Any licensee is protected against the inaction of the patent owner in case of infringement,
and has the right to institute infringement proceedings in his own name if the owner of the patent,
after being called upon to do so by the licensee, does not do so within the specified period.
3.181 In a contractual license, a licensee may be granted the right to institute infringement
proceedings without having to request the owner of the patent to do so, or, the licensee may be
completely barred from instituting infringement proceedings.
3.182 A person licensed to use a patent may challenge the validity of a patent. So-called “nochallenge
clauses” which prohibit the licensee from contesting the validity of the licensed patent are
anti-competitive.
Trademark Licenses
3.183 Trademark licensing is of fairly recent origin in trademark history. Since the original function
of a trademark was to indicate trade origin, goods emanating from a source other than the
trademark owner could not, without deception, carry a licensor’s mark. Indeed the grant of a
trademark license rendered a licensor vulnerable to a claim of non-use and so to invalidation of his
mark. The exercise by a licensor of quality control over the products sold by a licensee to which the
mark was affixed opened the door to the fiction that such ,control was a manner for the user to
avoid the expungement of the mark. This fiction formed the basis of the registered user provisions
inserted into most trademark statutes for more than forty years.
3.184 Most registered user provisions require the license parties to submit their agreements to the
Registrar who scrutinizes them to ascertain the nature and extent of the quality controls to be
exercised by the licensors. The Registrar is obliged to ensure that registration of such agreements
190 WIPO Intellectual Property Handbook: Policy, Law and Use
accord with the national interest, and the Registrar is required to refuse registration to agreements
which appear to him to facilitate trafficking. It should be noted, however, that registration has
been considered not to be essential for validity of a trademark license. The registration provisions
have been described as permissive and not mandatory. Provided a licensor maintains control over
the quality of the licensed products and the licensor is perceived as retaining a connection with the
licensed products, invalidation can be avoided.
3.185 It should be noted in this context that in September 2000, the WIPO General Assembly and
the Assembly of the Paris Union adopted a Joint Recommendation Concerning Trademark Licenses
providing a maximum list of information and elements that an Office may require for a license to be
recorded (Article 2(1)). The Recommendation also attempts to limit the effect of non-compliance
with recordal requirements to the license agreement itself by stipulating that non-recordal of a
license should not affect (i) the validity of the trademark which is the subject of the license
(Article 4(1)), (ii) any right that a licensee might have under the legislation of Member States to join
infringement proceedings initiated by the holder (Article 4(2)(a)) and (iii) the question whether use
of a mark by a third person can be considered use by the trademark holder which can be relevant in
the context of use requirements (Article 5).
3.186 Trademark licenses may be granted as adjuncts to or separately from patent and know-how
licenses. Among the provisions particular to most trademark licenses are the following:
3.187 Permission to Use. The grant of permission to use the relevant mark or marks is the
first-stated provision of most license agreements. The particulars of the mark or marks are usually
listed in a schedule to the license agreement, together with the products in respect of which the
mark is to be used.
3.188 Number of Licensees. It will be important for the licensee to know how many other
licensees will be appointed to service the license territory. It will also be important to ascertain
whether the licensor intends to distribute within the territory. Finally, it will be important to a
licensee where others are to be appointed to ensure that its rivals are appointed on comparable
terms.
3.189 Quality Control. As mentioned above, at the heart of any registered user agreement is a
provision that the licensee will not use the marks on products which do not attain the standard of
quality prescribed by the licensor. Quality control provisions will provide that the user receives, on a
confidential basis, all specifications, technical data and know-how of the licensor to allow the
prescribed quality standards to be met. Policing of this clause will usually require the user to send
sample products to the licensor and to permit inspections of the user’s factory and warehouses and
of methods of production, materials used, storage and packing of finished products. The
agreement should permit the user to dispose of products which do not meet the quality standard,
provided they do not carry the trademark.
3.190 Marketing. The license will designate the territory in which the trademark may be used.
This will usually contain prohibitions against trading outside the designated territory as well as
provisions keeping the licensor out of the license territory. Advertising material employed by the
licensee may have to receive the licensor’s approval.
3.191 Financial Arrangements. In addition to a fee or royalties for being permitted to use his
trademarks, a licensor may also require payment in respect of the provision of skilled persons to
instruct employees of the licensee in the materials required to achieve the prescribed quality
standards required in the agreement. Arrangements also have to be made to allocate the cost of
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 191
the sampling procedure. Finally, the licensee is usually required to keep detailed books and records
of sales of the trademarked products.
3.192 Infringements. The licensee is normally required to report to the licensor all particulars of
infringements that occur, and the licensor is usually responsible for conducting infringement
proceedings.
Copyright Licenses (Publishing)
3.193 In the case of a publishing contract, the owner of copyright does not need and usually does
not intend to part with his copyright or even his right to control the publication of his work. Under
certain copyright laws, which consider the author’s economic rights inseparable from his moral
rights, assignment of the author’s right to publish the work may not even be possible. When
entering into a publishing contract, the owner of the copyright usually only undertakes to restrict
the exercise of his right in the work to be published and restrict it to the extent necessary for the
publisher to be able to use the work. At the same time, the ownership of copyright does not
change but remains with the author or other owner of the copyright.
3.194 Thus, a characteristic publishing contract is a mere license granted to the publisher by the
owner of copyright. To be of value to the publisher, a license must also enable him to protect his
publishing activity against third persons.
3.195 A license is generally understood in the field of copyright as the authorization given by the
author or other owner of copyright (licensor) to the user of the work (publisher or other licensee) to
use it in a manner and according to conditions agreed upon between them.
3.196 The publisher should be granted a license comprising all the rights necessary for optimum
realization of the planned publication. Generally, he acquires an exclusive license (providing him
with an exclusive right) to reproduce and publish the work concerned — or, if appropriate, to
provide, reproduce and publish its translation — in a standard trade edition, comprising a
reasonable number of copies.
3.197 The license can be granted for one edition only, or also for subsequent ones. The size of a
single — or the first — edition is usually determined in the contract either by fixing the number of
copies it should comprise, or by stipulating a minimum and/or maximum number of copies (“the
print run”). The agreement on the size of a single — or the first — edition usually takes into
account the need to comply with the presumable demand of the public, at costs permitting sales at
the usual retail price per copy prevailing in the given book market as regards similar publications.
3.198 In the case of a license to publish the work in translation, the language (or languages) of
the authorized edition (or editions) must be specified.
3.199 In order to promote the dissemination of the work published, and with regard to possible
further exploitation of the publication under the contract, the licensee may acquire also certain
so-called “subsidiary rights.” Such rights serve the purpose of reproducing or communicating to
the public, or licensing others to reproduce or communicate to the public, the work (or its
translation) in specified forms other than the standard trade edition.
3.200 Such subsidiary rights may for instance comprise: the right of previous and subsequent
publication in the press of one or more extracts from the work; serial rights, that is, the right to
publish the entire work or parts of it in one or more successive issues of a newspaper or periodical,
before or after publication of the work in the standard trade edition; the right to read extracts from
192 WIPO Intellectual Property Handbook: Policy, Law and Use
the work in sound or television broadcasting; the right to include the published work or a part of it
in an anthology; the right to arrange for pocket book or book club editions subsequent to the
standard trade edition.
3.201 Publishers often request the licensor to confer on them, in the framework of subsidiary
rights, the right also to license the reproduction of the published work by means of making
microfilms or other reprographic reproductions thereof, for purposes beyond the limits of fair use
allowed by the law. The publisher may also request the right to license storage of the work in a
computer, accessible to the public. Again, publishers may request the licensor to entitle them to
license the reproduction of the work in the form of sound recordings as well. Sometimes, also the
right of licensing the reproduction of filmstrips is requested. All these kinds of reproduction by
means of modern technology are often referred to in contemporary publishing contracts as
“mechanical reproduction” of the work, and the rights involved as “mechanical reproduction
rights.” This term should not be confused with the notion of the “musical mechanical right,”
which means the right to reproduce a musical work in the form of sound recordings.
3.202 It is a reasonable and usually accepted position not to confer on the publisher rights to
exploit the work in any manner involving its adaptation, such as dramatization rights for stage or
film production, or for sound or television broadcasting, or translation rights in general. Strictly
speaking, the exploitation of such rights goes beyond the scope of the promotion or direct
exploitation of the publisher’s own publication of the work.
3.203 The grant of “digest rights” (the right to publish an abridgment or shortened form of the
work), or of the so-called “strip cartoon rights”, is often made subject to special authorization in
each case, in view of the moral interests of the author relating to the integrity of his work.
3.204 With regard to the integrity of the work to be published, special stipulations can be
incorporated in the contract. This may prove useful especially in countries where no appropriate
“moral rights” provisions are established by legislation. For example, it may be agreed that “the
publisher shall reproduce the work without any amendment or abbreviation thereof, or addition
thereto.”
3.205 As regards translation of the work, it is usual to agree that “the publisher shall have a
precise and faithful translation made at his own expense. The title of the translation is subject to
the written approval of the copyright licensor. On request, the final text of the translation shall also
be submitted to him for approval.”
3.206 It can also be stipulated that “the Publisher shall ensure that the title of the work and the
name of its author shall appear with due prominence on every copy produced.” Depending on the
circumstances, it also can be added that “the Publisher undertakes to print the name of the original
publisher (that is, ...) as well as the year(s) of the previous edition(s) of the work on the verso of the
title page.”
3.207 With regard to certain formalities required in a few States (mainly in the United States of
America) as a condition of the full enjoyment of copyright in published works, it is generally
stipulated in publishing contracts that an appropriate notice of copyright shall be printed on the title
page. The notice consists of the symbol C, or ©, the year of the first publication of the work and
the name of the owner of the copyright in the work.
3.208 As regards distribution of the copies published, it is often stipulated that “the Publisher shall
provide for efficient promotion of the work at his own expense.” In cases where his license has not
been confined to one edition only, it is often added that “he shall see to it that the book is
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 193
continuously available, and that new editions are printed in due time so as to comply with actual
demand.”
Government Control of Licensing Agreements
3.209 In many developing countries, the inflow of technology is subject to a variety of controls as
a means of ensuring that contracts concerning transfer of technology are consistent with the
economic aims of the government. In some countries, these controls are part of a more
comprehensive system of laws dealing with foreign investment in the country. In others, the
controls result from the foreign exchange regulations which are directed at the flow of payments
abroad, whether as dividends, royalties, or income in other forms or as the return of capital.
Indirectly, import regulations, particularly lower tariff rates or exemptions on products embodying
needed technology, may also have an effect on the inflow of technology. In still other developing
countries, legal systems have been devised specifically to control the transfer of technology to, or
within, the country. These systems include the requirement that industrial property licenses and
technology transfer agreements be notified to government authorities or be registered or approved
by them in accordance with criteria established by the legislation or set forth in regulations or
guidelines issued by appropriate governmental bodies.
3.210 The failure of the responsible party to submit for registration or approval an industrial
property license or technology transfer agreement or its modification, amendment, extension or
termination, to the appropriate government authorities within the time limits and under the other
conditions prescribed has a number of legal consequences. Under the relevant laws, the failure to
comply may render the license or agreement void or unenforceable and subject the party
responsible to a penalty or to the suspension of its right to trade or to loss of its business
organization status. The registration or approval of the license or the agreement may be a
prerequisite to giving evidence of actual exploitation of a patent or actual use of a trademark in the
country, or obtaining an authorization from the fiscal authorities to make payments abroad or to
receiving fiscal or other benefits designed to encourage or promote investment in certain sectors or
industries.
3.211 The WIPO Model Law for Developing Countries on Inventions (Volume II), contains
provisions establishing a legal and administrative framework for the examination and registration of
such contracts in accordance with the policy of ensuring that such contracts do not impose
unjustified restrictions on the acquirer of the technology (“the transferee”) which would have the
consequence that the contract, as a whole, would be harmful to the economic interests of the
country.
3.212 The intent is not only to protect the local enterprise that is contracting to acquire the
technology, which frequently is in a relatively weak bargaining position, but also, and even to a
higher degree, to prevent the economic policy of the government being frustrated by certain
contracts. It is of vital importance to a developing country that — even though badly needed — the
acquisition of foreign technology should not impose an undue burden on its economy. If the cost
of technology should exceed its value to the local economy, there may be serious consequences;
for example, a decline in the industrial growth rate, depletion of natural resources, unfavorable
balance of trade, misallocation of financial resources, etc.
3.213 The Model Law provides that the examination and registration of contracts is a task of the
Patent Office. According to the organizational structure of the government, instead of the Patent
Office, another government agency could be entrusted with this task.
194 WIPO Intellectual Property Handbook: Policy, Law and Use
3.214 In order to assist the Office concerned in the examination of such contracts the Model Law
establishes a list of 17 terms that the Office must particularly take into consideration. The list of
17 terms is not exhaustive: registration of a contract can be refused even if that contract does not
contain any of the terms listed; this can be the case if the contract contains a term not appearing
on the list but which imposes certain restrictions upon the transferee so that the contract, taken as
a whole, is harmful to the economic interests of the country. Secondly, the presence in the contract
of any of the 17 terms listed does not necessarily entail a refusal to register the contract;
registration of the contract can only be refused if the restrictions imposed upon the transferee are
unjustified and if the contract, taken as a whole, is harmful to the economic interests of the
country; indeed, depending on the circumstances of the case, the presence of the term in question
might not entail detrimental effects to the economic interests of the country or, if it does entail such
effects, these might be offset by positive effects for the economic interests of the country brought
about by the presence of other terms in the contract, since no codification of specific terms can
anticipate the practically unlimited number of background factors (business, commercial,
technological, etc.) which may enter into a determination of the effect a given contract will have
within a given economic environment. In other words, the Office must apply the provisions with
flexibility, while considering the particular merits of each contract in the light of the economic
interests of the country.
3.215 The said 17 terms are those the effect of which would be:
- to import technology from abroad when substantially similar or equivalent technology may
be obtained on the same or more favorable conditions without any importation of the technology
from abroad;
- to oblige the transferee to make payments which are disproportionate to the value of the
technology to which the contract relates;
- to oblige the transferee to acquire any materials from the transferor or from sources
designated or approved by the transferor, unless it is otherwise impossible, for all practical
purposes, to ensure the quality of the products to be produced and provided that the said materials
are supplied at a reasonable price;
- to restrict the transferee’s freedom to acquire any materials from any source unless it is
otherwise impossible, for all practical purposes, to ensure the quality of the products to be
produced;
- to restrict the transferee’s freedom to use any materials which are not supplied by the
transferor or by sources designated or approved by the transferor, unless it is otherwise impossible,
for all practical purposes, to ensure the quality of the products to be produced;
- to oblige the transferee to sell the products produced by him exclusively or principally to
persons designated by the transferor;
- to oblige the transferee to make available to the transferor, without receiving appropriate
payment, any improvements made by the transferee with respect to the technology to which the
contract relates;
- to limit the quantity of the products produced by the transferee;
- to restrict the transferee’s freedom to export or his freedom to allow others to export the
products produced by him, provided that if the transferor owns, in a country to which such
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 195
a restriction applies, a patent which would be infringed in case of importation of the said products
into the said country; if the transferor has a contractual obligation not to allow others to export the
said products to such a country; or if the transferor already supplies the market in such a country
with the same products, such facts shall be taken into account;
- to oblige the transferee to employ persons designated by the transferor not needed for the
efficient transfer of the technology to which the contract relates;
- to impose restrictions on research or technological development carried out by the
transferee;
- to restrict the transferee’s freedom to use any technology other than the technology to
which the contract relates;
- to extend the coverage of the contract to technology not required to achieve the objective
of the contract and to oblige the transferee to give consideration for such technology;
- to fix prices for the sale or resale of the products produced by the transferee;
- to exempt the transferor from any liability resulting from any defect inherent in the
technology to which the contract relates or unreasonably to restrict such liability;
- to restrict the transferee’s freedom to use, after the expiration of his contractual obligations,
the technology acquired as a result of the contract, subject, however, to any right of the transferor
under a patent;
- to establish the duration of the contract for a period which is unreasonably long in relation
to the economic function of the contract, provided that any period which does not exceed the
duration of the patent to which the contract relates shall not be regarded as unreasonably long.
3.216 The system provided for by the Model Law, although it enumerates some of the most
important clauses to be considered, recommends a flexible approach which allows the examination
of each contract on its merits within the general economic and technological context of the country
concerned.
Copyright and Development
3.217 Copyright has a special role in the context of development. Particularly since the 1950s,
when the political map of the world changed considerably, and several States progressively became
independent and other States were newly created, developing countries have had to cope with the
enormous problems of educating the vast masses of their peoples. Some developing countries,
racing against time in order to provide mass education by methods both formal and non-formal, are
facing acute challenges in respect of encouraging and fostering intellectual creativity and satisfying
the urgent need for promoting knowledge, particularly in the field of science and technology, in
their countries.
3.218 Most developing countries, on attaining independence, have given priority to the training of
their peoples and to education, in order to meet the need for staff and management personnel to
196 WIPO Intellectual Property Handbook: Policy, Law and Use
design and implement development policies and plans. Progressively, emphasis had to be placed on
the need to give an essentially national character to the training of the people.
3.219 It is indeed important that people be trained in a manner that is in keeping with their
natural environment. Consequently, teaching material, including literary, artistic and scientific
works, has to be created by authors originating in the community to which the works are
addressed, and the community has in turn to see and recognize its reflection in them. A reasonable
level of recourse to foreign works will continue to remain desirable, in order to facilitate cultural
interchange and the reciprocal flow of ideas.
3.220 In many developing countries, there is a shortage of specialists in certain areas of
knowledge. Incentives and subsidies are required for the purpose of encouraging national
authorship both in a language in general use and in the local language. Also required is education
of the public in the laws of copyright.
3.221 Development of national authorship and creativity cannot be set in motion without
guarantees to the author of adequate remuneration for his efforts, to enable him to devote his time
and attention fully to the need for producing educational material. Copyright protection involves
ensuring not only payment of attractive and reasonable royalties to the authors, but also suitable
protection for publishers, for the opportunity available to an author to have his works disseminated
depends equally on the laws protecting publishers. Protection of authors and creators both
nationally and internationally calls for adequate legislation.
3.222 Developing countries may need to introduce such legislation also in order to protect the
traditional manifestations of their culture which are the expression of their national identity. Once
the law has been enacted, the infrastructure for its application has to be established.
The Development Cooperation Program of WIPO
Introduction
3.223 WIPO’s development cooperation aims to assist developing countries — including the least
developed countries (LDCs), for which a special unit has been established in the WIPO Secretariat —
to attain levels of socio-economic development through their intellectual property systems, which
enable them to enter into effective partnership with more developed countries and generally to take
their place in the world.
Objectives
3.224 The objectives of WIPO’s cooperation for development program are achieved either directly,
by providing legal, practical and administrative information, advice and training for governments
and organizations in developing countries, or indirectly, by facilitating their contacts with public and
private bodies worldwide which can also thus assist them.
3.225 The major objectives of the cooperation for development program are to assist developing
countries in:
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 197
- the establishment of intellectual property systems which are modern and function well, with
regard to legislation and administration, and with personnel adequately trained and using up-todate
equipment;
- the development of human resources, especially by the WIPO Worldwide Academy;
- the adoption of timely and informed policies to meet existing and new intellectual property
challenges such as the preservation, conservation and dissemination of biological diversity, the use
of traditional knowledge to benefit the holders of it, the improved protection of expressions of
folklore and the implications of electronic commerce;
- the promotion of cooperation among developing countries, in particular by the use of the
WIPO Global Information Network (WIPONET), in order to pool all available useful technological
information resources at sub-regional and regional levels;
- the development and adjustment of information technology, in both its legal and practical
aspects, to harmonize and enhance its intellectual property application worldwide.
3.226 The creation and use of intellectual property through the setting up of innovation support
structures and technology transfer.
3.227 In order to carry out activities to fulfil these aims, WIPO undertakes projects and activities
tailored to the needs of particular groups of developing countries.
3.228 A single Permanent Committee on Cooperation for Development Related to Intellectual
Property was established in 1999, to direct Permanent Programs in the fields of both industrial
property and copyright and related rights. Its membership is open to any Member State of WIPO,
as well as to intergovernmental and non-governmental organizations with observer status.
3.229 The Permanent Committee is a forum for debating policy and practice in intellectual
property matters of particular concern to developing countries. It has focused on all the new
challenges described above (see at the beginning of this chapter the section on the Objectives of
Developing Countries). Its sessions have especially reviewed WIPO’s newer initiatives to help
developing countries to meet those challenges: the major subjects of discussion have been, among
other things, the development of human resources in the context of the work of WIPO’s Worldwide
Academy, assistance to the Least Developed Countries (LDCs), the promotion and development of
collective management of copyright and related rights (notably in connection with the development
of a regional system), the promotion of innovation in all fields of intellectual property to stimulate
economic growth and culture, new approaches to traditional knowledge, genetic resources and
folklore and, in support of all these and other activities, measures required to enable developing
countries to benefit fully from the latest information technology. The Permanent Committee will
continue to meet biennially.
Development Cooperation in Relation to Intellectual Property
3.230 WIPO’s development cooperation activities in the field of intellectual property are aimed at
helping developing countries in the following respects:
198 WIPO Intellectual Property Handbook: Policy, Law and Use
- training of government officials and representatives of the private sector, such as lawyers,
agents and staff of collective management organizations working in the fields of copyright and
related rights;
- providing legal advice and assistance in drafting new, or revising existing, intellectual
property legislation;
- establishing or strengthening intellectual property offices and other related institutions;
- promoting indigenous innovative, inventive and creative activities;
- using the technological information contained in patent documents;
- establishing programs for legislators and the judiciary;
- promoting awareness of intellectual property protection in local enterprises and educational
institutions.
Training
3.231 WIPO’s training program consists of various regular general and specialized courses
organized each year, in a number of developed and developing countries, for the collective training
of government officials and others, and periodical seminars, workshops and other types of meeting
at national, sub-regional and regional level in which government officials and other personnel from
developing countries participate. In addition, government officials are attached to intellectual
property offices and other institutions in developed or developing countries for practical training,
and middle and senior level officials are sent on observation visits to such offices. WIPO also
organizes on-the-job training in some countries by international experts. The level of training
ranges from basic, introductory courses to refresher or specialization courses for officials in
responsible positions in intellectual property administrations.
3.232 Training programs have been extended to other categories of beneficiaries, in addition to
the government officials working in the national intellectual property administrations. These
categories include private lawyers and practitioners, staff of research and development institutions,
of enterprises and of collective management organizations, representatives of the judiciary, officials
of enforcement agencies such as police and customs, of ministries of trade and foreign affairs and
other persons dealing with questions related to intellectual property matters.
3.233 It is also desirable that the teaching of intellectual property law should be developed in a
number of universities in developing countries. The International Bureau has already awarded
fellowships for this purpose to university teachers from developing countries to enable such
personnel to examine the course and curriculum content in order to introduce or strengthen
teaching at the university level. This means a more intensive involvement in the training of trainers.
3.234 The aim of the training activities is to enable government officials and other personnel from
developing countries to acquire knowledge and practice in the various aspects of intellectual
property, so that they may effectively organize and administer the intellectual property system of
their own countries. Training activities occupy a preeminent place within WIPO’s development
cooperation program because laws and institutions, however good they may be, are of little use
without qualified staff to administer them.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 199
Legal Advice and Assistance
3.235 In recent years, there have been many instances of a growing interest, on the part of
governments of developing countries in various parts of the world, in making intellectual property
an effective tool in the development process. The existence of intellectual property laws suited to
the needs of the country concerned is a precondition of an effective intellectual property system.
3.236 For this reason, WIPO has received many requests for advice in drafting intellectual property
laws where they do not exist, and in revising existing laws that are inadequate for the country’s
economic needs and priorities. In addition, adherence to international treaties oblige countries to
adapt their legislation in order to meet the protection requirements established in those treaties.
3.237 At the request of a government, WIPO comments on draft legislation prepared by the
government or prepares draft legislation with due regard to the wishes of the government and the
needs of the country concerned. Those wishes and needs would have been ascertained through
consultations and surveys made on the spot by WIPO experts. The draft texts are then submitted to
the authorities for study and comment. What follows is often an exchange of letters and visits
between the authorities and WIPO experts to clarify and improve the texts.
3.238 Legal assistance is provided by the International Bureau of WIPO in two forms — the
drafting of model laws and assistance in the drafting of national legislation. The International
Bureau has already drawn up a number of model laws for the use of developing countries. These
texts are prepared by meetings of experts from developing countries and developed countries,
working on the basis of drafts prepared by the International Bureau and, in all cases, submitted to
the States for their comments and subsequently adopted by meetings of governmental experts.
3.239 In addition, WIPO has produced model laws or guides for developing countries dealing with
such subjects as patents, trademarks, industrial designs and industrial property licensing, copyright
and related rights, the implementation of treaties, the implementation of licensing procedures for
translation and reproduction licensing under the Berne Convention, and the protection of
traditional knowledge and expressions of folklore.
Institutional Assistance
3.240 A law is not an end in itself for the country concerned. It provides an important framework
within which its industrial property system will function. The law must be administered and used,
and for that purpose suitable administrative machinery and procedures are required.
3.241 Here again, WIPO has considerable expertise to offer governments and institutions. WIPO
experts are sent, at the request of countries, in order to give on-the-spot advice, on such matters as
the establishment, streamlining and automation of procedures, preparation of organigrams,
acquisition of appropriate equipment including computer hardware and software, acquisition of the
required technical documentation, establishment of links with external institutions, assessment of
staff requirements and training needs, utilization of office space and the determination of suitable
fee schedules. In the copyright and related rights fields, WIPO has paid special attention to the
establishment and reinforcement of collective management systems, which undertake the
safeguarding of the rights and interests of authors, composers and performers, and the collection
and distribution of their royalties, and which also contribute to the promotion of education and
culture, as well as assisting in participation in international cultural exchange.
200 WIPO Intellectual Property Handbook: Policy, Law and Use
3.242 Often, such administrative improvements and changes are planned, for implementation over
a period of time, by WIPO in consultation with the authorities concerned, depending on priorities
and available resources.
3.243 For an intellectual property administration system to be useful, it must serve the public. In
many countries, the intellectual property system has not been used to full advantage partly because
the public, including creators and business circles, are unaware of the advantages the system has to
offer and its role in the development process. WIPO therefore organizes meetings which aim at
building, to start with, awareness of intellectual property by answering such basic questions as what
is intellectual property, what are its constituent elements, how does intellectual property help trade,
technological development and cultural development, and how to use and protect intellectual
property rights at the national level?
Promotion of Indigenous Creativity, Innovation and Inventiveness
3.244 As observed earlier, the role that the intellectual property system can play in technological,
economic and cultural development has long been recognized in developing countries. The
protection afforded by intellectual property laws results in more creations, innovations and
inventions, more investment and effort in research and development (R&D) in technical fields,
leading to technological improvements, and thereby to improvement in the quality of industrial
output, and by greater access to creations of foreign origin, in an educational and cultural climate
that promotes development in general.
3.245 Without a national intellectual property system, it is difficult for a country to stimulate and
protect the results of indigenous creativity and innovation. Governments can, with the help of
WIPO experts, devise ways and means of encouraging local entrepreneurs and enterprises, the
creation of national associations in the field, the provision of legal advice on protection procedures,
financial support and incentives, public recognition of creators and inventors, the award of prizes
through competitions, etc. Through mass participation in nationwide events and competitions, and
in clubs in schools, public consciousness and use of the intellectual property system is stimulated.
One example is that since 1979, WIPO has established an award for inventors and innovators that is
widely used by developing countries to encourage inventive activity.
3.246 Following this, since 2001 two new Awards were added to the Awards program. First, the
WIPO Creativity Award gave due recognition to individuals or groups of individuals whose creativity,
artistic skills and imagination have resulted in original works, performances or productions
connected with the field of copyright and related rights, including original works developed and
used in the digital environment and related fields. There is also the WIPO Trophy for Innovative
Enterprises, which encourages enterprises and companies in all Member States to actively use the
intellectual property system in their production and commercial activities.
Use of Patent Information
3.247 One of the activities of WIPO in assisting the development process in developing countries is
directed at improving access by those countries to the technological information contained in
patent documents, by the provision of the necessary patent documentation and training in methods
of retrieval and dissemination.
3.248 A program, now called the WIPO Patent Information Services for Developing Countries,
began in 1975. Its aim is to provide free-of-charge patent information services to institutions in
developing countries under agreements concluded between the International Bureau of WIPO and
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 201
contributing industrial property offices in some 20 countries (both industrialized and developing
countries).
3.249 WIPO gives assistance and advice, and is the executing agency for several UNDP projects,
concerning the planning and establishment of patent information and documentation centers
which serve the needs of national or regional institutions in developing countries. Such centers may
be created within an existing or planned industrial property office, or within a scientific and
technological information center.
Programs for Legislators and the Judiciary
3.250 WIPO cooperates in promoting the exchange of experience and other information among
legislators so that they are better prepared to consider the needs of their own countries, and find
solutions to such needs, when engaged in the adaptation of their intellectual property legislations
to the changing economic and technological situation, both on the domestic level and in
international relations. This cooperation may take the form of national and regional seminars and
study trips.
3.251 In addition, WIPO works to promote the exchange of experience and information among
members of the judicial branch (judges of courts of all levels) so that they are better prepared to
interpret and apply domestic laws and international treaties in the field of intellectual property law
and to order measures that would prevent the continuation of infringement of intellectual property
rights. Such cooperation may also take the form of national and regional seminars, simulated trials
and study trips.
Promotion of Awareness in Local Enterprises and Educational Institutions
3.252 It is increasingly recognized that efficient use of the intellectual property protection system
can significantly contribute to economic growth. The Small and Medium-Sized Enterprises (SMEs)
Division, established in October 2000 following unanimous support by WIPO’s General Assembly,
seeks to raise awareness of the relevance of intellectual property for small business and promotes
initiatives to make the intellectual property system more accessible, less cumbersome and more
affordable for SMEs.
3.253 The activities carried out by the SMEs Division of WIPO recognize the important role played
by such enterprises in strengthening the economic wellbeing of a country. Research has shown that
SMEs can and should contribute considerably to employment creation and trade, which ultimately
promote economic growth. It has also been shown that, given the opportunity, SMEs are
innovative and competitive. However, SMEs need to be encouraged to take full advantage of the
existing intellectual property protection system in order to compete more successfully in the global
economy.
3.254 One of the priorities of this program is to raise awareness of the potential benefits for SMEs
so that they effectively use this system. The awareness-building activities are for government
institutions responsible for SMEs, other institutions supporting SMEs and, through information
made available on the Internet, for SMEs themselves. These include international, regional and
national seminars organized by WIPO, distance learning courses offered by the WIPO Worldwide
Academy and joint activities in cooperation with other international or regional organizations or
institutions which deal with matters concerning SMEs.
3.255 WIPO has already been active in raising awareness of the value of the intellectual property
system in higher education, through cooperation activities with universities and similar institutions
202 WIPO Intellectual Property Handbook: Policy, Law and Use
to include intellectual property in teaching programs. A number of cooperation agreements have
been concluded with universities and regional training centers towards this aim (see under the
WIPO Academy below).
The WIPO Worldwide Academy
3.256 The WIPO Worldwide Academy (WWA) was established in March 1998. It is WIPO’s central
coordinating institution for human resources development. The overall objective of the Academy is
to serve as an educational institution providing teaching, training and research services in
intellectual property, particularly for developing countries. In order to meet its objectives, the
Academy carries out its programs both at its Headquarters in Geneva, and in different parts of the
world, and cooperates with several academic institutions and intellectual property offices.
3.257 Owing to the rising level of activities related to intellectual property in member countries,
the demand for tailor-made programs has continued to increase steadily. In response, the Academy
expanded the scope of its training programs in 2000 to include courses and seminars on the
legislative, administrative and enforcement aspects of intellectual property systems.
3.258 The programs of the WWA comprise three main categories, namely, Professional Training,
Policy Training and Distance Learning.
3.259 The Professional Training Program offers intermediate and advanced training courses for
managers and technical staff of intellectual property offices and other professional users of the
system. These courses are not only for persons working in intellectual property offices, but also for
those involved with research work in universities and Research and Development (R&D) institutions,
as well as for those in chambers of commerce and industry.
3.260 Under the Policy Training Program, the Academy organizes sessions for decision-makers,
policy advisers, development managers, diplomats and other groups, to promote policy debate and
a deeper understanding of the practical implications of the intellectual property system. These
sessions are also designed to provide a forum for sharing information and exchanging views on the
experience of other countries in using the intellectual property system as a tool for development. In
addition, special Academy sessions are organized for specific interest groups and also to deal with
special or topical issues, such as strengthening the teaching of intellectual property for professors
and the enforcement of intellectual property rights for the judiciary.
3.261 The Distance Learning Program is an advance in teaching methodology, with the attendant
advantages of flexibility of time and space, cost effectiveness and the capacity to reach the
unreached. Distance learning courses are a complement to traditional training methods, as well as
a means of increasing the range of training beneficiaries. These courses are delivered via the
Internet, using a format that allows for online registration, student-teacher interaction, student tests
and course monitoring and evaluation systems. In addition to a General Course on Intellectual
Property, five specialized advanced distance learning courses which focus on specific aspects of
intellectual property are to be launched.
3.262 The Academy also organizes diploma programs on intellectual property law in cooperation
with universities and other institutions, such as an intellectual property law program with the
University of South Africa (South Africa), a Master Course joint degree on intellectual property with
the University of Turin (Italy) and the qualification of Master of Intellectual Property Law and Human
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 203
Rights with the Raoul Wallenberg Institute of Human Rights and Humanitarian Law, University of
Lund (Sweden).
3.263 The WWA works closely with the WIPO Knowledge Management Center and e-Library. That
Center is the catalyst of WIPO's knowledge management initiatives and incorporates the WIPO
Library, which specializes in intellectual property matters and is designed to support the research
and information needs of WIPO and UPOV staff, students of the WWA and external researchers. It
has approximately 35,000 monographs and nearly 300 periodicals. Its collection is enriched by a
number of electronic journals and electronic books and is completed by electronic resources (most
of them acquired under a United Nations inter-agency consortium agreement). Databases like
Proquest, Oxford Reference, Britannica Online and Lexis-Nexis are available through the reading
room services of the Library.,d of
contracts, the supervision of the construction of the factory, including the installation of the
equipment, the supervision of the start-up and testing of the equipment and making findings on
the state of performance of the process utilized, as well as giving advice in the initial period on the
operation of particular equipment or the entire factory.
3.91 One or more individual consultants or firms of consultants might be engaged to render the
services in question. Usually, however, such an individual or firm specializes in a particular type of
service, such as investment planning, design and engineering, environmental impact, marketing or
business organization and management. In a sense, the consultancy services are forms of
know-how. They can thus be considered within the framework of the know-how contract, more
particularly, the technical services contract or agreement.
The Turn-Key Project
3.92 In certain instances, two or more of the business arrangements, and hence the legal
methods that they reflect, can be combined in such a way as to entrust the planning, construction
and operation of a factory to a single technology supplier, or to a very limited number of
technology suppliers.
3.93 Thus, the “turn-key project” may involve a comprehensive arrangement of certain of the
legal methods, whereby one party undertakes to hand over to his client — the technology
recipient — an entire industrial plant that is capable of operating in accordance with agreed
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 177
performance standards. More usually, the turn-key project involves the undertaking by one party to
supply to the client the design for the industrial plant and the technical information on its
operation. In the latter event, supplementary arrangements might also be made for the acquisition
of rights to the technology, for civil engineering work and for provision of technical services and
assistance concerning the construction of the plant, the purchase and installation of equipment,
raw materials or parts and components, training and supervision of the operation of the plant, at
least in its initial stages.
3.94 It is called a “turn-key” project because the end result is to “turn” over to the client the
“key” to the door of the industrial plant. That is a symbolic way of expressing the completion of
the tasks agreed to between the parties.
3.95 Both the consultancy arrangement and the turn-key project arrangement have their
shortcomings. The first does not usually entail the responsibility of the consultant for the results. In
the second, the technology supplier or suppliers are so responsible. Neither the first nor the second
provides means for a continuing involvement of the technology supplier so that access to later
advances in its technology can be more readily facilitated. This is because neither contains a
commitment to the technology acquirer to provide further advice or services or to provide improved
or additional technology. Neither contains measures to provide money or other resources that may
be needed for further growth.
3.96 Because of these shortcomings and for other reasons, joint venture arrangements can be
more attractive means of industrial or commercial cooperation.
Joint Venture Arrangements
3.97 The nature of a “joint venture” is briefly referred to under “Territorial Franchises” in
chapter 2. The subject is further developed here as to the forms of joint ventures possible, and the
legal methods applicable.
3.98 There are two fundamental forms of joint venture, the equity joint venture and the
contractual venture.
3.99 The equity joint venture is an arrangement whereby a separate legal entity is created in
accordance with the agreement of two or more parties. The parties undertake to provide money or
other resources as their contribution to the assets or other capital of that legal entity. That entity is
usually established as a limited liability company and is distinct from either of the parties that
participated in its creation. That company becomes the owner of the resources that are contributed
by each party. Each of the parties in turn become the owners of the company, that is, each is said
to have “an equity” in the company.
3.100 Where one or more of the parties is a foreign enterprise or entity, such a party is, or such
parties are called a “foreign participant” or “the foreign participants.” The parties or participants,
as they are called, will agree on the purposes and functions of the limited liability company, the
proportion of the capital each will contribute to, and the share of each in the profits of, the limited
liability company, and on such other matters as its management, operation, duration and
termination.
3.101 On the other hand, the contractual joint venture might be used where the establishment of
a separate legal entity is not needed or where it is not possible to create such an entity. This may
be the case where the project involves a narrow task or a limited activity or is for a limited time or
where the laws of the country in which the business operation is to be conducted do not recognize
178 WIPO Intellectual Property Handbook: Policy, Law and Use
the ownership of property by foreigners. The relationship between the parties will be set forth in
the contract or agreement concluded between them.
3.102 The different legal methods for the commercial transfer and acquisition of technology can
be used in either form of joint venture arrangement.
3.103 An assignment of the exclusive rights to a patented invention, a utility model, industrial
design or trademark by one of the participants could constitute a portion of that participant’s
contribution to the capital of the joint venture company. It is also possible, of course, for one of the
participants to grant a license of a patented invention or other object of industrial property or to
supply know-how as part of that participant’s contribution to the joint venture company. More
commonly, however, such a license or the supply of know-how in one or more of its forms will be
the subject of one or more contracts made after the joint venture company is established. Those
contracts will be concluded between one of the participants as the transferor of the technology in
question and the joint venture company. Through such contracts the technology in question can be
transferred to the joint venture company which will thus acquire the means to enable it to carry out
its operations.
3.104 Whether one or more of the legal methods are used in the establishment of the joint
venture company, or whether one or more of those legal methods are used and when so as to
enable the joint venture to carry out its operations, will be matters for negotiation between the
prospective participants. The result of their negotiations will be reflected in the joint venture
agreement. The license contract, the know-how contract, the technical services or the technical
assistance contract, the franchise contract and contracts covering other commercial matters might
even form annexes to the joint venture agreement. They would be signed once the joint venture
company was established.
3.105 Needless to say the joint venture agreement, whether it be for the establishment of a
limited liability company or not, and the different contracts of the various legal methods that may
be used, must be concluded in accordance with laws and regulations applicable to such companies
and to the tax laws concerning those companies or to the laws relating to agency or partnership, as
well as to other economic laws, including laws relating to labor, sales of goods, insurance and
foreign economic and trade contracts.
Negotiation of Licensing Agreements
Introduction
3.106 Any technical licensing contract may be analyzed in respect of the following basic elements:
- the subject of the contract;
- the licensor’s obligations;
- the obligations common to both parties.
3.107 The following topics are typically the subject of the negotiations leading to the conclusion of
the license contract or which require special attention in drafting its provisions. These provisions are
discussed from the point of view of the licensing of patents but they apply also to the other forms
of intellectual property.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 179
Identification of the Parties
3.108 One of the first points of concern to the negotiators of the license contract will be the
identification of the entities or persons which or who will become the parties or, in other words, will
sign the license contract and become legally bound to carry out its provisions.
3.109 The objective in describing the parties to a license contract is to identify each of them with
sufficient certainty, so that their identity will not later become a subject of controversy.
3.110 This objective assumes particular significance in complex business transactions between
more than one entity or person on either side and between entities or persons in different
countries.
3.111 For example, one side in the negotiations leading to the conclusion of the license contract
may be a grouping of legal entities, all organized and located in one foreign country or each
organized and located in separate countries, but in either case, with a common ownership, control
or other interest. In such cases, it may be contemplated that the patent license will be given by one
of the legal entities in the group (or perhaps even by a legal entity outside the group) and that other
performances will be undertaken or received by one or more of the other legal entities in the group.
3.112 Similar questions will arise where the other side to the negotiations is likely to involve a
number of governmental authorities — ministries, commissions, bureaus or administrations or other
governmental units — or public entities, state enterprises or private entities, including those
established as a result of a joint venture with a foreign legal entity.
3.113 Further, consideration will have to be given to whether one document setting forth all the
terms and conditions and commitments should be prepared and executed between all the parties
on both sides or whether several documents, each containing distinct terms and conditions and
commitments, should be drawn up and signed by the different parties on each side.
Objectives of the Parties: Scope of the License
3.114 When the parties are negotiating a license contract, they usually proceed on the basis that
certain technology is necessary for the manufacture of a particular product or the application of a
particular process from which a product or other result is to be obtained. In other words, the
ultimate objective of the parties in concluding a license contract is the transfer by the licensor, and
the acquisition by the licensee, of a given technology and of the right to exploit that technology in
the making, or in the use or sale of a given product or in the application of a given process through
which a product or other result will be obtained.
3.115 Their objective will be reflected in a general way either in a preambular part of the license
contract, consisting of a series of provisions often referred to as “recitals” or “whereas clauses,” or
directly in an operative element of the license contract, consisting of a particular article entitled
“background information.”
3.116 The objective of the parties to the license contract will be expressed more specifically in
subsequent provisions that delineate the “scope” of the license contract. One set of those
provisions identifies the technical subject matter of the license contract (that is, the product or the
process, the invention or inventions and the know-how and technological advances, if any).
Another group of those provisions will determine which of the parties may perform one or more
acts of exploitation, designate the place or places where that act or those acts may take place,
establish the duration of the exploitation and specify the purpose or purposes for which the
180 WIPO Intellectual Property Handbook: Policy, Law and Use
technology may be exploited. Other provisions will prescribe the level of working of the invention
or inventions, specify the means, if any, to assist in the exploitation, fix the remuneration for the
exploitation and state the consequences of a failure of or of an interference with the exploitation of
the technology or with other commitments agreed upon.
Subject Matter
3.117 These provisions describe the product to be made, used or sold, or the process to be applied
and from which a product will be obtained and in turn used or sold; they will also identify the
invention or inventions included in that product or process, describe the know-how, if any, that is to
be supplied and identify the technological advances of one party or the other, and the conditions
under which those advances will be made available by that party to the other.
Identification of Product or Processes
3.118 Since the ultimate objective of the licensee concerns a product or process, one of the
provisions in the license contract will identify in concise terms that product or process. In the typical
case, that provision is set forth in the part of the license contract dealing with definitions.
3.119 The product might be identified somewhat broadly, as for example, “instruments for the
purpose of writing,” which would include, for instance, fountain pens, ball-point pens and felttipped
pens. The product might be defined more specifically, as for example, only one or more but
not all of those kinds of pens.
3.120 The process might be identified as a chemical formula according to which certain chemical
substances interact when a specified catalyst is introduced resulting in a specified product.
3.121 The title and the abstract included in the application for the grant of a patent for the
invention that is embodied in the product or the process may be a useful starting point in providing
the requisite information to describe the product or the process.
Identification of the Invention
3.122 The provision that identifies the invention or inventions included in the product or process
usually refers to the number of the patent for invention or the application for the grant of a patent
for invention, the country where the patent was granted or registered or where the application was
filed, the date of the patent grant or the filing date of the application, and in some cases the title of
the invention and the status of the application. Where the product or the process in question
includes a number of inventions, the relevant information in respect of each invention is usually
grouped together and set forth in a schedule attached to the license contract.
Description of the Know-How
3.123 Under the standard requirements of most patent laws, the description of the invention
claimed in an application for the grant of a patent for invention must disclose the invention in a
manner sufficiently clear, detailed and complete to permit a person having ordinary skill in the art to
carry out the invention. Some patent laws go further, and require also that the best mode
contemplated by the inventor for carrying out the invention be described. But those patent laws do
not extend to requiring a description of additional means that may facilitate the carrying out of the
invention. Such additional means may consist of the use of technical information and expertise
acquired through long experimentation with the invention.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 181
3.124 As regards the description of such know-how, technical information can be identified in
terms of the relevant documentation, as for example, diagrams of the layout of the plant, drawings
or blueprints of machines, lists of spare parts, manuals or instructions for the operation of machines
or the assembly of components, specifications of raw materials, labor and machine time
calculations, packaging and storing instructions and information on stability and environmental
aspects. Job descriptions can be drawn up for each expert whose technical or professional expertise
is needed. This information can be set forth in one or more annexes, appendixes or schedules
attached to the license contract.
Confidentiality
3.125 Know-how is acquired or developed by the licensor in the course of research and
development activities or through the application of industrial and business techniques in the
operations of the licensor’s enterprise. The know-how may often be the reason for the current
competitive position, if not superiority, of the licensor in the field of technology concerned. As
such, it is a valuable asset of the licensor to be preserved. At the same time, it is a resource which
the licensor is willing to part with in exchange for an agreed price from the licensee or others who
wish to use it. Its supply to the licensee is consequently the result of a bargain in which the price is
not just the payment of a monetary remuneration fixed by the license contract but also the
commitment by the licensee not to disclose that know-how to third persons except under certain
conditions or with the consent of the licensor.
Access to Technological Advances
3.126 The technological advance of immediate concern to the parties to the license contract will
normally be one which significantly or substantially affects, for example, in the case of a given
product, the volume of its production, the cost of its manufacture or the efficiency of its use, or, in
the case of a given process, the material conditions under which that process is applied, or the cost
of its application, or the efficiency of its application.
3.127 The parties might decide that the mutual exchange of information on technological
advances is in their best interests, and that each shall be free to exploit, free of charge, the
technological advance of the other. This is called cross-licensing. They might also decide that if
either party makes available the technological advance of the other to a third person for a
remuneration, then the other shall be entitled to share in that remuneration in some agreed manner
and amount. It is usually provided further that the party making the technological advance should
apply for patent protection. In the event that it does not elect to do so, the other party may apply,
in the name of either and at the expense of the party applying.
Limitations of the License and Anti-competitive Practices
3.128 The license can have several contractual limitations regarding permissible activities (to make,
to sell, the fields of use, etc.), restrictions to part of the claims on them as well as territorial or
quantity restrictions or limitations on the sale prices.
3.129 However, any provision conflicting with the prohibition of antitrust or anti-competitive
practices is usually to be considered null and void. The main requirement is that as a rule exclusive
intellectual property rights represent a pro-competitive monopoly for a limited duration only, so that
their owner should not exercise his right by abusing his monopoly, e.g., by imposing anticompetitive
obligations on the licensee. The most important forms of such abuse can be, for
example, tie-in clauses, export bans, minimum royalty clauses, exclusive grant-back, conditions
preventing challenges to validity and coercive package licensing. Tie-in clauses provide that the
182 WIPO Intellectual Property Handbook: Policy, Law and Use
licensee may purchase materials only from certain sources; grant-back clauses secure exclusive
rights to improvements in favor of the licensor.
3.130 Under the TRIPS Agreement Members agree that some licensing practices or conditions
pertaining to intellectual property rights which restrain competition may have adverse effects on
trade and may impede the transfer and dissemination of technology.
3.131 Nothing in the TRIPS Agreement prevents Members from specifying in their legislation
licensing practices or conditions that may in particular cases constitute an abuse of intellectual
property rights, with an adverse effect on competition in the relevant market. A Member may
adopt, consistently with the other provisions of the Agreement, appropriate measures to prevent or
control such practices, in the light of the relevant laws and regulations of that Member.
Territorial Exclusivity
3.132 Which of the parties to the license contract will be able, by virtue of its provisions, to
perform what act or acts of exploitation, in what territory or territories, and with what effects on
arrangements with third persons in relationship with the licensor or the licensee, who are also
interested in exploiting the technology, are distinct but related questions. They are related because
each concerns the exclusive right of the licensor under the patent for invention granted to the
licensor which will be the subject matter of the license contract. A decision on each of these
questions must be clearly reflected in the license contract.
Permitted Field of Use
3.133 A provision on the field or fields of use or activity specifies the purpose or purposes for
which the invention or the know-how may be applied. It serves to define the scope of that
application by the licensee. At the same time, depending on that defined scope, the licensor may
be able to grant a license or supply know-how to each of a number of other licensees, each
specializing in different applications of the invention or the know-how in question. That permits
the most practical way of exploiting the invention or know-how, given the capabilities of each
particular licensee.
3.134 In the long run, though, it may be desirable for the licensee to have the opportunity to
apply the technology for all purposes. The price asked for in that case, however, must be compared
to the lower price which may be asked for if a limited purpose is agreed to. The comparison
becomes all the more relevant if the licensee is not currently, nor in the future likely to be, in a
position to exploit the technology beyond the limited purpose.
Exploitation
3.135 The licensor expects that the licensee will not only exploit the invention and apply the
know-how but will do so to the fullest extent permitted by the terms and conditions of the license
contract.
3.136 The parties might wish to specify that the licensee will make, use or sell the product that
includes the patented invention or will apply the know-how in a certain manner with a view to
obtaining a certain result and to exploiting the technology at a certain level. The parties might wish
also to set forth the commitments of the licensor, the performance of which will assist the licensee
in achieving the expected manner and extent of working or other exploitation.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 183
3.137 The questions that usually arise in respect of the manner and extent of exploitation are
concerned with the following matters: the quality of the product, the volume of production, the
making of part of the product by third persons to be authorized by the licensee, the import of the
product to meet local demand in the absence of sufficient working in the country itself and the use
of the distribution channels of the licensor.
3.138 The licensee may seek an assurance that the know-how supplied will be adequate to attain
the objective agreed with the licensor. Such an assurance is referred to as a guarantee of knowhow.
In this context, a guarantee is an assertion that a given fact or event concerning the knowhow
exists or that a given performance will take place if the know-how is applied; that assertion is
accompanied by a promise that if the fact or event does not exist or the performance does not take
place, a correction will be made or some other act will be done in its place.
3.139 The guarantee provision of the license contract might be phrased in terms of the conformity
of the know-how supplied to the agreed description of what was promised to be supplied. It might
be phrased in terms of the results to be attained by the application of the know-how. It might be
phrased in terms of the suitability of the know-how to meet the technological requirements of the
licensee.
Settlement of Disputes
3.140 When non-performance is likely to or does occur, and there is no provision in the license
contract which fixes the agreed consequences in respect of that failure of performance, one party
might propose a solution that is satisfactory to the other. That solution might be the allowance of
additional time to render the performance or the substantial correction of the flaw or flaws in
question. It might mean that some other performance in lieu of the defective performance would
be acceptable. In these ways, an amicable way of settling the dispute between the parties could be
arrived at without recourse to legal remedies in the courts or other tribunals.
3.141 Normally, the law of the country where a given act or performance is to take place governs
the disputes arising out of that act or performance and the competent courts are the courts of that
country. In the case of a license contract involving a foreign licensor and a domestic licensee, the
law of the licensee’s country would be applicable and the courts of that country would be
competent since most, if not all acts or performances take place in that country. However, the
contract may stipulate, subject to possible limitations under the law of the licensee’s country, that
disputes arising under the contract will be subject to arbitration rather than to judicial proceedings.
3.142 Yet circumstances could arise when the party injured by the default in the performance of
the other is not offered a satisfactory solution. It could be also that the party alleged to have
defaulted, denies that there has been a failure to perform as agreed. In either event, some
machinery for the settlement of the dispute should be provided for before recourse is had to the
courts or other tribunals. Thus, recourse might have been to the advice of independent experts, or
the findings and recommendations of a group consisting of representatives of each side, or to
conciliation or to arbitration proceedings or, ultimately, to the courts or other tribunals competent
in the matter. In particular, a clause designating the WIPO Arbitration Center as the forum for
settling disputes may be added to a license contract.
Duration of the License Contract
3.143 The time-scale of a licensing contract, that is, its commencement, duration and termination,
must be stipulated in the contract. An intellectual property right can be licensed for the maximum
period of time during which it is in force (for patents, for instance, the maximum is generally
184 WIPO Intellectual Property Handbook: Policy, Law and Use
20 years). Shorter licensing periods may also be agreed upon and the parties may reserve the right
to terminate the contract with future effect in case of specified circumstances.
Remuneration
Introduction
3.144 The “price” or the “cost” of the acquisition of industrial property is dependent upon a
number of factors, including the nature and duration of the industrial property rights and the
technology and the relative bargaining power of the parties. The prospective transferor usually
makes a careful assessment in terms of value or the need for the particular technology, the
alternative technologies available, the prospect of technological advances and the likely production
and profitability of the potential transferee. The prospective transferor also makes detailed
projections of production and consequent income flow from other potential licensees or technology
recipients.
3.145 The potential transferee assesses the total payments likely to be made for a particular
technology and for advances in that technology against the profitability of the enterprise over a
period of time and also evaluates such payments in relation to costs of alternative technology or
payments made with respect to similar transactions.
Direct Monetary Compensation
3.146 Direct monetary compensation for industrial property rights or for technology may take
different forms: (a) “lump-sum payment”, a pre-calculated amount to be paid once or in
installments, (b) “royalties”, post-calculated, recurring payments, the amount of which is
determined as a function of economic use or result (production units, service units, sales of the
product, profits), and (c) “fees,” compensation for services and assistance rendered by technical or
professional experts, fixed at a specified amount or calculated per person and per period of service.
3.147 These forms of remuneration may be combined in a given industrial property license or
technology transfer agreement. In some instances, the lump-sum payment form may replace the
system of royalties altogether, while in other instances the two might be combined one way or
another, as where the licensee or technology recipient may elect to make a lump-sum payment in
lieu of one form of royalty or another. In other instances, the licensee or technology recipient may
be given the opportunity to elect to pay royalties on production units rather than on sales. The fees
for technical services and assistance may be determined separately, either stipulated in advance or
negotiated as rendered.
3.148 It is to be noted, however, as elaborated below, that under the laws in certain countries
governing the transfer of technology, the various rights or elements of technology may have to be
separately priced or valued and even made the subject of distinct licenses or agreements.
Lump-Sum Payment Compared with Royalties
3.149 The lump-sum payment is characterized by the fact that the obligation is fulfilled
immediately or fairly shortly. Further, the parties do not have to make continuous accounts or
control the calculation or the remittance, as in the case of royalties.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 185
3.150 The lump-sum payment, when compared with royalties, may or may not have certain tax
advantages. The continuous payment of royalties is considered to be income to the licensor or
technology supplier from the viewpoint of taxation and, as such, royalties are subject to income tax.
The single lump-sum payment, and even the lump-sum payable in instalments, may be considered
the counterpart to, or the financial result of, a sale or purchase operation, with the assignment or
transfer of the industrial property rights and the supply of the know-how considered analogous to
the sale of commercial goods. The licensor or technology supplier will also have to pay taxes on the
lump-sum payment. The single lump-sum payment, however, may be subject to a different (often
higher) tax rate than income in the form of royalties. Under some tax laws, it may be possible to
alleviate the higher or progressive rates on the lump-sum payment if it is split into instalments and
paid over several tax years and thus subject to lower tax rates.
3.151 Where a more or less single performance is the counter value, the lump-sum payment may
lead to results economically more justified between the parties. If, for example, unexpected high
sales are reached, especially under the influence of monetary fluctuations or other economic
circumstances, the system of royalties leads to unexpected and unjustified returns to the licensor or
technology supplier. Upon the payment of a lump-sum, the licensor or technology supplier would
receive only the counter value of the single performance which was thought justified at the time the
agreement was concluded.
3.152 On the other hand, the lump-sum payment may also entail risks for the licensee or
technology recipient if production or sales of the product lag behind expectation and if the
lump-sum payment is disproportional to the economic value of the performance of the licensor or
technology supplier.
Lump-Sum Payment and Royalties Combined
3.153 In many cases, the remuneration for industrial property rights or know-how is a
combination of a lump-sum payment and royalties.
3.154 The lump-sum payment is often treated as an initial payment for disclosing information that
enables the potential licensee or technology recipient to evaluate the technology. The actual initial
payment varies a great deal from transaction to transaction and may range from a small sum for the
delivery of initial technical information to a very large amount for sophisticated technology that has
required much research and development. In some instances, the initial lump-sum payment may be
viewed as a minimum payment or regarded as a down payment or advance against royalties.
Further, the licensee or technology recipient may be given the opportunity to make an additional
lump-sum payment, stipulated in advance or negotiated at the time of the election to make that
payment, in lieu of royalties, with a credit against the payment of the royalties already made.
3.155 In negotiating remuneration in the form of a combined lump-sum payment and royalties,
the licensee or technology recipient will need to evaluate carefully the total outflow and incidence
of the payments that may be likely for various combinations. The burden of interest charges, for
example, is important in determining the size of the lump-sum figure, while projections of
production estimates and of cash-flow from sales during the period of the license or agreement are
essential in assessing the percentage rate of royalties.
Fees for Technical Services and Assistance
3.156 Specific technical services and assistance, to be provided by the licensor or technology
supplier, may be necessary in connection with the transfer of the technology or the marketing of
the product under a trademark, and may have to be paid for separately.
186 WIPO Intellectual Property Handbook: Policy, Law and Use
3.157 The fees for specific technical services and assistance related to a patent or trademark
license or a technical know-how agreement include: (a) the cost of training programs for the
personnel of the licensee or technology recipients; (b) fees for technical services and assistance to
be rendered by technical experts of the licensor or technology supplier to the licensee or technology
recipient at the latter’s industrial plant during the period of the license or agreement; (c) fees for
technical services and assistance which concern machinery, equipment or other capital goods
needed in the utilization of the technology at the industrial plant of the licensee or technology
recipient.
Indirect and Non-Monetary Compensation
Income from Related Operations
3.158 The licensor or technology supplier may receive income from various operations. These may
be commissions on the sales of the product made on behalf of the licensee or technology recipient
through the distribution channels of the licensor or technology supplier, profits from the sale of the
product supplied to the latter under exclusive purchase arrangements, profits from the sale to the
licensee or technology recipient of related products which complete its marketing program, profits
from the sale to the licensee or technology recipient of raw materials, intermediate goods, parts or
other components and rentals from machinery, equipment or other capital goods released by the
licensor or technology supplier to the licensee or technology recipient.
Dividends
3.159 If the licensor or technology supplier assumes a financial participation in the enterprise of
the licensee or technology recipient or if they enter into a joint venture, the licensor or technology
supplier will obtain, in the event of successful commercial operations, dividends from the financial
participation. If an essential part of the commercial operations depends upon the industrial
property rights or technology of the licensor or technology supplier, there may be a direct
dependency between the amount of the royalties and the amount of the dividends: the higher the
royalties, the lower the dividends, and vice versa. The degree of participation and financial and tax
factors may dictate the relevant amount to be assigned to each and the formation of reserves or the
holding back of profits, which may lead to an increase in the value of the financial participation.
3.160 In this context, attention is directed to the laws in certain countries governing the transfer of
technology which treat as profits payments in respect of the price of industrial property rights or
technology made between a subsidiary and its parent, or between subsidiaries; or where there
exists economic unity or community of interests between the parties, or where effective technical,
administrative, financial and commercial management of the technology transferee is exercised by
the technology transferor; or where the technology transferor supplies raw materials or
intermediate products used in the process in an amount equal to more than a specified percentage
of the total cost of the product. Some of these laws also provide that in such cases the lump-sum
payment or royalties may neither be treated as a contribution to capital nor constitute shares in the
profits or in the capital of the enterprise of the licensee or technology recipient nor be deducted for
the purpose of calculating the tax on its income.
3.161 Under the laws in certain other countries governing the transfer of technology, although
royalties may be paid by the licensee or technology recipient to the licensor or technology supplier
even where the latter has a financial participation in the former, the amount of the royalty
payments must be reduced substantially in the event that the licensor or technology supplier has a
majority participation in the licensee or technology recipient; in addition royalty payments by a
wholly owned subsidiary to its foreign parent company are ordinarily not permitted.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 187
Cost Shifting or Sharing Measures
3.162 Certain cost shifting or sharing measures, for example, the expenses in maintaining or
defending rights under the patent or the trademark, that are adopted, may have the effect of
reducing the expenses of the licensor or technology supplier and increasing the cost to the licensee
or technology recipient of the technology transfer transaction.
Feed-back of Technical Information
3.163 The technical know-how of the licensee or technology recipient which is to be turned over
to the licensor or technology supplier can also constitute a form of income to the latter.
Acquisition of Market Data
3.164 The licensor or technology supplier may benefit from data provided by the licensee or
technology recipient concerning the marketing of the product in the local area, including new sales
promotion techniques, which may prove useful to the marketing of the product in other areas.
Cost Reductions and Savings to the Licensee
3.165 Some elements of a given technology transfer transaction may have the effect of reducing
the operating expenses of the licensee or technology recipient or otherwise lead to savings on the
part of the technology transferee.
3.166 Mention may be made of such measures as the utilization by the licensee or technology
recipient of the channels of sales distribution of the licensor or technology supplier, the use without
payment of the trademark of the licensor or technology supplier, access for the licensee or
technology recipient to information concerning improvements to existing inventions, developments
in know-how, new inventions of the licensor or technology supplier or rights in respect of such
technological advances, and the opportunity to benefit from the marketing information and other
technical services and assistance of the licensor or technology supplier.
Description of the Currency of the Obligation and of Payment
3.167 It is necessary to distinguish two aspects of the question of currency designation. The first
concerns the determination of the currency which will serve as the measure of the obligation to
pay, and the second relates to the choice of the currency in which payments will be made to
discharge that obligation. The currency of obligation and the currency of payment may be one and
the same, but may also be different, as is often the case in an international commercial transaction.
Currency of Obligation
3.168 The currency of the obligation in the case of the lump-sum payment may be the currency of
either the country of the licensor or technology supplier, or the country of the licensee or
technology recipient or a third country.
3.169 In the case of royalties, if the royalty amount is linked to the volume of production and does
not depend on the value of the unit produced, the currency chosen may be either that of the
country where production takes place or that of another country. If the royalty amount is linked to
sales, the currency chosen may be that of the country where sales take place. If export sales are
likely, more than one currency may be chosen — the currency of the country of the licensee or
technology recipient where production and domestic sales occur, and the currency or currencies of
188 WIPO Intellectual Property Handbook: Policy, Law and Use
the country or countries where the export sales are made. If royalties are linked to the profits of the
enterprise of the licensee or technology recipient, then the currency of the country where that
enterprise is legally organized may be chosen.
3.170 As concerns fees for technical services and assistance, the determination will most likely be
between the currency of the country of the expert and the currency of the country where the
services are performed; however, in the case of services performed by experts sent to the country
of the licensee or technology recipient, the amount of the fees will normally be determined in the
currency of the country of the expert, with payment in whole or in part in the currency of that
country and the remainder, if any, plus the portion attributable to living expenses and other facilities
in the country of the licensee or technology recipient.
3.171 Under the laws in certain countries governing the transfer of technology, it is provided that
the currency of the obligation must be currency of the country of the licensee or technology
recipient, though remittance abroad may be made in the equivalent foreign currency; whereas,
under the laws in some other of these countries, though the currency of the obligation may be
expressed in a foreign currency at least the expenses connected with the maintenance of experts in
the country of the licensee or technology recipient must be paid in the currency of that country.
3.172 Many factors may play a role in the choice of the currency of payment. These are whether
the currency of obligation can be utilized in the country of that currency by the licensor or
technology supplier, the inflation rate in the country of the currency of obligation, the stability in
the international money markets of that currency in relation to other currencies, the existence of
currency exchange controls in the country of the currency of obligation or where the income of the
licensee or technology recipient is generated, and the applicability of tax laws which may provide
special benefits for one party or the other.
Rate of Exchange
3.173 In the event of the currency of payment chosen differing from the currency of obligation,
the rate of conversion will normally figure as a provision in the license or agreement. Any one of a
number of different exchange rates may be selected; for example, the official rate established by
national or international monetary authorities, or an average of the said rates or a commercial rate,
such as the telegraphic transfer selling rate or other selling rate or other rate of a specified domestic
or foreign commercial bank.
Types of Intellectual Property Licenses
Introduction
3.174 The typical provisions of an intellectual property license are discussed above in general
terms. Some provisions are particular to the type of intellectual property being licensed. Some of
the more important of these provisions are listed below.
Patent Licenses
3.175 Under a patent license, the purpose of the contract is to authorize the use of an invention
protected by a patent. The patent involved is identified by stating the name of the country in which
it has been granted, together with its number. Generally, the technical subject matter of the
invention is briefly stated in the preamble or in the article defining terms used in the contract.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 189
Reference is also frequently made to a separate annex when the license concerns a number of
patents issued in differing countries. It is advisable to state exactly those countries in which patent
applications are still pending and to stipulate which of the parties is responsible for complying with
the administrative and legal formalities required for the upkeep of the patent.
3.176 A patent affords a set of exclusive rights: to use the invention, to manufacture it, to sell it
or place it on the market. Generally, a license provides an authorization for the licensee to carry out
all those acts.
3.177 A license may be an exclusive license, a sole license, a non-exclusive license or a simple
license. An exclusive license guarantees that the licensee will have no competition, not even that of
the licensor or of the latter’s subsidiaries. This must be stipulated in the agreement. A sole license
guarantees the licensee that the licensor will afford no licenses to other manufacturers within the
contractual territory. A simple license provides no guarantees in that respect, but simply constitutes
an authorization to use the invention. A non-exclusive license means that another license for the
creation has been granted in the contractual territory.
3.178 In such cases, it is recommended to include in the contract what is known as the “most
favored licensee clause.” Such a clause ensures that the licensee will enjoy the most favorable
conditions that may subsequently be granted to a second licensee (for the same territory). This
clause thus avoids any distortion of competition that would result from differing contractual
conditions for the supply of technology.
3.179 The right to sue infringers is normally the privilege of the licensor as owner of the patent.
However, an exclusive licensee can sue for infringement in the name of the patent owner.
3.180 Any licensee is protected against the inaction of the patent owner in case of infringement,
and has the right to institute infringement proceedings in his own name if the owner of the patent,
after being called upon to do so by the licensee, does not do so within the specified period.
3.181 In a contractual license, a licensee may be granted the right to institute infringement
proceedings without having to request the owner of the patent to do so, or, the licensee may be
completely barred from instituting infringement proceedings.
3.182 A person licensed to use a patent may challenge the validity of a patent. So-called “nochallenge
clauses” which prohibit the licensee from contesting the validity of the licensed patent are
anti-competitive.
Trademark Licenses
3.183 Trademark licensing is of fairly recent origin in trademark history. Since the original function
of a trademark was to indicate trade origin, goods emanating from a source other than the
trademark owner could not, without deception, carry a licensor’s mark. Indeed the grant of a
trademark license rendered a licensor vulnerable to a claim of non-use and so to invalidation of his
mark. The exercise by a licensor of quality control over the products sold by a licensee to which the
mark was affixed opened the door to the fiction that such ,control was a manner for the user to
avoid the expungement of the mark. This fiction formed the basis of the registered user provisions
inserted into most trademark statutes for more than forty years.
3.184 Most registered user provisions require the license parties to submit their agreements to the
Registrar who scrutinizes them to ascertain the nature and extent of the quality controls to be
exercised by the licensors. The Registrar is obliged to ensure that registration of such agreements
190 WIPO Intellectual Property Handbook: Policy, Law and Use
accord with the national interest, and the Registrar is required to refuse registration to agreements
which appear to him to facilitate trafficking. It should be noted, however, that registration has
been considered not to be essential for validity of a trademark license. The registration provisions
have been described as permissive and not mandatory. Provided a licensor maintains control over
the quality of the licensed products and the licensor is perceived as retaining a connection with the
licensed products, invalidation can be avoided.
3.185 It should be noted in this context that in September 2000, the WIPO General Assembly and
the Assembly of the Paris Union adopted a Joint Recommendation Concerning Trademark Licenses
providing a maximum list of information and elements that an Office may require for a license to be
recorded (Article 2(1)). The Recommendation also attempts to limit the effect of non-compliance
with recordal requirements to the license agreement itself by stipulating that non-recordal of a
license should not affect (i) the validity of the trademark which is the subject of the license
(Article 4(1)), (ii) any right that a licensee might have under the legislation of Member States to join
infringement proceedings initiated by the holder (Article 4(2)(a)) and (iii) the question whether use
of a mark by a third person can be considered use by the trademark holder which can be relevant in
the context of use requirements (Article 5).
3.186 Trademark licenses may be granted as adjuncts to or separately from patent and know-how
licenses. Among the provisions particular to most trademark licenses are the following:
3.187 Permission to Use. The grant of permission to use the relevant mark or marks is the
first-stated provision of most license agreements. The particulars of the mark or marks are usually
listed in a schedule to the license agreement, together with the products in respect of which the
mark is to be used.
3.188 Number of Licensees. It will be important for the licensee to know how many other
licensees will be appointed to service the license territory. It will also be important to ascertain
whether the licensor intends to distribute within the territory. Finally, it will be important to a
licensee where others are to be appointed to ensure that its rivals are appointed on comparable
terms.
3.189 Quality Control. As mentioned above, at the heart of any registered user agreement is a
provision that the licensee will not use the marks on products which do not attain the standard of
quality prescribed by the licensor. Quality control provisions will provide that the user receives, on a
confidential basis, all specifications, technical data and know-how of the licensor to allow the
prescribed quality standards to be met. Policing of this clause will usually require the user to send
sample products to the licensor and to permit inspections of the user’s factory and warehouses and
of methods of production, materials used, storage and packing of finished products. The
agreement should permit the user to dispose of products which do not meet the quality standard,
provided they do not carry the trademark.
3.190 Marketing. The license will designate the territory in which the trademark may be used.
This will usually contain prohibitions against trading outside the designated territory as well as
provisions keeping the licensor out of the license territory. Advertising material employed by the
licensee may have to receive the licensor’s approval.
3.191 Financial Arrangements. In addition to a fee or royalties for being permitted to use his
trademarks, a licensor may also require payment in respect of the provision of skilled persons to
instruct employees of the licensee in the materials required to achieve the prescribed quality
standards required in the agreement. Arrangements also have to be made to allocate the cost of
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 191
the sampling procedure. Finally, the licensee is usually required to keep detailed books and records
of sales of the trademarked products.
3.192 Infringements. The licensee is normally required to report to the licensor all particulars of
infringements that occur, and the licensor is usually responsible for conducting infringement
proceedings.
Copyright Licenses (Publishing)
3.193 In the case of a publishing contract, the owner of copyright does not need and usually does
not intend to part with his copyright or even his right to control the publication of his work. Under
certain copyright laws, which consider the author’s economic rights inseparable from his moral
rights, assignment of the author’s right to publish the work may not even be possible. When
entering into a publishing contract, the owner of the copyright usually only undertakes to restrict
the exercise of his right in the work to be published and restrict it to the extent necessary for the
publisher to be able to use the work. At the same time, the ownership of copyright does not
change but remains with the author or other owner of the copyright.
3.194 Thus, a characteristic publishing contract is a mere license granted to the publisher by the
owner of copyright. To be of value to the publisher, a license must also enable him to protect his
publishing activity against third persons.
3.195 A license is generally understood in the field of copyright as the authorization given by the
author or other owner of copyright (licensor) to the user of the work (publisher or other licensee) to
use it in a manner and according to conditions agreed upon between them.
3.196 The publisher should be granted a license comprising all the rights necessary for optimum
realization of the planned publication. Generally, he acquires an exclusive license (providing him
with an exclusive right) to reproduce and publish the work concerned — or, if appropriate, to
provide, reproduce and publish its translation — in a standard trade edition, comprising a
reasonable number of copies.
3.197 The license can be granted for one edition only, or also for subsequent ones. The size of a
single — or the first — edition is usually determined in the contract either by fixing the number of
copies it should comprise, or by stipulating a minimum and/or maximum number of copies (“the
print run”). The agreement on the size of a single — or the first — edition usually takes into
account the need to comply with the presumable demand of the public, at costs permitting sales at
the usual retail price per copy prevailing in the given book market as regards similar publications.
3.198 In the case of a license to publish the work in translation, the language (or languages) of
the authorized edition (or editions) must be specified.
3.199 In order to promote the dissemination of the work published, and with regard to possible
further exploitation of the publication under the contract, the licensee may acquire also certain
so-called “subsidiary rights.” Such rights serve the purpose of reproducing or communicating to
the public, or licensing others to reproduce or communicate to the public, the work (or its
translation) in specified forms other than the standard trade edition.
3.200 Such subsidiary rights may for instance comprise: the right of previous and subsequent
publication in the press of one or more extracts from the work; serial rights, that is, the right to
publish the entire work or parts of it in one or more successive issues of a newspaper or periodical,
before or after publication of the work in the standard trade edition; the right to read extracts from
192 WIPO Intellectual Property Handbook: Policy, Law and Use
the work in sound or television broadcasting; the right to include the published work or a part of it
in an anthology; the right to arrange for pocket book or book club editions subsequent to the
standard trade edition.
3.201 Publishers often request the licensor to confer on them, in the framework of subsidiary
rights, the right also to license the reproduction of the published work by means of making
microfilms or other reprographic reproductions thereof, for purposes beyond the limits of fair use
allowed by the law. The publisher may also request the right to license storage of the work in a
computer, accessible to the public. Again, publishers may request the licensor to entitle them to
license the reproduction of the work in the form of sound recordings as well. Sometimes, also the
right of licensing the reproduction of filmstrips is requested. All these kinds of reproduction by
means of modern technology are often referred to in contemporary publishing contracts as
“mechanical reproduction” of the work, and the rights involved as “mechanical reproduction
rights.” This term should not be confused with the notion of the “musical mechanical right,”
which means the right to reproduce a musical work in the form of sound recordings.
3.202 It is a reasonable and usually accepted position not to confer on the publisher rights to
exploit the work in any manner involving its adaptation, such as dramatization rights for stage or
film production, or for sound or television broadcasting, or translation rights in general. Strictly
speaking, the exploitation of such rights goes beyond the scope of the promotion or direct
exploitation of the publisher’s own publication of the work.
3.203 The grant of “digest rights” (the right to publish an abridgment or shortened form of the
work), or of the so-called “strip cartoon rights”, is often made subject to special authorization in
each case, in view of the moral interests of the author relating to the integrity of his work.
3.204 With regard to the integrity of the work to be published, special stipulations can be
incorporated in the contract. This may prove useful especially in countries where no appropriate
“moral rights” provisions are established by legislation. For example, it may be agreed that “the
publisher shall reproduce the work without any amendment or abbreviation thereof, or addition
thereto.”
3.205 As regards translation of the work, it is usual to agree that “the publisher shall have a
precise and faithful translation made at his own expense. The title of the translation is subject to
the written approval of the copyright licensor. On request, the final text of the translation shall also
be submitted to him for approval.”
3.206 It can also be stipulated that “the Publisher shall ensure that the title of the work and the
name of its author shall appear with due prominence on every copy produced.” Depending on the
circumstances, it also can be added that “the Publisher undertakes to print the name of the original
publisher (that is, ...) as well as the year(s) of the previous edition(s) of the work on the verso of the
title page.”
3.207 With regard to certain formalities required in a few States (mainly in the United States of
America) as a condition of the full enjoyment of copyright in published works, it is generally
stipulated in publishing contracts that an appropriate notice of copyright shall be printed on the title
page. The notice consists of the symbol C, or ©, the year of the first publication of the work and
the name of the owner of the copyright in the work.
3.208 As regards distribution of the copies published, it is often stipulated that “the Publisher shall
provide for efficient promotion of the work at his own expense.” In cases where his license has not
been confined to one edition only, it is often added that “he shall see to it that the book is
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 193
continuously available, and that new editions are printed in due time so as to comply with actual
demand.”
Government Control of Licensing Agreements
3.209 In many developing countries, the inflow of technology is subject to a variety of controls as
a means of ensuring that contracts concerning transfer of technology are consistent with the
economic aims of the government. In some countries, these controls are part of a more
comprehensive system of laws dealing with foreign investment in the country. In others, the
controls result from the foreign exchange regulations which are directed at the flow of payments
abroad, whether as dividends, royalties, or income in other forms or as the return of capital.
Indirectly, import regulations, particularly lower tariff rates or exemptions on products embodying
needed technology, may also have an effect on the inflow of technology. In still other developing
countries, legal systems have been devised specifically to control the transfer of technology to, or
within, the country. These systems include the requirement that industrial property licenses and
technology transfer agreements be notified to government authorities or be registered or approved
by them in accordance with criteria established by the legislation or set forth in regulations or
guidelines issued by appropriate governmental bodies.
3.210 The failure of the responsible party to submit for registration or approval an industrial
property license or technology transfer agreement or its modification, amendment, extension or
termination, to the appropriate government authorities within the time limits and under the other
conditions prescribed has a number of legal consequences. Under the relevant laws, the failure to
comply may render the license or agreement void or unenforceable and subject the party
responsible to a penalty or to the suspension of its right to trade or to loss of its business
organization status. The registration or approval of the license or the agreement may be a
prerequisite to giving evidence of actual exploitation of a patent or actual use of a trademark in the
country, or obtaining an authorization from the fiscal authorities to make payments abroad or to
receiving fiscal or other benefits designed to encourage or promote investment in certain sectors or
industries.
3.211 The WIPO Model Law for Developing Countries on Inventions (Volume II), contains
provisions establishing a legal and administrative framework for the examination and registration of
such contracts in accordance with the policy of ensuring that such contracts do not impose
unjustified restrictions on the acquirer of the technology (“the transferee”) which would have the
consequence that the contract, as a whole, would be harmful to the economic interests of the
country.
3.212 The intent is not only to protect the local enterprise that is contracting to acquire the
technology, which frequently is in a relatively weak bargaining position, but also, and even to a
higher degree, to prevent the economic policy of the government being frustrated by certain
contracts. It is of vital importance to a developing country that — even though badly needed — the
acquisition of foreign technology should not impose an undue burden on its economy. If the cost
of technology should exceed its value to the local economy, there may be serious consequences;
for example, a decline in the industrial growth rate, depletion of natural resources, unfavorable
balance of trade, misallocation of financial resources, etc.
3.213 The Model Law provides that the examination and registration of contracts is a task of the
Patent Office. According to the organizational structure of the government, instead of the Patent
Office, another government agency could be entrusted with this task.
194 WIPO Intellectual Property Handbook: Policy, Law and Use
3.214 In order to assist the Office concerned in the examination of such contracts the Model Law
establishes a list of 17 terms that the Office must particularly take into consideration. The list of
17 terms is not exhaustive: registration of a contract can be refused even if that contract does not
contain any of the terms listed; this can be the case if the contract contains a term not appearing
on the list but which imposes certain restrictions upon the transferee so that the contract, taken as
a whole, is harmful to the economic interests of the country. Secondly, the presence in the contract
of any of the 17 terms listed does not necessarily entail a refusal to register the contract;
registration of the contract can only be refused if the restrictions imposed upon the transferee are
unjustified and if the contract, taken as a whole, is harmful to the economic interests of the
country; indeed, depending on the circumstances of the case, the presence of the term in question
might not entail detrimental effects to the economic interests of the country or, if it does entail such
effects, these might be offset by positive effects for the economic interests of the country brought
about by the presence of other terms in the contract, since no codification of specific terms can
anticipate the practically unlimited number of background factors (business, commercial,
technological, etc.) which may enter into a determination of the effect a given contract will have
within a given economic environment. In other words, the Office must apply the provisions with
flexibility, while considering the particular merits of each contract in the light of the economic
interests of the country.
3.215 The said 17 terms are those the effect of which would be:
- to import technology from abroad when substantially similar or equivalent technology may
be obtained on the same or more favorable conditions without any importation of the technology
from abroad;
- to oblige the transferee to make payments which are disproportionate to the value of the
technology to which the contract relates;
- to oblige the transferee to acquire any materials from the transferor or from sources
designated or approved by the transferor, unless it is otherwise impossible, for all practical
purposes, to ensure the quality of the products to be produced and provided that the said materials
are supplied at a reasonable price;
- to restrict the transferee’s freedom to acquire any materials from any source unless it is
otherwise impossible, for all practical purposes, to ensure the quality of the products to be
produced;
- to restrict the transferee’s freedom to use any materials which are not supplied by the
transferor or by sources designated or approved by the transferor, unless it is otherwise impossible,
for all practical purposes, to ensure the quality of the products to be produced;
- to oblige the transferee to sell the products produced by him exclusively or principally to
persons designated by the transferor;
- to oblige the transferee to make available to the transferor, without receiving appropriate
payment, any improvements made by the transferee with respect to the technology to which the
contract relates;
- to limit the quantity of the products produced by the transferee;
- to restrict the transferee’s freedom to export or his freedom to allow others to export the
products produced by him, provided that if the transferor owns, in a country to which such
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 195
a restriction applies, a patent which would be infringed in case of importation of the said products
into the said country; if the transferor has a contractual obligation not to allow others to export the
said products to such a country; or if the transferor already supplies the market in such a country
with the same products, such facts shall be taken into account;
- to oblige the transferee to employ persons designated by the transferor not needed for the
efficient transfer of the technology to which the contract relates;
- to impose restrictions on research or technological development carried out by the
transferee;
- to restrict the transferee’s freedom to use any technology other than the technology to
which the contract relates;
- to extend the coverage of the contract to technology not required to achieve the objective
of the contract and to oblige the transferee to give consideration for such technology;
- to fix prices for the sale or resale of the products produced by the transferee;
- to exempt the transferor from any liability resulting from any defect inherent in the
technology to which the contract relates or unreasonably to restrict such liability;
- to restrict the transferee’s freedom to use, after the expiration of his contractual obligations,
the technology acquired as a result of the contract, subject, however, to any right of the transferor
under a patent;
- to establish the duration of the contract for a period which is unreasonably long in relation
to the economic function of the contract, provided that any period which does not exceed the
duration of the patent to which the contract relates shall not be regarded as unreasonably long.
3.216 The system provided for by the Model Law, although it enumerates some of the most
important clauses to be considered, recommends a flexible approach which allows the examination
of each contract on its merits within the general economic and technological context of the country
concerned.
Copyright and Development
3.217 Copyright has a special role in the context of development. Particularly since the 1950s,
when the political map of the world changed considerably, and several States progressively became
independent and other States were newly created, developing countries have had to cope with the
enormous problems of educating the vast masses of their peoples. Some developing countries,
racing against time in order to provide mass education by methods both formal and non-formal, are
facing acute challenges in respect of encouraging and fostering intellectual creativity and satisfying
the urgent need for promoting knowledge, particularly in the field of science and technology, in
their countries.
3.218 Most developing countries, on attaining independence, have given priority to the training of
their peoples and to education, in order to meet the need for staff and management personnel to
196 WIPO Intellectual Property Handbook: Policy, Law and Use
design and implement development policies and plans. Progressively, emphasis had to be placed on
the need to give an essentially national character to the training of the people.
3.219 It is indeed important that people be trained in a manner that is in keeping with their
natural environment. Consequently, teaching material, including literary, artistic and scientific
works, has to be created by authors originating in the community to which the works are
addressed, and the community has in turn to see and recognize its reflection in them. A reasonable
level of recourse to foreign works will continue to remain desirable, in order to facilitate cultural
interchange and the reciprocal flow of ideas.
3.220 In many developing countries, there is a shortage of specialists in certain areas of
knowledge. Incentives and subsidies are required for the purpose of encouraging national
authorship both in a language in general use and in the local language. Also required is education
of the public in the laws of copyright.
3.221 Development of national authorship and creativity cannot be set in motion without
guarantees to the author of adequate remuneration for his efforts, to enable him to devote his time
and attention fully to the need for producing educational material. Copyright protection involves
ensuring not only payment of attractive and reasonable royalties to the authors, but also suitable
protection for publishers, for the opportunity available to an author to have his works disseminated
depends equally on the laws protecting publishers. Protection of authors and creators both
nationally and internationally calls for adequate legislation.
3.222 Developing countries may need to introduce such legislation also in order to protect the
traditional manifestations of their culture which are the expression of their national identity. Once
the law has been enacted, the infrastructure for its application has to be established.
The Development Cooperation Program of WIPO
Introduction
3.223 WIPO’s development cooperation aims to assist developing countries — including the least
developed countries (LDCs), for which a special unit has been established in the WIPO Secretariat —
to attain levels of socio-economic development through their intellectual property systems, which
enable them to enter into effective partnership with more developed countries and generally to take
their place in the world.
Objectives
3.224 The objectives of WIPO’s cooperation for development program are achieved either directly,
by providing legal, practical and administrative information, advice and training for governments
and organizations in developing countries, or indirectly, by facilitating their contacts with public and
private bodies worldwide which can also thus assist them.
3.225 The major objectives of the cooperation for development program are to assist developing
countries in:
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 197
- the establishment of intellectual property systems which are modern and function well, with
regard to legislation and administration, and with personnel adequately trained and using up-todate
equipment;
- the development of human resources, especially by the WIPO Worldwide Academy;
- the adoption of timely and informed policies to meet existing and new intellectual property
challenges such as the preservation, conservation and dissemination of biological diversity, the use
of traditional knowledge to benefit the holders of it, the improved protection of expressions of
folklore and the implications of electronic commerce;
- the promotion of cooperation among developing countries, in particular by the use of the
WIPO Global Information Network (WIPONET), in order to pool all available useful technological
information resources at sub-regional and regional levels;
- the development and adjustment of information technology, in both its legal and practical
aspects, to harmonize and enhance its intellectual property application worldwide.
3.226 The creation and use of intellectual property through the setting up of innovation support
structures and technology transfer.
3.227 In order to carry out activities to fulfil these aims, WIPO undertakes projects and activities
tailored to the needs of particular groups of developing countries.
3.228 A single Permanent Committee on Cooperation for Development Related to Intellectual
Property was established in 1999, to direct Permanent Programs in the fields of both industrial
property and copyright and related rights. Its membership is open to any Member State of WIPO,
as well as to intergovernmental and non-governmental organizations with observer status.
3.229 The Permanent Committee is a forum for debating policy and practice in intellectual
property matters of particular concern to developing countries. It has focused on all the new
challenges described above (see at the beginning of this chapter the section on the Objectives of
Developing Countries). Its sessions have especially reviewed WIPO’s newer initiatives to help
developing countries to meet those challenges: the major subjects of discussion have been, among
other things, the development of human resources in the context of the work of WIPO’s Worldwide
Academy, assistance to the Least Developed Countries (LDCs), the promotion and development of
collective management of copyright and related rights (notably in connection with the development
of a regional system), the promotion of innovation in all fields of intellectual property to stimulate
economic growth and culture, new approaches to traditional knowledge, genetic resources and
folklore and, in support of all these and other activities, measures required to enable developing
countries to benefit fully from the latest information technology. The Permanent Committee will
continue to meet biennially.
Development Cooperation in Relation to Intellectual Property
3.230 WIPO’s development cooperation activities in the field of intellectual property are aimed at
helping developing countries in the following respects:
198 WIPO Intellectual Property Handbook: Policy, Law and Use
- training of government officials and representatives of the private sector, such as lawyers,
agents and staff of collective management organizations working in the fields of copyright and
related rights;
- providing legal advice and assistance in drafting new, or revising existing, intellectual
property legislation;
- establishing or strengthening intellectual property offices and other related institutions;
- promoting indigenous innovative, inventive and creative activities;
- using the technological information contained in patent documents;
- establishing programs for legislators and the judiciary;
- promoting awareness of intellectual property protection in local enterprises and educational
institutions.
Training
3.231 WIPO’s training program consists of various regular general and specialized courses
organized each year, in a number of developed and developing countries, for the collective training
of government officials and others, and periodical seminars, workshops and other types of meeting
at national, sub-regional and regional level in which government officials and other personnel from
developing countries participate. In addition, government officials are attached to intellectual
property offices and other institutions in developed or developing countries for practical training,
and middle and senior level officials are sent on observation visits to such offices. WIPO also
organizes on-the-job training in some countries by international experts. The level of training
ranges from basic, introductory courses to refresher or specialization courses for officials in
responsible positions in intellectual property administrations.
3.232 Training programs have been extended to other categories of beneficiaries, in addition to
the government officials working in the national intellectual property administrations. These
categories include private lawyers and practitioners, staff of research and development institutions,
of enterprises and of collective management organizations, representatives of the judiciary, officials
of enforcement agencies such as police and customs, of ministries of trade and foreign affairs and
other persons dealing with questions related to intellectual property matters.
3.233 It is also desirable that the teaching of intellectual property law should be developed in a
number of universities in developing countries. The International Bureau has already awarded
fellowships for this purpose to university teachers from developing countries to enable such
personnel to examine the course and curriculum content in order to introduce or strengthen
teaching at the university level. This means a more intensive involvement in the training of trainers.
3.234 The aim of the training activities is to enable government officials and other personnel from
developing countries to acquire knowledge and practice in the various aspects of intellectual
property, so that they may effectively organize and administer the intellectual property system of
their own countries. Training activities occupy a preeminent place within WIPO’s development
cooperation program because laws and institutions, however good they may be, are of little use
without qualified staff to administer them.
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 199
Legal Advice and Assistance
3.235 In recent years, there have been many instances of a growing interest, on the part of
governments of developing countries in various parts of the world, in making intellectual property
an effective tool in the development process. The existence of intellectual property laws suited to
the needs of the country concerned is a precondition of an effective intellectual property system.
3.236 For this reason, WIPO has received many requests for advice in drafting intellectual property
laws where they do not exist, and in revising existing laws that are inadequate for the country’s
economic needs and priorities. In addition, adherence to international treaties oblige countries to
adapt their legislation in order to meet the protection requirements established in those treaties.
3.237 At the request of a government, WIPO comments on draft legislation prepared by the
government or prepares draft legislation with due regard to the wishes of the government and the
needs of the country concerned. Those wishes and needs would have been ascertained through
consultations and surveys made on the spot by WIPO experts. The draft texts are then submitted to
the authorities for study and comment. What follows is often an exchange of letters and visits
between the authorities and WIPO experts to clarify and improve the texts.
3.238 Legal assistance is provided by the International Bureau of WIPO in two forms — the
drafting of model laws and assistance in the drafting of national legislation. The International
Bureau has already drawn up a number of model laws for the use of developing countries. These
texts are prepared by meetings of experts from developing countries and developed countries,
working on the basis of drafts prepared by the International Bureau and, in all cases, submitted to
the States for their comments and subsequently adopted by meetings of governmental experts.
3.239 In addition, WIPO has produced model laws or guides for developing countries dealing with
such subjects as patents, trademarks, industrial designs and industrial property licensing, copyright
and related rights, the implementation of treaties, the implementation of licensing procedures for
translation and reproduction licensing under the Berne Convention, and the protection of
traditional knowledge and expressions of folklore.
Institutional Assistance
3.240 A law is not an end in itself for the country concerned. It provides an important framework
within which its industrial property system will function. The law must be administered and used,
and for that purpose suitable administrative machinery and procedures are required.
3.241 Here again, WIPO has considerable expertise to offer governments and institutions. WIPO
experts are sent, at the request of countries, in order to give on-the-spot advice, on such matters as
the establishment, streamlining and automation of procedures, preparation of organigrams,
acquisition of appropriate equipment including computer hardware and software, acquisition of the
required technical documentation, establishment of links with external institutions, assessment of
staff requirements and training needs, utilization of office space and the determination of suitable
fee schedules. In the copyright and related rights fields, WIPO has paid special attention to the
establishment and reinforcement of collective management systems, which undertake the
safeguarding of the rights and interests of authors, composers and performers, and the collection
and distribution of their royalties, and which also contribute to the promotion of education and
culture, as well as assisting in participation in international cultural exchange.
200 WIPO Intellectual Property Handbook: Policy, Law and Use
3.242 Often, such administrative improvements and changes are planned, for implementation over
a period of time, by WIPO in consultation with the authorities concerned, depending on priorities
and available resources.
3.243 For an intellectual property administration system to be useful, it must serve the public. In
many countries, the intellectual property system has not been used to full advantage partly because
the public, including creators and business circles, are unaware of the advantages the system has to
offer and its role in the development process. WIPO therefore organizes meetings which aim at
building, to start with, awareness of intellectual property by answering such basic questions as what
is intellectual property, what are its constituent elements, how does intellectual property help trade,
technological development and cultural development, and how to use and protect intellectual
property rights at the national level?
Promotion of Indigenous Creativity, Innovation and Inventiveness
3.244 As observed earlier, the role that the intellectual property system can play in technological,
economic and cultural development has long been recognized in developing countries. The
protection afforded by intellectual property laws results in more creations, innovations and
inventions, more investment and effort in research and development (R&D) in technical fields,
leading to technological improvements, and thereby to improvement in the quality of industrial
output, and by greater access to creations of foreign origin, in an educational and cultural climate
that promotes development in general.
3.245 Without a national intellectual property system, it is difficult for a country to stimulate and
protect the results of indigenous creativity and innovation. Governments can, with the help of
WIPO experts, devise ways and means of encouraging local entrepreneurs and enterprises, the
creation of national associations in the field, the provision of legal advice on protection procedures,
financial support and incentives, public recognition of creators and inventors, the award of prizes
through competitions, etc. Through mass participation in nationwide events and competitions, and
in clubs in schools, public consciousness and use of the intellectual property system is stimulated.
One example is that since 1979, WIPO has established an award for inventors and innovators that is
widely used by developing countries to encourage inventive activity.
3.246 Following this, since 2001 two new Awards were added to the Awards program. First, the
WIPO Creativity Award gave due recognition to individuals or groups of individuals whose creativity,
artistic skills and imagination have resulted in original works, performances or productions
connected with the field of copyright and related rights, including original works developed and
used in the digital environment and related fields. There is also the WIPO Trophy for Innovative
Enterprises, which encourages enterprises and companies in all Member States to actively use the
intellectual property system in their production and commercial activities.
Use of Patent Information
3.247 One of the activities of WIPO in assisting the development process in developing countries is
directed at improving access by those countries to the technological information contained in
patent documents, by the provision of the necessary patent documentation and training in methods
of retrieval and dissemination.
3.248 A program, now called the WIPO Patent Information Services for Developing Countries,
began in 1975. Its aim is to provide free-of-charge patent information services to institutions in
developing countries under agreements concluded between the International Bureau of WIPO and
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 201
contributing industrial property offices in some 20 countries (both industrialized and developing
countries).
3.249 WIPO gives assistance and advice, and is the executing agency for several UNDP projects,
concerning the planning and establishment of patent information and documentation centers
which serve the needs of national or regional institutions in developing countries. Such centers may
be created within an existing or planned industrial property office, or within a scientific and
technological information center.
Programs for Legislators and the Judiciary
3.250 WIPO cooperates in promoting the exchange of experience and other information among
legislators so that they are better prepared to consider the needs of their own countries, and find
solutions to such needs, when engaged in the adaptation of their intellectual property legislations
to the changing economic and technological situation, both on the domestic level and in
international relations. This cooperation may take the form of national and regional seminars and
study trips.
3.251 In addition, WIPO works to promote the exchange of experience and information among
members of the judicial branch (judges of courts of all levels) so that they are better prepared to
interpret and apply domestic laws and international treaties in the field of intellectual property law
and to order measures that would prevent the continuation of infringement of intellectual property
rights. Such cooperation may also take the form of national and regional seminars, simulated trials
and study trips.
Promotion of Awareness in Local Enterprises and Educational Institutions
3.252 It is increasingly recognized that efficient use of the intellectual property protection system
can significantly contribute to economic growth. The Small and Medium-Sized Enterprises (SMEs)
Division, established in October 2000 following unanimous support by WIPO’s General Assembly,
seeks to raise awareness of the relevance of intellectual property for small business and promotes
initiatives to make the intellectual property system more accessible, less cumbersome and more
affordable for SMEs.
3.253 The activities carried out by the SMEs Division of WIPO recognize the important role played
by such enterprises in strengthening the economic wellbeing of a country. Research has shown that
SMEs can and should contribute considerably to employment creation and trade, which ultimately
promote economic growth. It has also been shown that, given the opportunity, SMEs are
innovative and competitive. However, SMEs need to be encouraged to take full advantage of the
existing intellectual property protection system in order to compete more successfully in the global
economy.
3.254 One of the priorities of this program is to raise awareness of the potential benefits for SMEs
so that they effectively use this system. The awareness-building activities are for government
institutions responsible for SMEs, other institutions supporting SMEs and, through information
made available on the Internet, for SMEs themselves. These include international, regional and
national seminars organized by WIPO, distance learning courses offered by the WIPO Worldwide
Academy and joint activities in cooperation with other international or regional organizations or
institutions which deal with matters concerning SMEs.
3.255 WIPO has already been active in raising awareness of the value of the intellectual property
system in higher education, through cooperation activities with universities and similar institutions
202 WIPO Intellectual Property Handbook: Policy, Law and Use
to include intellectual property in teaching programs. A number of cooperation agreements have
been concluded with universities and regional training centers towards this aim (see under the
WIPO Academy below).
The WIPO Worldwide Academy
3.256 The WIPO Worldwide Academy (WWA) was established in March 1998. It is WIPO’s central
coordinating institution for human resources development. The overall objective of the Academy is
to serve as an educational institution providing teaching, training and research services in
intellectual property, particularly for developing countries. In order to meet its objectives, the
Academy carries out its programs both at its Headquarters in Geneva, and in different parts of the
world, and cooperates with several academic institutions and intellectual property offices.
3.257 Owing to the rising level of activities related to intellectual property in member countries,
the demand for tailor-made programs has continued to increase steadily. In response, the Academy
expanded the scope of its training programs in 2000 to include courses and seminars on the
legislative, administrative and enforcement aspects of intellectual property systems.
3.258 The programs of the WWA comprise three main categories, namely, Professional Training,
Policy Training and Distance Learning.
3.259 The Professional Training Program offers intermediate and advanced training courses for
managers and technical staff of intellectual property offices and other professional users of the
system. These courses are not only for persons working in intellectual property offices, but also for
those involved with research work in universities and Research and Development (R&D) institutions,
as well as for those in chambers of commerce and industry.
3.260 Under the Policy Training Program, the Academy organizes sessions for decision-makers,
policy advisers, development managers, diplomats and other groups, to promote policy debate and
a deeper understanding of the practical implications of the intellectual property system. These
sessions are also designed to provide a forum for sharing information and exchanging views on the
experience of other countries in using the intellectual property system as a tool for development. In
addition, special Academy sessions are organized for specific interest groups and also to deal with
special or topical issues, such as strengthening the teaching of intellectual property for professors
and the enforcement of intellectual property rights for the judiciary.
3.261 The Distance Learning Program is an advance in teaching methodology, with the attendant
advantages of flexibility of time and space, cost effectiveness and the capacity to reach the
unreached. Distance learning courses are a complement to traditional training methods, as well as
a means of increasing the range of training beneficiaries. These courses are delivered via the
Internet, using a format that allows for online registration, student-teacher interaction, student tests
and course monitoring and evaluation systems. In addition to a General Course on Intellectual
Property, five specialized advanced distance learning courses which focus on specific aspects of
intellectual property are to be launched.
3.262 The Academy also organizes diploma programs on intellectual property law in cooperation
with universities and other institutions, such as an intellectual property law program with the
University of South Africa (South Africa), a Master Course joint degree on intellectual property with
the University of Turin (Italy) and the qualification of Master of Intellectual Property Law and Human
Chapter 3- The Role of Intellectual Property in Development and WIPO's Development Cooperation Program 203
Rights with the Raoul Wallenberg Institute of Human Rights and Humanitarian Law, University of
Lund (Sweden).
3.263 The WWA works closely with the WIPO Knowledge Management Center and e-Library. That
Center is the catalyst of WIPO's knowledge management initiatives and incorporates the WIPO
Library, which specializes in intellectual property matters and is designed to support the research
and information needs of WIPO and UPOV staff, students of the WWA and external researchers. It
has approximately 35,000 monographs and nearly 300 periodicals. Its collection is enriched by a
number of electronic journals and electronic books and is completed by electronic resources (most
of them acquired under a United Nations inter-agency consortium agreement). Databases like
Proquest, Oxford Reference, Britannica Online and Lexis-Nexis are available through the reading
room services of the Library.
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