This week I had the opportunity to edit our new legal guide for technology transfer in Vietnam. It was prepared by Yen Pham, a lawyer on our staff, and I thought I would give a preview of some of its contents as it is related to my practice.
Some Basics of Technology Transfer
Technology transfer means the transfer of the ownership or the right to use a given technology from the party with the right to transfer such technology to the technology transferee. Subject matters of technology to be transferred comprise: (i) Technical know-how and technological know-how; (ii) technology plans or processes; technical solutions, parameters, drawings or diagrams; formulae, computer software and databases; (iii) solutions for rationalizing manufacture and renovation of technologies; and (iv) equipment and machinery accompanied by one of the above-mentioned subject matters.
The government encourages the transfer of: high technologies; accompanying machinery/equipment of high technologies the transfer of which is encouraged under regulations of the High Technology Law; advanced technologies, new technologies and clean technologies that are suitable for socio-economic conditions of Vietnam.
Technology Transfers may only be made subject to a technology transfer agreement. All technology transfers which are not restricted must be registered with the Ministry of Science and Technology of Vietnam (the “MOST”), and the transferee is responsible for such registration. For restricted technologies, approval must first be obtained from the MOST prior to entering into the technology transfer agreement. Fees such as royalties, training fees, and technical assistance fees are subject to the foreign contractor tax and must be withheld by the transferee of the technology.
Technology Transfers involving Intellectual Property Rights (IPRs)
In case a subject of a technology to be transferred is protected by IPRs under the IP Law, the transfer must be in accordance with the intellectual property law. The agreement on transfer of IPRs must be registered with the National Office of Intellectual Property of Vietnam (“NOIP”) in order to be considered a legally effective IPRs assignment agreement or legally effective against third parties, except for trademark license agreements. In practice, the IPRs transfer agreement may be established in a separate agreement or as a part of the TTA for convenience in registration with the NOIP.
Capital Contribution by Technology Transfer
Article 34 of the law on enterprises allows the owner(s) of a technology eligible for transfer to contribute that technology as capital in an enterprise. In addition to the registration of the agreement on the transfer of ownership of technology, if the subject matter of the technology to be transferred is protected as IPRs under the IP Law of Vietnam, the IPRs protection titles in the name of the technology owner(s) must be assigned to the enterprise in accordance with Article 35 of the law on enterprises and the IP Law.
For the purpose of capital contribution, as provided in Article 36.1 of the Enterprise Law, such technology must be denominated in Vietnamese Dong. The denomination in Vietnamese Dong of a technology to be transferred shall comply with the following provisions:
- Technology contributed to an enterprise upon its establishment shall be valued by members or founding shareholders on the principle of consensus or shall be valued by a price evaluation organization. In the case of valuation by a price evaluation organization, the value of the assets contributed as capital must be approved by more than 50% of members or founding shareholders. If the technology contributed as capital are valued at more than their actual value at the time of capital contribution, the members or founding shareholders must jointly make an additional contribution in an amount equal to the difference between the valuation and the actual value of the technology contributed as capital at the time of completion of the valuation, and concurrently, are jointly liable for any loss and damage caused by the contributed technology being valued intentionally at more than their actual value; and
- Technology contributed as capital during the course of an enterprise’s operation shall be valued on the basis of the agreement between the enterprise’s owner or the members’ council or the partners’ council in the case of an LLC or partnership or the board of management in the case of a shareholding company on the one hand and the owner of the technology on the other hand, or by a price evaluation organization. Where a price evaluation organization conducts the valuation, the value of the technology contributed as capital must be accepted by the owner of the technology and the enterprise’s owner, the members’ council or the partners’ council or the board of management in the case of a joint-stock company. Where the technology contributed as capital is valued at more than its actual value at the time of capital contribution, the owner of the technology, the enterprise’s owner or members of the members’ council or the partners’ council or members of the board of management shall jointly make an additional contribution in an amount equal to the difference between the valuation and the actual value of the technology contributed as capital at the time of completion of the valuation, and concurrently, are jointly liable for any loss and damage caused by the contributed technology being valued intentionally at more than their actual value.
Technology transfer creates a great deal of value for transactions in any country, and in Vietnam, the government is keen to see useful and advanced technologies transferred into the country and used to promote the development of industry and services. The ability to contribute technology as capital in an enterprise in Vietnam is also an important method for building startups with an international element or of luring in major manufacturers who might need to transfer technology to a subsidiary in Vietnam for the purpose of conducting high-technology manufacturing. Either way, Vietnam is happy to see proper technologies transferred into the country and will, surely, continue to provide incentives for the same.