Technology Transfer Agreement is a legally binding contract between two parties which grants a party [the licensee/transferee] the right to use proprietary technology from its owner [the licensor/transferor], in exchange for agreed-upon consideration. Such technology transfers provide a means for developing countries such as Nigeria and even developed countries to access cutting-edge technologies from entities that they would not otherwise have access to, or need to develop themselves, often at great expense.
Before entering into Technology Transfer Agreements, the parties involved have their objectives for entering into the agreement, and these objectives will determine the type of TTA to be entered into. In Nigeria, once parties enter into these agreements with their counterparts, they are required to register them with the National Office for Technology Acquisition and Promotion [“NOTAP”], and NOTAP registers agreements in these sectors:
- Mining & Quarry
- Power and Energy
- Manufacturing
- Information and Communication Technology
- Finance & Insurance
- Oil and Gas
- Construction
- Franchising
It should be noted that NOTAP registers technology transfer agreements not only in the sectors aforementioned, but in other sectors. The point is that, so long as the agreement between the involved parties involves the transfer of [foreign] technology, expertise, technical know-how, trademark license, R&D, hotel management, software licences, amongst others, to Nigeria, it must be registered with the NOTAP. This is a regulatory requirement and there are penalties for non-compliance.
Types of Technology Transfer Agreements that are registrable in Nigeria
Technical Know-How Agreement: This type of Agreement applies to the manufacturing sector for the provision of technical skills, knowledge, information, raw materials sourcing and processing for the manufacture of products in Nigeria. The company [transferee] involved in the agreement must be directly involved in manufacturing in Nigeria, while the agreement must be for products produced in Nigeria, with the transferee demonstrating evidence of a factory in Nigeria for the manufacture of the products under reference.
Technical Management Services Agreement: This type of Technology Transfer Agreement also applies to the manufacturing sector. However, it has to involve services that are related to the day-to-day management of the factory by [foreign] expatriates to ensure that the products manufactured meet the international quality standards of the transferor and that the business is profitable.
Technical Services Agreement: This type of agreement applies to the provision of short-term services capped at a maximum of six months, within which period the expatriate is to render specific technical services in a project/contract…and this is for a very short period of time, not extended project timeline periods.
Consultancy Services Agreement: This type of agreement applies to projects of longer duration, unlike the aforementioned technical services agreement. Consultancy services agreements apply to projects where a certain part of a contract/project will be handled by a consultant. The consultant’s payment will be a portion of the [overall] contract sum. It should be noted, however, that the NOTAP-approved fee for such must not exceed 5% of the entire project cost.
Software License Agreement: This type of agreement applies to the resale or deployment of software in any sector of the Nigerian economy. For such a technology transfer agreement, the payment for same is usually lump sum.
Value Added Services Agreement: This type of agreement applies when IT companies in Nigeria enter into agreements with foreign technical partners to render specific IT services to telecommunications companies in Nigeria so the companies can enhance service delivery to their customer base in Nigeria. The usual duration for such agreements is one year.
Trademark License: This is a type of agreement that involves the protection or a trade name and good will deployed in the sale of goods manufactured in Nigeria, for the Nigerian market. Such a Mark must be internationally registered and locally registered as a trademark in Nigeria as well.
R & D Agreement: This type of agreement applies to the manufacturing sector, for research and development purposes which may lead to new product development. Such agreements are required to be explicit in terms of stating the R & D activities, process and procedure for arriving at end results.
Technology Transfer Registration of Technology Transfer Agreements with NOTAP
As aforementioned, specific types of agreements – which borders on technology transfers – must be registered with the NOTAP before they can be effective and before the transferor or licensor can get paid royalties or payments in respect of their use in Nigeria. The registration process for technology transfer agreements in Nigeria require certain key steps:
- Preparation of the Agreement: Parties need to draft and sign the Agreement under the relevant umbrella, of which shall outline the terms and conditions of the transfer, the scope of technology being transferred, payment terms, and duration of the contract, among other ancillary terms.
- Submission of the Agreement to NOTAP for registration and payment of registration fees: When parties are done preparing and signing the agreement, they have to submit the agreement to NOTAP for registration within the approved timeline. For each type of agreement in different sectors to be submitted, there are additional documentation requirements, and parties are expected to assemble and submit the additional documentation together with the Agreement itself, to NOTAP. At that point, they are expected to pay applicable registration fees for registration of the Agreement to kickstart the registration process.
- Review: NOTAP officials will review all submitted documentation for the Agreement, in order to ensure compliance with applicable guidelines for registration.
- Issuance of Registration Certificate: Once reviewed and approved, NOTAP will issue a registration certificate for the technology transfer agreement under reference. This registration certificate from NOTAP will serve as evidence of registration of the agreement and must be presented in order to actualize foreign remittance of funds as payment for the services or royalties as referenced under the registered Agreement terms.
- Compliance: Registration of the technology transfer agreement is not a one-off step. Parties are expected to comply with the precise terms outlined in the agreement.
Automation of the registration process for technology transfer agreements in Nigeria
To comply with the ease of doing business mandates of the federal Government of Nigeria, NOTAP has been implementing sectoral reforms to ease application process for TTAs in Nigeria. To that effect, Nigeria now has an automated platform where applicants can file their application to register their TTAs in Nigeria – in other words, Nigerians can submit their technology transfer agreements online through the NOTAP’s online portal, for registration in line with applicable regulations.
This publication is intended for general informational purposes only and does not constitute legal advice. For tailored assistance, please contact our Technology, Media & IP Protection team at corporateservices@kabbizlegal.com .
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