Introduction
Ghana has over the years performed poorly on the World Information and Communication Technology rankings prepared by the World Economic Forum in respect of technological advancement. In 2011, Ghana ranked 99th out of the 138 Economies whose data were used.
Even the most technologically advanced countries in Africa seem to be lingering at the bottom yearly with absolutely no or very little advancement over the years. A 2017 study by the International Telecommunications Union through the ICT Development Index (IDI) revealed that Ghana, which was ranking 116th on the overall IDI list was ranking 7th on the African Continent alone in terms of ICT development with a value of 4.05 from the previous year’s 3.88. These statistics show that even though the value or the rate of ICT Development had increased in Ghana, its ranking had dropped from the previous year’s 113th to 116th. The statistics given above is very clear and sends one message across; that Ghana is not technologically well equipped enough to engage in certain activities or to provide certain expertise.
It is therefore not very surprising that Ghana is taking appropriate measures to ensure that entities or enterprises in Ghana who may require technical know-how for their activities or some technology for their production or services do so in accordance with law.
What is a Technology Transfer Agreement?
According to section 43 of the Act 865, a technology transfer agreement refers to an agreement with an enterprise which has a duration of not less than eighteen months and which involves
- The assignment, sale and licensing of all forms of industrial property, except trademarks, service marks and trade names when they are not part of transfer of technology.
- The provision of technical expertise in the form of feasibility studies, plans, diagrams, models, instructions, guides, formulae, basic or detailed engineering designs, specifications and equipment for training, services involving technical advisory and managerial personnel and personnel training;
- The provision of technological knowledge necessary for the installation, operation and functioning of e plant and equipment, and turn-key projects; and
- The provision of technological knowledge necessary to acquire, install and use machinery, equipment, intermediate goods or raw materials which have been acquired by purchase, lease or other means
Why is there a need to enter into a Technology Transfer Agreement?
Usually, due to lack of technical expertise, many indigenous enterprises seek the required expertise from foreign and external companies which may be in the position to provide them with such. For that reason, many agreements regarding the provision of these technical expertise are entered into by parties involved. It is therefore expedient that when such agreements are entered into, they are registered with the GIPC.
The GIPC Act does not forbid enterprises from entering into such technology transfer agreements. However, in order to ensure that local enterprises get the needed technology or technical expertise they so require to facilitate their businesses, as well as to ensure that they are not over-exploited by the foreign or external companies they enter into agreements with, the GIPC requires that the agreements are registered with the Centre.
Section 37(1) of the Ghana Investment Promotion Centre Act states that an enterprise may enter into a technology transfer agreement that the enterprise considers appropriate for the enterprise and that agreement entered into under ought to be registered with the Centre.
The GIPC is mandated to keep a record of technology transfer agreements and this mandate is given by the GIPC Act.
Whenever the GIPC receives a Technology Transfer Agreement (TTA), for the purpose of registration, it shall review the agreement and ensure that the agreement is in line with the law regulating the formation of the agreement. This implies that no clause in the agreement ought to be onerous or in clear contradiction of the law. If the GIPC should encounter anything or any clause like that, they ought not to register the agreement.
It is important to register a TTA with the GIPC because among other things, and subject to the Foreign Exchange Act, 2006 (Act 723) an enterprise is assured of total transferability in easily exchangeable currency under a TTA registered with the Centre.
Furthermore, because transfer of payment is freely allowed, such payment would usually be treated as an expense. Corporate tax is usually applied on gross profit, i.e. after the deduction of expenses. Therefore, the amount that would go into tax would be less. This is in one way or the other results in a higher net profit after tax.
Repulsive Clauses in Technology Transfer Agreement
The LI 1547 identifies certain clauses which when found by the GIPC to be present in a TTA, would be inapplicable and unenforceable.
First and foremost, an agreement which purports to transfer technology which is freely and easily available in Ghana would not be enforceable. If it is realized even before the registration is done, then such an agreement would not qualify for registration in the first place.
Secondly, any clause in a TT agreement which restricts the volume of production or the sale of the transferee’s products in the transferee’s country, completely prohibits the exportation of the transferee’s products or the right to export to specific geographical areas other than to areas where the transferor has previously granted exclusive rights to third parties, or requires the transferee to export exclusively through the transferor or on unfavorable terms, requires the transferor’s prior permission before any export transaction is made, or requires the transferee to pay an additional royalty on export sales would be.
Apart from the clauses referred to above, the GIPC is mandated by law to ensure that TTT Agreements which contain clauses which oblige the transferee to acquire its inputs including equipment, tools, parts, raw materials or intermediate products exclusively from the transferor or any other person or a specific source are not registered since such clauses are unenforceable. However, if the inputs which the transferee is obliged to procure from the transferor are not commercially available elsewhere or such inputs are special to the technology supplied or are required to meet the specifications of products to be produced either under licence or trademark, then such clauses may be allowed in the agreement.
Again, any clause found in a TTA which obliges a transferee to employ personnel to be appointed by the transferor but whose remunerations shall be provided by the transferee would be inapplicable and unenforceable, unless in the opinion of the GIPC such an obligation is would be requisite, considering the work to be performed by the personnel in respect of the transferred technology. The GIPC would also consider if the remuneration being paid for it matches favourably with what prevails in the international market for similar services to be performed by the personnel and in any such case the provision of the services is supported by a properly drawn-up Management or Technical Services Agreement.
Furthermore, unless the parties are agreed or mutually consent to it, any provision in the agreement which requires the obligatory transfer by the transferee of improvements or innovations introduced or developed, or patents acquired by the transferee in respect of the licensed technology to the transferor may be permissible, but it must be noted that such transfer would not cover patents.
In addition to the clauses or provisions which have been stated above already, no TTA must contain the following:
- Clauses which require payment for patent and other industrial property rights after their expiration, termination or invalidation
- Clauses which prohibit the manufacture or sale or both of products based on the technology transferred on the expiration of the agreement, or prohibit the use of licensed technical know-how acquired from the use of the licensed technology after the expiry of the agreement; or
- clauses which are designed to prevent the transferee from contesting or assisting in determining, either administratively or by means of judicial proceedings, the validity of industrial property rights claimed or secured in Ghana by the transferor; or
- clauses which restrict R & D (research and development) activities of the transferee to improve and adapt the licensed technology or restrict the transferee access to continue improvements in techniques and processes related to the licensed technology; or
- clauses which forbid the use by the transferee of complementary technologies; prevent the manufacture of products different from those covered by the agreement or prevent the manufacture of products similar to those covered by the technology transfer agreement; or
- clauses which require the consent of the transferor before any modifications to products, processes or plants can be effected by the transferee or which impose on the transferee obligations to introduce unnecessary designs; except where the licensed technology is used to manufacture specific products under a license or trademark; or
- clauses which limit the scope, volume of production or the sale or resale prices of the products manufactured by the transferee; or
- clauses which impose on the transferee an obligation to sell all its manufactured products to the transferor at a price fixed by the latter or to any other person or enterprise designated by the transferor. It must be noted that provision ought not to apply where the transferee is engaged exclusively in the manufacture of intermediate products, parts or components for subsequent transformation, assembly or finishing by the transferor, and the transferor is the sole potential buyer of such intermediate goods, the requirement is related exclusively to certain export markets, or the transferor can prove that it possesses an adequate distribution system or enjoys sufficient prestige in the trade to be able to market the products covered by the agreement more efficiently than the transferee.
Duration of the Agreement
The effective date of A technology transfer agreement is the date of the registration of that agreement. This means that the date on which the registration of the agreement was done is the date on which the agreement will take effect or come into existence. The lifespan of a TTA is supposed to be not less than eighteen (18) months and not more than ten (10) years, but may be renewed with the approval of the Centre and the regulator of the relevant sector, where it is considered desirable by the parties for subsequent terms each not exceeding five years. This is provided for by Regulation 9 of the LI 1547.
Duties of the parties under a TTA
One of the main duties of a transferor under a TTA is to provide adequate training for the transferee and its personnel in the effective utilization of licensed technology. The agreement itself ought to have attached to it a detailed training schedule which would be used as a guide and be complied with by the transferor in the provision of the said training. This duty ought to be enshrined in the TTA before it can be enforceable.
Again, the TTA is required to indicate that taxes due on royalties shall be borne by the transferor.
The transferor has a duty to give a full description of the technology and to supply all necessary documentation and information in English Language so as to be understood by the transferee.
Moreover, the transferor has a basic duty to guarantee the efficient performance of the technology and the continuous availability of essential spare parts during the tenure of the agreement and the transferor shall inform the transferee of improvements and innovations relating to the technology and shall supply them on terms mutually acceptable to the parties.
One very major duty of the transferee is to keep the licensed know-how confidential and use it only for its own production during and after the expiration of the agreement and without the consent of the transferor and on terms acceptable to both parties, the transferee cannot sub-license the licensed know-how under the agreement to any other person.
Matters relating to payments under the TTA
The Technology Transfer Agreement Regulations, 1992 (LI 1547) provides the quantum of amount that would be required of the transferee as well as the transferor, where the need arises.
Process performance warranties would be required to be provided in agreements covering large projects which involve considerable technical complexity not explained to the transferee to the time of negotiations or before the transferee makes front-end payments.
Offences
Section 40 of the GIPC Act provides for the various offences that may or can be committed under the Act. According to Section 40(a), a person commits an offence if that person is required by the Act to register with the Centre but fails to register or renew a registration with the Centre. This implies that failure to register a technology transfer agreement constitutes an offence since it is an agreement required by the Act to be registered.
The punishment for committing an offence under section 40 is that the enterprise which is found culpable would be liable on summary conviction to a fine of not less than five hundred penalty units and not more than thousand penalty units and in the case of a continuing offence to an additional fine of not less than twenty-five (25) penalty units and not more than fifty penalty units in respect of each day that the offence continues.
The Centre may in addition to the conviction referred to above, in consultation with the appropriate agency suspend the registration of an enterprise, cancel the registration of an enterprise, order the payment or part-payment to the appropriate agency of fees, taxes, duties and other changes in respect of which benefits were granted to the enterprise, revoke some or all of the incentives granted to the enterprise, advise the Bank of Ghana to suspend any remittance including transfer of capital, profits and dividends from or by that enterprise and take any other action that the Board considers appropriate.
Conclusion
Enterprises are entreated to register their Technology Transfer Agreements with the GIPC so that the Centre can help considerably protect both local and foreign enterprises from exploitation from the entities they enter into these agreements with.
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