The “price” or “cost” to obtain ownership of intellectual property depends on various factors, including the nature and duration of intellectual property rights, the technology, and the relative bargaining power of the parties involved. Prospective franchisors typically assess the value and need for a specific technology, existing alternative technologies, prospects for technological advancements, production capabilities, and the profit potential of the prospective franchisee. Prospective franchisors must provide detailed production plans and income sources derived from the prospective franchisee or technology recipient.
Prospective franchisees evaluate the overall costs that may have to be paid for a specific technology and for improvements to the technology compared to the business’s profit potential during the transfer period. The recipient party also considers the price of substitute technology or the costs of similar transactions.
Direct payment of the technology transfer fee in cash can be carried out in several ways:
- Lump-sum payment: an estimated fee that will be paid when the contract is signed.
- Royalties: payments made afterward, periodically, and as a function of usage or economic results (based on production quantity, service quantity, product sales volume, profit).
- Service fees: Money paid for services and technical support provided by technical experts, set at a specific rate or calculated per person and within each service provision period.
These payment methods can be combined in a particular industrial property or technology transfer agreement. In some cases, the lump-sum payment method may replace the royalty system, while in others, the two payment methods may be combined. For example, the technology recipient or technology acquirer may choose to pay a lump-sum fee instead of royalties or any other payment method. In other cases, the technology recipient or technology acquirer may have the opportunity to choose to pay royalties based on production quantity rather than sales volume. Support and technical service fees may be determined separately, whether stipulated in advance or negotiated when providing services.
