Technology Transfer Agreements in India: Know-how, SCOMET & Cross-Border Tax

A technology-transfer agreement moves technology, know-how and the IP around it from one party to another – by licence, by assignment, or as part of an R&D collaboration, a manufacturing or supply arrangement, or an investment. In India it draws on the Patents Act 1970 (patents and the right to apply), the Copyright Act 1957 (software and technical literature), and contract law – because, as in the UAE, India has no standalone trade-secrets statute, so know-how is protected by contract and the common-law action for breach of confidence. Three features make Indian technology transfer distinctive. First, much of the value is unregistered know-how, so confidentiality does the heavy lifting. Second, where the technology is dual-use, strategic or military-related, the transfer engages India’s export-control regime – the SCOMET list under the Foreign Trade (Development & Regulation) Act 1992 and the WMD Act 2005, administered by the DGFT – which expressly reaches the intangible transfer of technology and software (by email, download or cloud), not just physical exports. Third, the cross-border tax treatment is favourable but technical: royalties bear withholding (treaty-capped at 10% to the UAE), while technical-service fees have no separate article in the India–UAE treaty and are generally taxed as business profits – taxable in India only if there is a permanent establishment – and software payments are not “royalty” after Engineering Analysis. Confirm the current position before relying on it.

A guide to transferring technology and know-how in and out of India – the legal building blocks, know-how, R&D and joint development, software and data, the SCOMET export-control overlay, and the cross-border tax and FEMA position.

At a glance

• Technology transfer = moving technology + know-how + the IP around it – by licence, assignment, R&D collaboration, manufacturing or investment
• Building blocks: Patents Act 1970, Copyright Act 1957 (software), and contract – with background vs foreground IP defined expressly
• Know-how: protected by contract + the common-law breach-of-confidence action – no standalone trade-secrets statute, so confidentiality is critical
• R&D / joint development: allocate foreground-IP ownership and license background IP; note India has no statutory employer-vesting of patents, so JDAs and employment contracts must assign inventions
• Export controls: dual-use/strategic technology and software engage SCOMET (FTDR Act 1992 + WMD Act 2005, DGFT) – covering intangible technology transfer; screen and obtain authorisation before transfer
• Software & data: software is a copyright work; the DPDP Act 2023 (operational via the DPDP Rules 2025) applies where personal data is involved
• Cross-border tax: royalties WHT-capped at 10% (India–UAE); technical fees taxed as business profits (no treaty FTS article – PE-dependent); software payments not royalty (Engineering Analysis); FEMA automatic route; GST on import (reverse charge)

1. What technology transfer is

“Technology transfer” describes any arrangement that moves technology and the know-how to use it from one party to another. It is rarely a single right changing hands – it is usually a bundle: one or more patents or patentable inventions, confidential know-how and technical data, software, designs and specifications, and the training and technical assistance needed to put the technology to work. That bundle can move by several routes: a licence (use without ownership – see our Licensing page), an outright assignment (transfer of ownership – see IP Assignment), or as part of a wider deal such as an R&D or joint-development collaboration, a manufacturing or supply arrangement, or an investment or acquisition. Because the package crosses several IP types and includes unregistered know-how, an Indian technology-transfer agreement has to handle registered rights and confidential information together, and – distinctively – has to be checked against export-control (SCOMET) law where the technology is sensitive, and structured carefully for FEMA and tax. The sections below set out the building blocks, then know-how, R&D, software and data, the export-control overlay, and the cross-border dimension.

2. The legal building blocks

An Indian technology-transfer agreement is built on two statutes plus contract. The Patents Act 1970 governs patents and the right to apply for them – and recall the India-specific point that there is no statutory vesting of employee inventions in the employer, so the right to an invention follows the contract (covered on our IP Assignment page). The Copyright Act 1957 governs software and the technical literature, manuals and designs that accompany the technology. And contract law – the Indian Contract Act 1872 – supplies the framework for the agreement itself and for any element (such as pure know-how) that is not a registered right. A central drafting concept is the distinction between background IP (what each party brings to the arrangement) and foreground IP (what is created during it): the agreement must say who owns each, and who may use it, during and after the relationship. Where patents are involved, the licence or assignment should follow the Patents Act formalities (writing and execution for an assignment; recordal of title); where software is involved, the Copyright Act position governs. The old regime of government approval for foreign technology agreements has been liberalised – most technology transfers now proceed under the automatic route for exchange-control purposes (section 7) – so the legal work is in the contract, the IP allocation, the export-control screen and the tax structuring, not in seeking permissions.

3. Know-how and confidential information

The most valuable part of a technology transfer is often the part that is not registered – the know-how: the processes, methods, data, specifications and accumulated technical experience that make the technology work. India has no standalone trade-secrets statute, so know-how is protected by a combination of the contract between the parties, the common-law action for breach of confidence (an equitable obligation that can arise expressly or by implication), and – at the margins – provisions of the Indian Penal Code and the Information Technology Act 2000 for misuse of data. This makes confidentiality the central safeguard of any technology-transfer arrangement: the agreement must define the confidential information precisely, restrict its use to the permitted purpose, control onward disclosure (employees, contractors, sub-licensees), and impose post-term obligations to return or destroy materials and to continue protecting the information. Because there is no register and no statute to fall back on, confidentiality and non-disclosure terms are not boilerplate here but the principal mechanism by which transferred know-how keeps its value – often supported by a separate NDA at the negotiation stage and reinforced by the breach-of-confidence remedy if the obligation is broken.

4. R&D and joint development

Much technology is created collaboratively, and joint development is where ownership disputes most often arise. In an R&D or joint-development agreement (JDA), two or more parties contribute people, funding and background IP to develop something new, and the critical questions are: who owns the foreground IP that results; who may use it, in what fields and territories; and what licences each party has to the other’s background IP to exploit the result. There is an India-specific trap here: because the Patents Act does not automatically vest an employee’s or a collaborator’s invention in the sponsoring company, the JDA (and the underlying employment and contractor agreements) must expressly assign the foreground inventions – otherwise the inventor may be the first owner. Ownership may rest with one party (with a licence back to the other), be jointly owned (which needs careful rules on use, licensing and enforcement, since joint ownership is otherwise a frequent source of deadlock), or be allocated by field. The JDA should also address funding and milestones, publication and confidentiality, improvements, third-party and open-source components, and what happens on exit, along with any R&D incentives (taken forward with our tax colleagues). For the firm’s clients, joint development frequently spans the India–UAE corridor, so the agreement must coordinate the IP-ownership and confidentiality position across both jurisdictions.

5. Software, data and digital technology

Where the transferred technology is software or a digital platform, additional issues come into play. The software is a copyright work (a literary work) under the Copyright Act 1957, and the arrangement should address whether source code (not just object code) is transferred or escrowed, the scope of any modification and reverse-engineering rights, and maintenance, updates and support. SaaS and cloud delivery reframes the transfer as access-and-use rather than a hand-over of code, layering in data-processing, security and service-level obligations. Open-source components carry their own licence conditions that must be identified and complied with, since they can affect what the transferee may do with the combined product. Two India-specific points matter. First, where the technology processes personal data, the Digital Personal Data Protection Act 2023 – now operational following the DPDP Rules 2025 – imposes consent, purpose-limitation, security and cross-border-transfer obligations that the agreement must address. Second, on tax, the Supreme Court’s decision in Engineering Analysis (2021) means that payments for shrink-wrap and licensed software are generally not “royalty”, which affects withholding – a point developed in section 7. A technology-transfer agreement involving software should therefore be read alongside our Licensing page and the data-protection material where personal data is involved.

6. Export controls – SCOMET

This is the overlay that catches many technology transfers by surprise. India controls the export of dual-use, strategic and military items, software and technology through the SCOMET list (Special Chemicals, Organisms, Materials, Equipment and Technologies), maintained under Chapter IVA of the Foreign Trade (Development & Regulation) Act 1992 and Chapter 10 of the Foreign Trade Policy 2023, and backed by the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act 2005, administered by the DGFT with inter-ministerial clearance and aligned to the multilateral export-control regimes. The point that surprises technology businesses is that SCOMET expressly covers the intangible transfer of technology (ITT) – transferring controlled technology, technical data or software by email, remote access, download or cloud, or to a foreign national even within India, can be a controlled “export” requiring authorisation. The regime provides individual export authorisations and, increasingly, general authorisations – including the Global Authorization for Intra-Company Transfer (GAICT) for transfers within a corporate group, and recent measures easing dual-use exports to a list of trusted destinations. The practical consequence is that a technology-transfer agreement involving anything potentially dual-use – advanced electronics, aerospace, certain chemicals or biotech, encryption, or military-civilian applications – must be screened for SCOMET and sanctions exposure before the technology moves, with the appropriate authorisation obtained. The detail of classification and licensing is an export-controls matter; the point here is that it must be checked as part of structuring the transfer.

7. Cross-border tax, FEMA and structuring

For the firm’s clients the technology transfer is usually cross-border, and the FEMA and tax overlay is decisive. On exchange control, payments for transferred technology – royalties, lump-sum technology fees and technical-service fees – are current-account transactions that may be remitted under the FEMA automatic route (no prior RBI approval and no statutory cap, following the liberalisation of the royalty rules), through an authorised-dealer bank. On tax, the position is favourable but turns on characterisation. Royalties paid to a non-resident bear withholding at 20% domestically, reduced by treaty – the India–UAE treaty caps royalty at 10%. Fees for technical services, however, have no separate article in the India–UAE treaty, so they are generally treated as business profits under Article 7 – taxable in India only if the UAE provider has a permanent establishment here – which can mean no Indian tax on a genuine technical-service fee absent a PE (a materially different result from royalties, and one to analyse carefully, including the “make available” question and PE risk). And after Engineering Analysis (2021), payments for software are generally not royalty, so often not subject to withholding. GST applies to the import of technology and technical services, usually on reverse charge. The structuring choice – how the package is split between patent royalty, software, and technical services, and where the IP and R&D sit – therefore has real tax consequences and should be made together with the IP and confidentiality terms, with the detailed tax analysis handled by our corporate-tax colleagues.

8. Drafting and the cross-border picture

A sound technology-transfer agreement ties all of this together. It identifies the technology package precisely (patents, know-how, software, data, training); allocates background and foreground IP (with express assignments, given the no-vesting rule); and makes confidentiality the backbone for the unregistered know-how. It deals with improvements, sub-licensing, support and training, warranties and indemnities (including IP-infringement and third-party/open-source risk), data protection where personal data is involved, payment, FEMA and tax (with the royalty/technical-fee/software split made deliberately), and SCOMET and sanctions compliance as a condition of transfer. It fixes the term, termination and post-term position – what the transferee may continue to use, and what must be returned – and chooses the governing law and forum (Indian courts or arbitration) deliberately. For India–UAE clients the arrangement is usually two-sided, so the Indian position must be coordinated with the UAE IP, export-control and tax treatment. Technology transfer therefore draws on the whole cluster – Licensing, IP Assignment and Franchising – and on Commercial Contracts and Cross-Border Structures on the corporate side, plus the Technology Transfer (UAE) page for the corridor.

Key points at a glance

Frequently asked questions