Technology transfer is a common collaboration model among industry, government, and academia. However, technology transfer often gives rise to disputes such as defects in rights, defects in goods, or breach of warranty terms. The Hsinchu District Court Decision Ref. 107-Min-Zhi-Zi-7 ("first-instance judgment"), and its superior judgment, the Intellectual Property and Commercial Court Decision Ref. 110-Min-Zhuan-Shang-Zi-5 ("second-instance judgment"), are typical examples of such disputes.

 

In this case, the technology provider (Company A) and the technology recipient (Company B) signed a technology transfer agreement, and subsequently signed a new technology transfer agreement. The new technology transfer agreement provides that "Provider warrants that the subject patent application under the contract can be granted in accordance with the original scope of the application ("Warranty of Patent Approval"). It further provides that "Provider warrants the applicability of the subject under the contract" ("Warranty of Applicability").  Both parties also agreed to invalidate the original technology transfer agreement. Company B later asserted that Company A violated the above-mentioned clauses, constituting the defects in goods, and claimed for the rescission of the technology transfer agreement and damage compensation. The first-instance judgment dismissed Company B's claims, and the second-instance judgment also found that Company A does not violate the aforementioned clauses and therefore dismissed Company B's appeal.

 

In detail, Company B asserted that after obtaining the subject application right for a US patent under the disputed technology transfer, it received an office action from the United States Patent and Trademark Office, which presumed that there was a situation of double patenting ("D.P.") between the subject under the disputed technology transfer and its parent patent. This resulted in the final approved patent for the subject under the disputed technology transfer agreement being narrowed in scope. Therefore, Company B claimed that Company A violated the Warranty of Patent Approval.

 

Nevertheless, the court found that the U.S. Manual of Patent Examining Procedure ("MPEP") recognizes two types of double patenting. The first type is the same invention type D.P. based on 35 USC §101, which aims to prevent the granting of identical patents. The other type is the obviousness-type D.P., which prohibits the lack of patent distinctiveness between the claims of two consecutive patent applications. In this case, the double patenting present is not the same invention type D.P. because the technical features of the claims are different, but there is a concern about the lack of patent distinctiveness. At that moment, Company B could still file a response, showing that the claims are different from the parent case claims, to demonstrate the patentability of the subject under the disputed technology transfer agreement. However, Company B decided to amend and narrow the claim scopes of the subject under the disputed technology transfer agreement and filed a terminal disclaimer, resulting in a narrower scope of the granted patent. This was attributed to Company B's own actions, and therefore cannot be found a defect of goods delivered by Company A.

 

Company B further asserted that the performance of the sample made according to the subject under the disputed technology transfer agreement was insufficient and can not meet the general market standards, which means it has no commercial value. Therefore, Company B asserted that Company A violated the Warranty of Applicability.

 

However, the court found that before signing the original technology transfer agreement, Company A had provided the test reports from an external company to show that the performance of the subject under the disputed technology transfer agreement was of high standard. As for the test report provided by Company B, it was produced by its own employees and could not be inferred from the test results that the subject was inferior to commercially available products for all of the test items. Therefore, it could not be found that the technology delivered by Company A constituted a defect in the goods.

 

From this case, it can be seen that when drafting and executing a technology transfer agreement, if there are similar needs to the Warranty of Patent Approval and the Warranty of Applicability, the determination standards for the warranties should be clearly defined in the agreement to reduce the risk of subsequent disputes.