Specimen Collaboration Agreement — Technical Know-How Transfer Format 2026

What Is a Technical Collaboration Agreement?

A Technical Collaboration Agreement is a contract between two parties — typically an Indian company and a foreign technology provider — for the transfer of technical know-how, manufacturing processes, designs, specifications, and expertise for commercial use in India. Unlike a Joint Venture (where a new company is formed), a collaboration agreement allows the Indian party to use the foreign party's technology while both parties remain independent entities. The agreement covers: scope of technology, royalty payments, training, improvement sharing, exclusivity, and IP ownership. For international collaborations: compliance with FEMA (Foreign Exchange Management Act) and RBI regulations on technology transfer payments is mandatory.

Specimen Technical Collaboration Agreement — Key Clauses

[Illustrative format — based on ICSI Drafting material]

TECHNICAL COLLABORATION AGREEMENT

This Agreement is made on [Date]

BETWEEN:

[Foreign Company Name], incorporated under the laws of [Country], having its office at [Address] (hereinafter called the "Licensor")

AND

[Indian Company Name], incorporated under the Companies Act, 2013, having its registered office at [Address] (hereinafter called the "Licensee")

RECITALS

WHEREAS the Licensor is the owner of valuable technical know-how, patents, and manufacturing processes relating to [Product/Technology Description].

WHEREAS the Licensee desires to obtain a license to use the said technical know-how for manufacturing and selling [Products] in India, and the Licensor has agreed to grant such license on the terms set out herein.

KEY CLAUSES

1. Definitions: "Technical Know-How" means all technical information, data, designs, drawings, specifications, manufacturing processes, formulae, quality control procedures, testing methods, and related documentation owned or developed by the Licensor for the production of [Products]. "Licensed Products" means [description]. "Territory" means India.

2. Grant of License: The Licensor hereby grants to the Licensee a [non-exclusive/exclusive] license to use the Technical Know-How for manufacturing, using, and selling the Licensed Products in the Territory for the term of this Agreement.

3. Technical Documentation: The Licensor shall provide the Licensee with: (a) complete manufacturing drawings and specifications, (b) bill of materials and process sheets, (c) quality control and testing procedures, (d) raw material specifications and approved vendor lists, (e) plant layout and equipment specifications, (f) all updates and improvements during the term.

4. Training and Technical Assistance: (a) The Licensor shall provide training to [Number] technical personnel of the Licensee at the Licensor's facility for [Duration], at the Licensor's cost (except travel and accommodation of trainees). (b) The Licensor shall depute [Number] technical experts to the Licensee's manufacturing facility for [Duration] to assist with installation, commissioning, and initial production runs. (c) Ongoing technical support via email, video conference, and telephonic consultation during the term.

5. Royalty and Payments: (a) Lump Sum Fee: The Licensee shall pay a one-time technology transfer fee of [Currency] [Amount] payable in [installments/on signing]. (b) Royalty: The Licensee shall pay a royalty of [X]% of net sales (excluding GST/duties) of the Licensed Products manufactured using the Technical Know-How. Royalty payable [quarterly/annually] within [30] days of the end of each period. (c) Minimum Royalty: A minimum annual royalty of [Currency] [Amount] is payable regardless of actual sales.

6. Intellectual Property: (a) All existing IP (patents, trademarks, designs) remains the property of the Licensor. (b) Any improvement or modification developed by the Licensee using the Technical Know-How shall be jointly owned / shall vest in the Licensor / shall vest in the Licensee [negotiate]. (c) The Licensee shall not challenge the validity of the Licensor's IP during the term. (d) The Licensor grants the Licensee the right to use the Licensor's trademark on Licensed Products in the Territory [if applicable].

7. Confidentiality: The Licensee shall keep all Technical Know-How strictly confidential and shall not disclose it to any third party without the Licensor's prior written consent. This obligation survives termination by [5/10] years. The Licensee shall restrict access to Technical Know-How to employees on a need-to-know basis and require all such employees to sign non-disclosure agreements.

8. Quality Standards: The Licensee shall manufacture the Licensed Products in accordance with the quality standards and specifications provided by the Licensor. The Licensor shall have the right to inspect the Licensee's manufacturing facility and test product quality at reasonable intervals.

9. Term and Termination: (a) Term: [5/7/10] years from the Effective Date, renewable by mutual consent. (b) Termination: either party may terminate with [6/12] months' notice for material breach not cured within [90] days. (c) Upon termination: the Licensee shall return all Technical Know-How documentation, cease manufacturing Licensed Products (after exhausting existing stock within [6] months), and continue paying royalty on remaining stock sales.

10. FEMA Compliance: All payments from the Licensee to the Licensor shall be made in freely convertible foreign currency through authorized dealer banks in compliance with the Foreign Exchange Management Act, 1999, and RBI regulations. The Licensee shall obtain all necessary regulatory approvals (if required) before making payments.

11. Dispute Resolution: Disputes shall be resolved by arbitration under [ICC Rules / SIAC Rules / Indian Arbitration Act, 1996]. Seat of arbitration: [City, Country]. The arbitral award shall be final and binding.

FEMA/RBI Compliance for Technology Transfer Payments

Under the current FEMA regime (as of 2025-26): (a) Automatic Route: Royalty payments for technology transfer are permitted under the automatic route — no prior RBI approval needed — up to [current limits — subject to the latest RBI circular. Generally: royalty up to 5% of domestic sales and 8% of exports is permitted under automatic route]. (b) Lump sum fee: One-time technology transfer fees are also under automatic route (subject to limits). (c) Reporting: Payments must be reported to RBI through the authorized dealer bank. (d) Tax: Royalty payments to foreign companies are subject to withholding tax (TDS) under Section 195 of the Income Tax Act — typically 10-15% (subject to DTAA between India and the Licensor's country). The Licensee must deduct TDS and deposit with the government.

GST Implications

Technology transfer from a foreign entity to an Indian entity constitutes import of services under GST. The Indian Licensee pays GST on reverse charge basis: (a) IGST at 18% on the royalty/lump sum fee, (b) the Licensee can claim Input Tax Credit (ITC) on the IGST paid. The place of supply for imported services is the location of the recipient (India). The Licensee must issue a self-invoice and report the transaction in GSTR-3B (reverse charge column).