Case Study 8 – Contribution of know-how in Vietnam
A European company is willing to establish a Joint Venture with a local partner in Vietnam where the investment in the capital will be composed of cash from the Vietnamese partner and know-how and cash from the European company. The European company has developed a specific know-how in treating and cleaning systems which enable to minimise the use of water and detergents.
The parties enter into negotiations in relation to the Joint Venture Agreement and have reached a point in which it became difficult to assess the exact value of the contribution of know-how since the process was and could not be patented in Europe nor in Vietnam. The parties could not find an agreement on the contribution and the European company was worried of disclosing further information at this stage.
the parties were advised by a local lawyer to enter into a Non-Disclosure Agreement (NDA) in relation to the technology process in question, however, the local partner refused to sign a binding NDA and was pressing the European company to close the Joint-Venture deal with a very low value of the know-how.
The European company had calculated the actual costs borne to develop the know-how and wanted the value to be reflected into the capital contribution. The European company engaged an IP evaluation company to provide an official evaluation report on the value of the know-how which shall be contributed to the capital of the JV.
The European company started to rethink the intentions of the local partner due to the refusal of signing the NDA during the negotiations and the scarce value that the local partner would attach to the contribution of know-how. As result, the European company decided not to proceed with that partner and started to look for a more reliable partner.
• Be aware of the value of your IP and seek the advice of professional evaluation companies to assess the value
• Perform a due diligence on your partner especially if you intend to co-invest with the partner into a corporate structure
• Submit NDAs to your partners to understand how they value your IP and detect their attitude and intentions towards IP value and protection
• Do not be scared to walk away from partners that seem to be mainly after your technology and look for options when you believe that you might risk IP loss.