The Inherent Flaws of Traditional Technology Transaction Models
Author: ZeMing M. Gao 高泽明, Business Architect, U.S. IP Attorney; Expert in "Company as a Product" (CaaP), Intellectual Property, Blockchain, Tokenization, and Smart Contracts (Development/Strategy/Economics); SEC/FINRA Private Securities Registered Representative; Chief Advisor at Caapable, consulting to multiple companies; gao@caapable.com
"Technology Exchange" has long become a buzzword in China, with individuals, local government agencies, and large national institutions alike offering so-called "technology exchange" services.
However, due to a fundamental lack of professional understanding of the essential nature of what is being transacted, as well as insufficient practical business experience and capability, traditional technology exchange can only deal in surface-level transactions. The results produced are negligible compared to the potential of the actual technological resources available, and such exchanges frequently have the negative effect of misdirecting resources and squandering commercial opportunities.
In the absence of a sound and well-implemented business structure, traditional technology exchange suffers from the following critical flaws:
First, what is transacted and transferred amounts to nothing more than isolated, thin transfers of technical information—transfers that often carry no substantive commercial meaning. Such technical information cannot encompass a complete package of talent, technology, and ongoing product development capability, and is therefore unable to complete a genuine transaction and transfer.
Second, at the same time, technology transfer transactions under the traditional model are concluded arbitrarily based on subjective judgment, with no reliable commercialization process to follow and no mature commercial tools available. This manifests specifically as:
(1) Isolated intellectual property is extremely difficult to value, and mechanisms and tools for assessment are lacking;
(2) Due to the absence of platform effects and a commercial tooling environment, every technology transfer transaction must be negotiated from scratch, with no established track record of trust, resulting in high transaction difficulty and disproportionately high transaction costs relative to the value realized;
(3) Due to a lack of practical implementation capability—including a complete team, technical implementation details and know-how, and supporting equipment and processes—patents and technical information acquired after a transaction cannot be effectively absorbed and industrialized.
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