{"id":990655,"date":"2024-10-15T11:19:07","date_gmt":"2024-10-15T11:19:07","guid":{"rendered":"https:\/\/frishberg.com\/?p=990655"},"modified":"2026-03-12T10:01:46","modified_gmt":"2026-03-12T10:01:46","slug":"transfer-of-dual-application-technology-to-defense-production-facilities-in-ukraine","status":"publish","type":"post","link":"https:\/\/frishberg.com\/uk\/transfer-of-dual-application-technology-to-defense-production-facilities-in-ukraine\/","title":{"rendered":"Transfer of Dual Application Technology to Defense Production Facilities in Ukraine"},"content":{"rendered":"
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The first of a series of articles by Frishberg & Partners, adapted by Kyiv Post, describes the steps foreign investors need to take to produce munitions and military equipment.<\/p>\n\n\n\n

Setting up defense production facilities in Ukraine necessarily involves transfer of intellectual property rights, which can include dual application technologies applicable to both military and civilian materiel. <\/p>\n\n\n\n

For example, the US-based AeroVironment Inc, is working jointly with Ukrainian companies to produce its Switchblade 600 loitering munition<\/a>in Ukraine using their dual application technology.  Initially it will ship the weapon\u2019s components to Ukraine for assembly, followed later by the manufacture of certain components in Ukraine. This requires transfer of intellectual property rights (IPR) to the Ukrainian entities.<\/p>\n\n\n\n

Other foreign companies, such as the Czechoslovak Group (CSG) have signed an agreement with Ukrainian Armor, a private defense company, to cooperate in the production of 155mm artillery ammunition<\/a>.  CSG will supply components and share its technology and manufacturing documentation for the production of the rounds to Ukrainian Armor. The licensing process for this, which also includes the transfer of dual application technology, will be finalized by the end of 2024, with production to start in early 2025.<\/p>\n\n\n\n

In respect of the transfer of dual application technologies to a Ukrainian legal entity<\/a> (joint venture (JV) or 100% foreign owned subsidiary), the owner of the IPR has two options: Either to contribute its dual application technology to the authorized capital of its Ukrainian subsidiary or to enter into a license agreement for the use of the technology (with corresponding royalty payments).<\/p>\n\n\n\n

Let us now consider both options, along with the registration of dual application IPR.<\/p>\n\n\n\n

Contribution of Dual-Use Technology to the Authorized Capital<\/strong><\/p>\n\n\n\n

The parent company (owner of the dual application technology) can transfer IPR as part of its contribution to the authorized capital of its Ukrainian joint venture or subsidiary.  In this scenario, the Ukrainian company (JV or a 100% foreign subsidiary) effectively becomes the owner of the contributed technology, enabling it to use it freely without paying ongoing fees.  This in effect increases the subsidiary\u2019s authorized capital, which can help bolster the company\u2019s financial standing.<\/p>\n\n\n\n

The drawbacks can be significant because the owner of dual application technology loses all rights to this intellectual property.  Additionally, registering the technology as part of authorized capital can be time-consuming.  For example, the contributed technology must be officially appraised to determine its fair market value, the contribution needs to be formally registered with the state, and documentation must be filed reflecting the updated authorized capital.<\/p>\n\n\n\n

Valuation of IPR is crucial for determining the accurate contribution value of the technology to a company\u2019s authorized capital, and it involves the following steps:<\/p>\n\n\n\n