Technology Transfer in Latvia: How research institutions now can invest in Startups
Year after year, new technologies, methods, and inventions emerge from Latvia’s scientific institutions. However, until now, a large portion of them simply never made it to the market – not because they lacked commercial value, but because Latvia lacked a unified, clear framework governing how a state scientific institution may transfer these rights to the private sector. On July 21, 2026, regulations came into effect that change this situation – a path has finally been opened for the private sector to purchase, license, or acquire through share capital the rights to scientific knowledge, technologies, and inventions resulting from publicly funded research.
Until now – hindered path of Science to the Private Market
Until now, Latvia lacked a regulatory framework that would establish uniform requirements enabling state scientific institutions to effectively pursue commercialization in accordance with each institution’s specific circumstances. Although the country had the existing Scientific Activity Law in place, it did not address practical issues: the procedure for evaluation, the types of commercialization an institution may choose, how prices are set, and how to ensure that a transaction does not constitute unlawful state aid.
The newly established regulatory framework addresses these shortcomings – the new Cabinet of Ministers Regulation No. 404 “Regulations on the Commercial Use of Knowledge, Technologies, and Inventions by State Scientific Institutions, the Evaluation of Investments, Risk Tolerance, and the Determination of Remuneration” transforms the principles enshrined in the law into a functioning process.
Consequently, for entrepreneurs and private investors, this means that a process, that was previously legally unclear or impossible to implement, is now structured, documented, and predictable, allowing state scientific institutions to become key partners in the private sector.
Scientific Institutions as Partners for Startups and Existing Companies
The new regulations stipulate that when deciding how to commercialize its rights to scientific knowledge, technology, or an invention, a state scientific institution may choose among three options:
- Licensing – where the institution retains ownership of the technology but grants a company the right to use it.
- Transfer of rights – where full ownership is transferred from the institution to the company. In this way, the company will acquire the technology irrevocably and will be able to use it at its discretion, without any further obligations to the institution.
- Joint use of rights – where a joint venture is established or the institution makes an investment in the company’s share capital. An institution may become a shareholder in a science-intensive (deep-tech) startup (as defined by the Law on Aid for the Activities of Start-up Companies), or in a company that develops or implements innovations, by contributing – not money, but its intellectual property rights to know-how, technology, or inventions as a capital contribution to pay for the share capital in accordance with the provisions of the Commercial Code.
It is important to note that a different mechanism is applied to each of these types, ensuring that the transaction takes place in line with the prevailing market economic conditions. Specifically, for licensing and expropriation, the market price must be demonstrated, while capital investments must meet the market economy operator test (discussed in more detail later in this article). Consequently, a “public-sector investor” is treated as equivalent to a private investor and subject to the prevailing market conditions at that time.
The Manager Institute – an Effective Solution for Linking the Public and Private Sectors
The commercialization of research results is not a one-day affair – it is a long-term process that requires specialized knowledge in the areas such as intellectual property, technology transfer, finance, investment, and government support.
Not every scientific institution has this capacity in-house, which is precisely why the new regulations introduce the “manager” institution. The manager will handle all the “heavy lifting” on behalf of the research institution, conducting market research, identifying potential partners and investors, administering the licensing process, establishing spin-off companies, and managing contracts.
For entrepreneurs and investors, this means concrete, practical benefits: collaboration with a scientific institution can take place through a professional intermediary familiar with market logic, rather than solely through an academic structure for which the administration of commercial transactions is not part of its day-to-day expertise. This makes collaboration between science and the private sector faster, simpler, and grounded in market conditions.
The Market Economy Operator Test and Market Price – Two Paths to the Same Goal
As noted above, depending on the chosen form of commercialization, two distinct but mutually consistent mechanisms are applied to ensure that the transaction takes place on the basis of prevailing market conditions rather than on the basis of privileges.
If a research institution chooses to invest its rights in a company’s share capital or in a joint venture, it must apply the market economy operator test. This means that, before making a decision, the institution must prepare an ex-ante assessment demonstrating that any rational private investor would act in the same way in a similar situation. The expected return is compared with the normal market return on comparable investments, based on objective and verifiable data.
On the other hand, if an institution chooses license or expropriation way, the obligation to demonstrate market value applies. This can be done through an independent expert appraisal, an open and non-discriminatory competitive process (such as a public auction), an agreement reached under conditions of fair competition, or by selecting the most economically advantageous offer if a party with a right of first refusal is involved in the transaction.
Why is this important for businesses and investors? Together, these two mechanisms ensure that the market is entered not by a privileged participant “armed” with state resources, but by an equal investor – one whose investment is evaluated according to the same criteria that would apply to private capital. For entrepreneurs, startups, and other investors, this opens up a real opportunity to pursue joint technological development with a scientific institution as a partner, and, crucially, not just as a licensor, but as a shareholder in the company, playing by the same rules that apply to any other investor.
New Regulations: Good News for the Private Sector
After years, in which technologies developed by many public research institutions were virtually inaccessible to the market, the new regulations, for the first time, establish a clear, market-based path for science and the private sector to develop technologies together – as licensing partners, business partners, and even co-investors in a single company.
At the same time, the new regulations address an issue that, in the long term – though unrelated, is nonetheless just as important to entrepreneurs and investors: the motivation of professionals involved in science. For the first time, the rights of the creator of intellectual property – such as an employee of a state scientific institution, to fair compensation from the income generated by commercialization, even after the termination of their employment relationship, have been clearly and legally enshrined. This means only one thing – a motivated scientist is one who is interested in making new discoveries and reporting them to the institution, rather than “burying” them in the laboratory or seeking informal ways for their commercialization outside the institution’s purview.
For entrepreneurs and investors, the new regulations generally lead to one simple conclusion: technologies developed in Latvian science may become more accessible in the coming years, the rules governing the process are clearer, and the institutions involved will act as equal partners subject to market principles – not as a bureaucratic entity with which it is difficult to reach an agreement.
The information in this article is general and not intended as legal advice. It is for information purposes only and does not reflect any particular situation or circumstances and should not be relied upon as a source of professional advice.
Author: Agnese Kacare, Lawyer at Venture Faculty
