Abstract: SMEs play a major role in the economies of Malaysia and many emerging countries by generating employment and contributing to their gross domestic product. To continue to develop, SMEs have to invest in technology creation processes though internal innovations and technology transfers. The sale and purchase of exclusive rights to patented technology or of consent to use a given technology is affected through a legal relationship between the owner or supplier of the rights and the person or entity acquiring those rights. This study, examines the issue of how the technology is transferred, the main types of legal contracts involved and their implications for SMEs.