<PAGE>

                                                                  Exhibit 10.7.4


   [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT
    HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]

                          Technology License Agreement

                            Nortel Networks Limited

                               LogicVision, Inc.

                          Design For Testability (DFT)

                                  Amendment #3

                                 March 20, 2001
<PAGE>

                           AMENDMENT TO THE AGREEMENT

THIS AGREEMENT is made and entered into as of the 20th day of March 2001 (the
"Amendment Date")

BY AND BETWEEN

     Nortel Networks Limited, formerly Northern Telecom Limited ("Northern
     Telecom"), a corporation organized and existing under the laws of Canada,
     having its executive offices at 8200 Dixie Road, Brampton, Ontario, Canada
     L6T 5P6, on behalf of itself and its Subsidiaries and on behalf of its
     Affiliates (hereinafter collectively referred to as "Nortel Networks");

AND

     LOGICVISION, INC., formerly LV SOFTWARE, INC., a corporation organized and
     existing under the laws of Delaware, having its primary business office at
     101 Metro Drive, Third Floor, San Jose, California 95110 (hereinafter
     referred to as "Licensee").

WHEREAS the Parties entered into an Agreement with an Effective Date of the 14th
day of September 1992 concerning software known as the Design For Testability
tool suite (the "Agreement"); and

WHEREAS the Parties made and entered into an amendment to the Agreement on the
1st day of October 1993; and

WHEREAS the Parties made and entered into an amendment to the Agreement on the
11th day of January 1994; and;

WHEREAS the Parties wish to further amend the Agreement as provided herein:

NOW THEREFORE, in consideration of the mutual promises set forth herein, the
Parties agree as follows:

1.0  ARTICLE 1 "DEFINITIONS" is hereby deleted and replaced by the following:

As used herein, unless otherwise defined:

   (a)  "Affiliate" means a company which a Party hereto, or its parent,
        effectively controls, directly or indirectly, other than a Subsidiary,
        through the ownership or control of shares in the company;
<PAGE>

(b)  "Associated Utilities" means the software elements, cells, or models
     described in Schedule C attached hereto and forming a part hereof;

(c)  "Derivative Works" means any software produced by Licensee incorporating
     all or a portion of the Licensed Product;

(d)  "DFT License Revenues" means ***, after deducting any reasonable and
     actually incurred transportation charges or allowances, transportation
     insurance, value added taxes or other sales taxes and custom duties imposed
     upon and paid by Licensee ***:

     (i) ***, or

     (ii)   ***.

(e)  "Documentation" means those documents and other written materials related
     to the Licensed Products, Derivative Works, or Licensed IP that may be
     delivered to End-Users, as described in and subject to certain conditions
     outlined in Schedule B attached hereto and forming a part hereof;

(f)  "Distributor" means any party to whom Licensee provides the Licensed
     Products, Derivative Works, or Licensed IP for sub-licensing to End-Users;

(g)  "Effective Date" means the 14th day of September, 1992;

(h)  "End-Users" shall mean all persons or companies, other than Nortel
     Networks, its Affiliates, Subsidiaries and Manufacturing Licensees, which
     acquire directly from

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE COMMISSION.

<PAGE>

     Licensee or indirectly through a Distributor, the right to use a Licensed
     Product, Derivative Works or Licensed IP as contemplated in this Agreement;

(i)  "Licensed IP" means any intellectual property licensed, or to be licensed,
     to an End-User whether software or otherwise which is derived from or
     created by the use of the Licensed Product, Technology or Technology IP
     licensed to Licensee under this Agreement.  For greater clarity, Licensed
     IP shall not include any intellectual property made, conceived, developed
     or reduced to practice by the Licensee independently without reference to
     any Technology, Technology IP, Technical Information, Associated Utilities,
     Licensed Product or any other material or information provided by Nortel
     Networks to Licensee.

(j)  "Licensed Product" means the Design for Testability (DFT) tool suite and
     any portion or modification thereof, as described in and subject to certain
     conditions identified in Schedule A attached hereto and forming a part
     hereof;

(k)  "Manufacturing Licensee" means a third party with whom Nortel Networks has
     entered into an agreement permitting such third party to make and sell or
     lease products based on products designed by or for and sold or leased by
     Nortel Networks;

(l)  "Party" means either Licensee or Nortel Networks;

(m)  "Patent Rights" means any patent rights associated with the patents and
     patent applications set forth in Schedule A together with any patents or
     patent rights arising or issuing from said patent applications, provided,
     however, that such patents and patent applications have an effective filing
     date prior to or including the Amendment Date;

(n)  "Subsidiary" means a company which Nortel Networks Limited or Licensee
     hereto effectively owns or controls, and continues to own or control,
     directly or indirectly, more than fifty percent (50%) of the voting stock
     or shares;

(o)  "Technical Information" means all technical or scientific documentation,
     product drawings, bills of materials, component supplier lists, and other
     information (in any form) that is related to the manufacture, use, support
     or maintenance of Licensed Products or that is related to the Technology,
     and that is provided by Nortel Networks to Licensee;

(p)  "Technology" means the source code, object code utilities, libraries,
     development utilities, circuit designs in HDL, algorithms, proof-of-
     concepts described in Schedule A attached hereto and as provided by Nortel
     Networks to Licensee, the associated utilities described in Schedule C
     attached hereto and as provided by Nortel Networks to Licensee, and all
     Technical Information as provided by Nortel Networks to Licensee;

(q)  "Technology IP" means the copyrights and trade secrets owned by Nortel
     Networks as of the Amendment Date directed to and covering the Technology,
     and also includes the Patent Rights, but excludes all trademarks; and

(r)  "Territory" means worldwide subject to applicable United States and
     Canadian export restrictions.
<PAGE>

2.0 ARTICLE 2 "LICENSE" is hereby deleted and replaced by the following:

Nortel Networks hereby, as of the Amendment Date, grants to Licensee subject to
the terms and conditions of this Agreement a personal, non-exclusive, non-
transferable, non-assignable, indivisible, worldwide right and license:

  (i)    to use, copy, translate, improve, enhance, and modify the Licensed
         Product and Technology object code and source code, to merge or have
         merged such translations, modifications, improvements or enhancements
         into other programming material, to sub-license and distribute object
         code versions of Licensed Product, Licensed IP and Derivative Works to
         End-Users, to copy, translate and modify the Documentation and to use,
         sell or distribute copies of such Documentation;
  (ii)   to appoint and to sub-license Distributors to sublicense for use and to
         distribute to End-Users object code versions of Licensed Product,
         Licensed IP and Derivative Works under terms and conditions no less
         stringent than those set out in this Agreement;
  (iii)  to place Licensed Products, Licensed IP and Derivative Works source
         code in escrow for the benefit of End-Users and Distributors and grant
         source code licenses to such End-Users and Distributors pursuant to
         which, in the event of a bankruptcy or similar proceeding against
         Licensee or in the event of termination of this Agreement and the
         refusal of Nortel Networks to assume Licensee's support obligations,
         such End-User or Distributor would be granted a license to use such
         source code solely to maintain and support the Licensed Product,
         Licensed IP or Derivative Works;
  (iv)   to make, use, sell the subject matter claimed by the patents listed in
         Schedule A and attached hereto and the trade secrets inherent in the
         Technology to develop Licensed IP and Derivative Works and to market,
         promote, distribute and license such Licensed IP and Derivative Works
         to End-Users directly or through Distributors;
  (v)    to authorize, directly or through Distributors, End-Users to use and
         incorporate any design objects or Licensed IP generated by the licensed
         use of a Licensed Product or Derivative Work into such End-User's
         integrated circuit designs, and to make or have made and sell or
         otherwise distribute integrated circuits based on such designs; and
  (vi)   to use the Technical Information only as may be necessary to exercise
         the rights granted in this Article 2.

  Nortel Networks also grants to Licensee the right to use Associated Utilities
  in the development and debugging of software produced by Licensee or for
  demonstration purposes.  Associated Utilities must not be delivered to End-
  Users.

  No provision or term or condition of this Agreement shall affect the rights of
  Nortel Networks or any Manufacturing Licensee to use Licensed Product,
  Derivative Works, Licensed IP or Associated Utilities in the normal course of
  Nortel Networks' business.

  Nothing contained herein shall transfer, or be deemed to transfer, or
  contemplate the transfer of, any rights in or to the Technology or Technology
  IP other than those rights specifically granted herein, and in particular but
  without restricting the generality of the foregoing, Nortel
<PAGE>

  Networks does not in any way transfer any right, title, or interest in or to
  the Technology or Technology IP, or any element constituting a portion thereof
  to Licensee or Distributors or End-Users, other than the limited right granted
  herein.

3.0    ARTICLE 3 "GRANTBACK" is hereby deleted and replaced by the following:

Licensee hereby grants to Nortel Networks and Manufacturing Licensees, a non-
exclusive, perpetual, irrevocable, transferable, assignable, worldwide paid-up
right to use Derivative Works and Licensed IP for use in the normal course of
Nortel Networks' business.  Such right includes the right to modify the
Derivative Works and Licensed IP and to incorporate them into software or
product for use in the normal course of Nortel Networks' business.  For greater
clarity, Nortel Networks shall have no right to sub-license, transfer, assign
Innovations (defined below) for the purpose of creating competing products with
Derivative Works.  Ownership in and to the Derivative Works (exclusive of any
Technology or Technology IP) and in and to any and all ideas, inventions,
discoveries, creations, processes, techniques, designs, methods, improvements or
know-how that Licensee may make, conceive, develop or reduce to practice
(collectively, "Innovations"), regardless of whether such Innovations are
developed as a result of Licensee's access to the Technology or Technology IP,
shall remain with and be vested in Licensee.  Subject to the provisions of
Article 2.0(iii), Licensee shall not be obligated to provide the source code
form of the Derivative Works to Nortel Networks.

In partial consideration of the License granted herein by Nortel Networks,
Licensee hereby grants to Nortel Networks, to the full extent of its legal right
to do so, an irrevocable, perpetual, non-exclusive, non-transferable, non-
sublicenseable, fully-paid up, royalty-free, worldwide license under any patents
or patent applications that Licensee owns or acquires that are embodied in the
Derivative Works or Licensed IP or were acquired as a result of access  to the
Technology or Technology IP or rights granted under this Agreement.

This Article 3 Grantback shall not be construed ***, nor shall it be construed
***.

4.0  ARTICLE 5 "ROYALTY" is hereby deleted and replaced by the following:

In partial consideration of the rights granted hereunder, including the
additional Technology and Technology IP, Licensee shall make the following
royalty payments (hereinafter "Royalties") to Nortel Networks:

     (i)  ***; and
     (ii) ***, paid within thirty (30) days

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE COMMISSION.
<PAGE>

           following the end of each quarterly period ending on March 31, June
           30, September 30, and December 31; and
     (iii) ***.

     Nortel Networks acknowledges that the payments under this amended Article 5
     (i) *** and except as expressly provided in this Article 5 (ii) and (iii),
     Licensee shall possess a fully paid-up license upon completion of these
     payment obligations.

     For further clarification, final payment obligations shall include payments
     under Article 5 (ii) and (iii) up to and including September 30, 2002.

5.0  ARTICLE 8 "RECORDS AND REMITTANCES" is hereby amended by deleting the
     following text:

"Payments related to Licensee's licensing activities in the USA shall be made
to:

Northern Telecom Inc.
200 Athens Way,
Nashville, Tennessee,
U.S.A.  37228

     Attention:    Sue Kane, Dept. 8452."

and adding the following text:

"Payments related to Licensee's licensing activities shall be made to

     Nortel Networks Limited
     8200 Dixie Road, Suite 100 MS:036NO154
     Brampton, Ontario
     L6T 5P6 Canada

     Attention:  Director, Technology Licensing Programs
     FAX:  905-863-8431

6.0  ARTICLE 14 "DURATION AND CONTINUING RIGHTS" is hereby deleted and replaced
     by the following:

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE COMMISSION.
<PAGE>

This Agreement shall continue until the earlier of September 30, 2002 and the
full and final payment of all sums due Nortel Networks hereunder or until
terminated pursuant to Article 15 hereof.

Provided this Agreement is not terminated prior to September 30, 2002, Licensee
shall on October 1, 2002 posses a fully paid up license to exercise the rights
granted in Article 2 (including patent rights granted in Article 2) without
having the obligation of making payments and providing statements as prescribed
in Articles 5 and 8 hereof.

7.0  ARTICLE 15 "TERMINATION" is hereby amended by adding the following as the
     last two paragraphs:

Notwithstanding anything else contained herein, in the event Licensee brings
patent infringement proceedings against Nortel Networks at any future date,
under any patent that is embodied in the Derivative Works or Licensed IP or that
was acquired as a result of access to the Technology or Technology IP or rights
granted under this Agreement, Nortel Networks shall have the right to
immediately terminate this Agreement and all continuing rights contemplated
under ARTICLE 14 hereof.

During the term of this Agreement, Licensee shall have the right to terminate
the Agreement with or without cause upon thirty (30) days written notice to
Nortel Networks subject to the termination prior to expiration obligations
above.  Termination initiated by Licensee as provided in this ARTICLE 15 shall
also result in immediate termination of all continuing rights contemplated under
ARTICLE 14 hereof.

8.0  ARTICLE 16 "NOTICES" is hereby deleted and replaced by the following:

Any and all notices or other information to be given by one Party to the other
shall be in writing and sent by certified or registered mail, return receipt
requested, or by hand delivery to the other Party at the following address or
fax number:

(a) if to Licensee:

     LOGICVISION, INC.
     101 Metro Drive, Third Floor,
     San Jose, California 95110
     USA

     Attention:    Dr. V.K. Agarwal, Chief Executive Officer
     FAX:          408-573-7640
<PAGE>

(b) if to Nortel Networks:

     Nortel Networks Limited
     8200 Dixie Road, Suite 100  MS:036NO154
     Brampton, Ontario
     L6T 5P6 Canada

     Attention:    Director, Technology Licensing Programs
     FAX:   905-863-8431

Such notices shall be deemed to have been received five (5) business days after
mailing if forwarded by mail or on the day of receipt if delivered by hand or
fax.  The address of either Party may be changed by giving notice to the other
Party in accordance with the foregoing.

9.0  ARTICLE 18 "GENERAL PROVISIONS" is hereby amended by replacing the first
     paragraph with the following paragraph:

"This Agreement shall not be assigned or transferred by either Party except with
the written consent of the other such consent not to be unreasonably refused.
Notwithstanding the foregoing, this Agreement may be assigned by Nortel Networks
to any of its Subsidiaries or Affiliates upon notification to Licensee.

And is further amended by replacing the paragraph;

"This Agreement sets forth the entire agreement and understanding between the
Parties with respect to the licensing of Licensed Products and Associated
Utilities and supersedes and cancels all previous negotiations, agreements,
commitments and writings in respect of the subject matter hereof, and no Party
hereto shall be bound by any term, clause, provision, or condition save as
expressly provided in this Agreement or as duly set forth on or subsequent to
the date hereof in writing, signed by duly authorized officers of the Parties.
The Parties may, however, modify Schedules A, B, and C hereto, from time to time
by written instrument signed by representatives of both Parties, provided any
such modification does not materially change the scope and substance of this
Agreement."

     with the following paragraph;

"This Agreement sets forth the entire agreement and understanding between the
Parties with respect to the licensing of Technology and Technology IP and
supersedes and cancels all previous negotiations, agreements, commitments and
writings in respect of the subject matter hereof, and no Party hereto shall be
bound by any term, clause, provision, or condition save as expressly provided in
this Agreement or as duly set forth on or subsequent to the Amendment Date
hereof in writing, signed by duly authorized officers of the Parties, which for
Nortel Networks Limited shall include the Vice President, Intellectual Property
Law.  The Parties may, however, modify Schedules A, B, and C hereto, from time
to time by written instrument signed
<PAGE>

by representatives of both Parties, provided any such modification does not
materially change the scope and substance of this Agreement."

10.0 SCHEDULE A "LICENSED PRODUCT" is hereby deleted and replaced by the amended
     SCHEDULE A "LICENSED PRODUCT AND PATENTS" attached hereto.

11.0 SCHEDULE B "DOCUMENTATION" is hereby deleted and replaced by the amended
     SCHEDULE B "DOCUMENTATION" attached hereto.

12.0 SCHEDULE C "ASSOCIATED UTILITIES" is hereby deleted and replaced by the
     amended SCHEDULE C "ASSOCIATED UTILITIES" attached hereto.

13.0 This Amendment shall be effective on the date first mentioned above.


IT IS FURTHER AGREED that this Amendment be and is hereby made a part of and
attached to the Agreement and that the Agreement, shall remain in full force and
effect, according to the terms, conditions and covenants therein, except as
herein amended.


IN WITNESS WHEREOF, the Parties hereto have duly executed this amending
agreement.

<TABLE>
<CAPTION>
Nortel Networks Limited                                     LOGICVISION, INC.

<S>                                                         <C>
/s/ Arthur Fisher                                           /s/ V.K. Agarwal  03/20/2001
-------------------------------------------------------     -------------------------------------------------------
Authorized Signature and Date                               Authorized Signature and Date

Arthur Fisher, VP Intellectual Property Law                 Dr. V.K. Agarwal, Chief Executive Officer
-------------------------------------------------------     -------------------------------------------------------
Printed Name and Title                                      Printed Name and Title


/s/ Blair F. Morrison
-------------------------------------------------------
Authorized Signature

Blair F. Morrison, Assistant Secretary
-------------------------------------------------------
Printed Name and Title
</TABLE>
<PAGE>

                                   SCHEDULE A

                          LICENSED PRODUCT AND PATENTS

Patents
-------
4969148        Serial Testing Technique For Embedded Memories
5349587        Multiple Clock Rate Test Apparatus For Testing Digital Systems

Source Code
-----------
The Design For Testability (DFT) Technology consists of the tool suite and
database provided to Licensee in source code form as described herein:

               (i)    SCANCHEK, Version 5 Release 3 (5.03) *See Note 2
                      This tool compiles a circuit description from Verilog
                      structural netlists and checks the logic for compliance to
                      a set of scan rules. It also extracts the combinational
                      logic driven by the scan chain as well as a description of
                      the scan chain connections and pin types.

               (ii)   ATPG, Version 5 Release 3 (5.03) *See Note 2
                      Automatic Test Pattern Generator (ATPG) generates and/or
                      evaluates a set of test vectors for the faults in the
                      combinational part of the logic of a circuit. ATPG applies
                      random patterns to detect most faults and switches to
                      deterministic algorithms to find the remaining one.
                      Optionally, a Linear-Feedback-Shift-Register (LFSR) can
                      generate the random patterns and the expected responses
                      for the circuit are compressed and expressed in terms of a
                      32-bit signature.

               (iii)  SEQUENCE, Version 5 Release 3 (5.03) *See Note 2
                      SEQUENCE populates a test pattern database with the test
                      patterns generated by ATPG for the combinational portion
                      of the circuit. SEQUENCE automatically adds generic test
                      patterns for the scan chain itself and asynchronous set /
                      reset pins, if applicable.

               (iv)   TPI, Version 5 Release 2 Maintenance Release 1 (5.02.01)
                      Test Point Insertion (TPI) tool.

               (v)    RamBist, Version 5 Release 2 (5.02)
                      A tool that generates a memory built-in self test
                      controller, a verification test bench, and test pattern.

               (vi)   ScanBist, Version 5 (5.00)
                      A tool that generate a scan built-in self test (a.k.a.
                      logicbist) controller, a verification test bench, and test
                      pattern.

               (vii)  IATPG, Version 5 (5.00)
                      A tool to perform Interconnect Automatic Test Pattern
                      Generator (IATPG)

               (viii) dh2wgl
                      A tool to extract test patterns from datahub native format
                      and translated to Fluence (former TSSI) WGL format.
<PAGE>

               (ix)   datahub
                      A proprietary database and the associated schema for
                      integrating DFT software tools via the storage and
                      exchange of data.

Notes:
-----
1. All Licensed Products and Derivative Works delivered to End-Users must be in
object code form.
2. The following software elements or modules must be modified by Licensee and
Nortel Networks must approve such modifications before Licensee delivers
Licensed Products or Derivative Works to any End-User.
               (i)    SCANCHEK: Cadence menus, ScanBist support, Nortel Networks
                      specific options.
               (ii)   ATPG: Cadence menus, ScanBist support, Nortel Networks
                      specific options.
               (iii)  SEQUENCE: Cadence menus, "Fast simulation", Nortel
                      Networks specific options.

Object Code Utility
-------------------

The Design For Testability (DFT) Technology includes the following utility
provided to Licensee in object code form.  This utility may be included in
Licensed Products or Derivative Works provided however delivery to End-Users
must only be in object code form:

               (i)    dh2tif, Version 5 Release 2 (5.02) A utility to extract
                      test patterns from a DATAHUB file and convert into a TIF
                      (Tool Interchange Format).

Libraries
---------

The Design For Testability (DFT) Technology includes the following libraries
provided to Licensee.  These utilities may be included in Licensed Products or
Derivative Works provided however delivery to End-Users must only be in object
code form:

               (i)    spdata,  (sp.a)
                      a collection of functions for read/write to/from the
                      simulation event file.

               (ii)   anvil,  (anvil.a)
                      a collection of functions for specifying design
                      verification event or test patterns.

               (iii)  Message, (MSg.a)
                      a collection of functions for messaging errors or
                      information messages.

               (iv)   Pattern, (PP.a)
                      a collection of functions for extracting patterns stored
                      in datahub.

               (v)    Read Scaninfo, (readscan.a)
                      a collection of functions for parsing the scaninfo
                      information into datahub.

               (vi)   Datahub, (datahub.a)
<PAGE>

                      a collection of functions that includes the basic
                      read/write of the datahub database and the interface
                      functions.

               (vii)  scan PLI,
                      a collection of PLI functions for Verilog to read and
                      write spdata file.


Circuit Designs in HDL
----------------------
The Design For Testability (DFT) Technology includes the following circuit
designs in HDL.

               (i)    TAP
                      A circuit design that implements an interpretation of the
                      IEEE 1149.1 Standard Test Access Port (TAP).

               (ii)   Boundary Scan Cells
                      A collection of circuit designs that implement an
                      interpretation of the IEEE 1149.1 standard boundary scan
                      cells.

               (iii)  Rambist Controller
                      A circuit design that implements the built-in self-test
                      controller for memory testing which employs the technique
                      specified in patent 4969148.

               (iv)   Logicbist Controller
                      A circuit design that implements the built-in self-test
                      controller for scan based logic testing which employs the
                      technique specified in patent 5349587.


                              [End of Schedule A]
<PAGE>

                                   SCHEDULE B

                                 DOCUMENTATION


The Documentation associated with licensed Technology that, once modified, can
be delivered with Licensed Products, Derivative Works, and/or Licensed IP to
End-Users consists of the following:

    1.  Scan Reference Guide, Version 5 Release 3 (5.03)     CCP 143.1

    2.  DFT Application Notes, Version 5 Release 2 (5.02)    CCP 146.1

    3.  DFT Guidelines, Version 5 Release 1 (5.01)           CCP 146.2

    4.  Memory BIST Guidelines, Version 5 (5.00)

    5.  Scanbist Documentation, Version 5 (5.00)

    6.  TIF Format Description, Version 5 (5.00)


     Note: Licensee must modify The Documentation and Nortel Networks must
     approve such modifications before Licensee delivers any Documentation to
     End-Users.  All other Technical Information is considered Confidential
     Information.



                              [End of Schedule B]
<PAGE>

                                   SCHEDULE C

                              ASSOCIATED UTILITIES

Associated Utilities include the following software elements, cells, or models
that can be used by Licensee for developing and debugging new software or for
demonstration purposes but must not be delivered to End-Users.

          (i)    cells,
                 a subset of simple BATMOS gates including Verilog nominal and
                 SCAN models.

          (ii)   memory macros,

          (iii)  mx,
                 a macro preprocessing utility.

          (iv)   syntran,
                 a translation utility for translating FML2 format into Verilog
                 HDL format.

          (v)    dh2tif, Version 5 Release 2 (5.02)
                 A utility to extract test patterns from a DATAHUB file and
                 convert into a TIF (Tool Interchange Format).

          (vi)   Synful and Synopsys Technology Library Translator to Synful
                 format.



                              [End of Schedule C]