Know-how licence agreement

The know-how communication contract is the contract by which a company transmits to another, for remuneration, secret, substantial and identified technical or commercial knowledge, in order to allow it to manufacture or market products or implement processes. Unlike the patent licence, it covers no title: the know-how is protected only by its secrecy. The know-how communication contract is an unnamed contract, governed by the ordinary law of obligations.

The essential clauses of the know-how communication contract

First, the identification of the know-how, in a confidential annex or a sealed deposit, in order to prove what was transmitted and to verify its secret and substantial character. Second, the modalities of communication: documentation, staff training, technical assistance, and the calendar of those services. Third, the confidentiality obligations, which bind the recipient, its employees and its subcontractors, during the contract and after its expiry. Fourth, the remuneration, as a lump sum, proportional royalties or a combination of the two, and the duration. The contract also specifies the fate of the improvements made by each party.

The obligations of the parties

The communicating party warrants that the know-how is in its possession, that it is secret and that it makes it possible to obtain the announced result, without however guaranteeing commercial success. The recipient undertakes not to disclose the know-how, to use it only within the agreed limits and, at the end of the contract, to cease its exploitation and return the documentation, unless otherwise stipulated. Breach of confidentiality engages the recipient’s contractual liability and may constitute a violation of trade secrets within the meaning of Articles L. 151-1 et seq. of the Commercial Code, available on Légifrance.

Key points

In practice, the main difficulty of the know-how communication contract lies in evidence: proof of what was transmitted, proof of its secrecy at the date of the contract, proof of misuse. The contract must organise that evidence from the outset. It is often articulated with a broader technology transfer agreement. The firm drafts these contracts and acts in the disputes arising from them, as presented on the page contracts.