Know-How License Agreement

Know-How License Agreement

Drafts a commercially balanced agreement licensing confidential technical knowledge, processes, and trade secrets — information deriving value from secrecy rather than patent disclosure.

Prerequisites

Collect before drafting:

1. Transaction documents — term sheets, LOIs, prior agreements with negotiated terms
2. Party information — legal names, entity types, jurisdictions, principal places of business
3. Technical description — functional description of know-how sufficient to define scope without disclosing secrets
4. Commercial terms — exclusivity, territory, field of use, financial structure, milestones
5. Regulatory context — export control applicability, industry-specific regulations

Quick Start

1. Extract deal terms from uploaded documents (see Document Review)
2. Draft agreement sections in order (see Agreement Sections)
3. Bracket undecided terms: [AMOUNT], [PERIOD], [JURISDICTION]
4. Validate against Drafting Checks

Document Review

Extract from uploaded documents before drafting:

Adjust approach for context: university-to-industry, cross-border, regulated technology, startup vs. established entity.

Agreement Sections

Draft these sections in order.

1. Preamble & Recitals

• Full party identification with entity type, jurisdiction, principal place of business
• Recitals: licensor ownership, trade secret status, licensee's desire for rights, mutual intent — no promotional language
• Reference background context (prior collaborations, strategic objectives)

2. Definitions

Precision is critical — ambiguity destroys enforceability and trade secret protection.

Key terms: Know-How/​Licensed Technology (specific enough to enforce, flexible for updates; use confidential technical schedule if needed) · Licensed Territory (geographic precision; subcategories if rights vary) · Field of Use (applications, industries, product categories with clear boundaries) · Confidential Information (broad capture + standard exclusions: public domain, independent development, prior knowledge, third-party receipt) · Improvements/​Derivative Know-How (modifications only vs. related developments) · Net Sales (inclusions/​exclusions, bundled product valuation, affiliate transfer pricing) · Affiliate · Milestone Events (objective triggering criteria)

3. Grant of License

• Specify exclusive / sole / non-exclusive — define each in context
• Enumerate rights: use, manufacture, have-made, sell, distribute, create derivatives, sublicense
• Field-of-use restrictions with clear boundaries
• Territorial scope: manufacturing, use, sale, import; cross-border treatment
• Improvements: ownership, grant-back (exclusive/​non-exclusive, royalty-bearing/​free), joint improvements
• Licensor reservations: research rights, existing obligations, competing technology development
• Sublicensing: scope, approval rights, required terms, termination treatment

4. Financial Terms

5. Confidentiality & Trade Secret Protection

Failure here destroys trade secret status — this section is outcome-determinative.

• Standard of care: at least same as own most sensitive information, no less than reasonable care
• Physical, technical, and administrative safeguards required
• Permitted disclosures: need-to-know only, written confidentiality agreements from recipients
• Written disclosure log maintained; available to licensor on request
• Compelled disclosure: prompt notice, cooperate on protective orders, minimum disclosure
• Survival: indefinite (until public domain through no breach)
• Return/​destruction on termination with officer certification
• Residual knowledge: address explicitly — cessation + destruction, or continued use subject to ongoing confidentiality and royalties (most litigated post-termination issue)

6. Technology Transfer & Support

• Documentation deliverables: format, scope, timeline
• Training: sessions, duration, location, cost allocation
• Ongoing technical support: scope, response times, limitations
• Manufacturing transfer, process validation, regulatory support
• Quality control: standards, sampling, reporting, facility inspections
• Updates/​improvements: obligation to provide, included vs. additional fee

7. Diligence & Performance

Required for exclusive licenses — include objective milestones.

• Commercially reasonable efforts obligation
• Specific milestones with deadlines (development, regulatory, first commercial sale, sales targets)
• Consequences for failure: conversion to non-exclusive, termination, compulsory sublicensing
• Periodic progress reports: frequency, content, timing

8. Representations & Warranties

Licensor: authority to grant license, ownership/​control of know-how, trade secret status maintained, no known third-party infringement (knowledge qualifier), disclosure of known limitations.

Licensee: authority to enter agreement, lawful use and regulatory compliance, technical and financial capability, export control and anti-corruption compliance.

Disclaimers (conspicuous text — bold or caps): AS-IS for functionality/​accuracy/​completeness/​fitness, no non-infringement warranty (licensee responsible for FTO), disclaim implied warranties of merchantability and fitness for particular purpose.

9. Indemnification

• Licensee indemnifies: use, modification, manufacture, sale; product liability; combination with other tech; failure to follow instructions
• Licensor indemnifies: third-party IP claims re know-how as provided (often limited to rep/​warranty breach)
• Procedures: prompt notice, indemnifier controls defense, no settlement admitting liability without consent, late notice relieves only to extent of material prejudice

10. Limitation of Liability

• Mutual consequential damages waiver (conspicuous text)
• Aggregate cap (e.g., multiple of fees paid in preceding 12 months)
• Carve-outs: confidentiality breach, unauthorized use beyond scope, indemnification, willful misconduct, gross negligence, fraud

11. IP Ownership

• Licensor retains all rights in licensed know-how; licensee acquires only expressly granted rights
• Improvements: licensor-developed → licensor; licensee-developed → licensee (subject to grant-back); joint → per agreement
• Enforcement: primary enforcer, notice obligations, cost/​recovery allocation, step-in rights

12. Term & Termination

13. Post-Termination

• Cessation of use (immediate or wind-down with continued royalties)
• Sublicense treatment: automatic termination, survival if compliant, or conversion to direct license
• Return/​destruction of all materials with written certification
• Accrued payments immediately due; audit rights survive
• Survival: confidentiality, payment, indemnification, liability limits, dispute resolution, governing law

14. Regulatory & Export Control

• Compliance with EAR, ITAR, and equivalent foreign laws
• Licensee responsible for export licenses/​approvals
• No transfer to prohibited destinations/​entities/​persons
• Industry-specific compliance (FDA, environmental, safety) — allocate regulatory approval responsibility

15. General Provisions

Entire agreement, amendment (written only), assignment restrictions (consent required; affiliate/​successor exceptions), notices, severability, waiver (written, instance-specific), independent contractor, counterparts/​e-signatures (E-SIGN Act), force majeure (excludes payment; termination if prolonged), further assurances.

16. Signature Blocks & Schedules

Signature blocks with name, title, date, authority representation. Exhibits: confidential technical description, documentation list, payment schedule, milestone chart, quality specs, form sublicense/​NDA.

Drafting Checks

• Calibrate to deal size: complex/​high-value → exhaustive schedules; simple methodology transfer → streamlined
• Protect trade secret status: every confidentiality provision must satisfy DTSA/​UTSA requirements
• No implied licenses: expressly reserve all rights not granted
• Conspicuous disclaimers: bold or caps for warranty disclaimers and liability limitations
• Export control: mandatory for any dual-use technology
• Royalty stacking: include anti-stacking or reduction provisions if applicable
• Exclusive licenses: always require diligence with objective milestones
• Jurisdictional flags: note where provisions need non-US adjustment