A know-how licence agreement grants the use of specific knowledge, skills and practical experience. These may be technical, manufacturing, commercial, financial, marketing and other. This knowledge, skill and experience usually constitutes a trade secret, because it provides its holder with a competitive advantage over the others on the market. For this reason, it has significant commercial value. Examples of know-how are software programs, chemical formulas and descriptions of manufacturing processes.
Incorporating know-how into other agreements
Often in practice, the granting of the right to use particular know-how is included in franchise agreements or as an addition to agreements for the use of patents. For example, the full use of a patented technology may also require the transfer of specific knowledge and skills that are not patentable.
Territorial scope and form of the agreement
Usually, the licence to use know-how is granted for a specific territory. If the agreement does not expressly specify the territorial scope, the rights are deemed to be valid for the territory of the Republic of Bulgaria. The know-how licence agreement must be concluded in writing and is subject to entry with the Patent Office. The entry is not a condition for the validity of the agreement, but from the date of entry it may be invoked against third parties who have rights under subsequent licensing agreements.
Types of licence
A know-how licence agreement may include:
- Exclusive licence: The licensee obtains the right to be the only one to use the know-how. This must be expressly stated in the agreement. The licensor may reserve the right to use the know-how.
- Non-exclusive licence: The licensor may grant the right of use to other persons as well, including using it itself.
Licence remuneration
The remuneration may be determined in several ways:
- A one-off payment upon conclusion of the agreement.
- Fixed annual amounts.
- Periodic deductions (royalties), for example a percentage of the profit or revenue.
- A combination of a one-off payment and royalties.
One-off payments and fixed annual amounts are often preferred because they provide predictability. The disadvantage is that they do not take inflation into account, which is why it is useful to include an inflation clause.
Investments and additional terms
If the implementation of the know-how requires large investments, the agreement may provide for a grace period with reduced or no licence remuneration. In the case of a non-exclusive licence, it is advisable to include a "most-favoured licensee" clause. In the event that the licensor grants the know-how to another person on better terms, the presence of such a clause in the agreement will guarantee the licensee that it too will receive the same more favourable terms.
Sublicensing and restrictions
A licensee with an exclusive licence may conclude a sublicence agreement, unless otherwise agreed in the agreement. It is possible to include a condition that the sublicence requires the prior written consent of the licensor.
Confidentiality
Know-how is confidential information, which is economically valuable precisely for this reason. The agreement must include confidentiality clauses and measures to prevent the disclosure of the information to third parties.
Term and termination
Agreements are usually concluded for a term of 5 to 10 years. It is important to specify whether the licensee will have the right to use the know-how after the expiry of the term. A clause on termination for non-use of the know-how within a specified period may be added.
The agreement may be terminated by written notice. If the term is not specified, the notice period is six months. The licensor may not terminate the agreement before the expiry of the first year of its operation.
If you need advice and assistance in drafting and registering a licence agreement for a trademark, know-how or patent, contact us on tel.: 0887550706 or by e-mail: [email protected]
