Licenses And Know-how

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Licenses and know-how

Before going on to examine how your company may be able to profit from an asset it may not know it has, let me explain that granting a company overseas a licence to manufacture your product locally, and selling your know-how are not quite the same thing, although many people use the two terms somewhat indiscriminately.

Licensing is strictly speaking granting someone permission to do something which would otherwise be an "actionable wrong". It means in effect that the licensor allows the licensee to carry out the patented method of manufacture for a specified length of time. And in theory the licensor gives the licensee the technical information to enable the process to be used. As a patent specification is a public document, then if the licensee breaks the agreement, for example by failing to pay, the licence can be revoked.

On the other hand, know-how means in effect technical know-ledge. When granting the right to use know--how one makes available, not only the knowledge but also the practical experience gained from the application of the knowledge. But it is not so easy to take effective action against anyone who breaks a know-how agreement because one cannot withdraw knowledge or information once it has has been supplied. Hence know-how is often sold on a one-off basis, for a once-only cash payment.

The main point is that it is better to treat the provision of know-how on a different basis from the grant of the patent licence itself. Indeed, there may be a case, if both are to be sold for making two separate arrangements. But against this, the success of any grant of a licence to manufacture and sell locally, and the provision of know-how will rest on a considerable degree of confidence between the two parties, so that as long as this distinction is remembered, in practice it can often be ignored,


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