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Know-how is a term for practical knowledge on how to accomplish something, as opposed to “know-what” (facts), “know-why” (science), or “know-who” (communication). Know-how is often tacit knowledge, which means that it is difficult to transfer to another person by means of writing it down or verbalising it. The opposite of tacit knowledge is explicit knowledge.
In the context of industrial property (now generally viewed as intellectual property - IP), know-how is a component in the transfer of technology in national and international environments, co-existing with or separate from other IP rights such as patents, trademarks and copyright and is an economic asset. While know-how is recognized in U.S. Tax regulations as a property, services by individuals having know-how are not.
Definition of industrial know-how
Know-how can be defined as confidentially held, or better, 'closely held' information in the form of unpatented inventions, formulae, designs, drawings, procedures and methods, together with accumulated skills and experience in the hands of a licensor firm's professional personnel which could assist a transferee/licensee of the object product in its manufacture and use and bring to it a competitive advantage. It can be further supported with privately maintained expert knowledge on the operation, maintenance, use/application of the object product and of its sale, usage or disposition.
The inherent proprietary value of know-how lies embedded in the legal protection afforded to trade secrets in general law, particularly, 'case law'. Know-how, in short, is "private intellectual property". The 'trade secret law' varies from country to country, unlike the case for patents, trademarks and copyright where there are formal 'conventions' through which subscribing countries grant the same protection to the 'property' as the others; examples of which are the Paris Convention for the Protection of Industrial Property and the World Intellectual Property Organization (WIPO), under United Nations, a supportive organization designed "to encourage creative activity, [and] to promote the protection of intellectual property throughout the world".
A trade- secret may be defined as:
- it is information
- it is secret, not absolutely so
- there is intent to keep it secret
- it has industrial, financial or trade application
- it has economic value
For purposes of illustration, the following may be a provision in a license agreement serving to define know-how:
- Know-how shall mean technical data, formulae, standards, technical information, specifications, processes, methods, code books, raw materials, as well as all information, knowledge, assistance, trade practices and secrets, and improvements thereto, divulged, disclosed, or in any way communicated to the Licensee under this Agreement, unless such information was, at the time of disclosure, or thereafter becomes part of the general knowledge or literature which is generally available for public use from other lawful sources. The burden of proving that any information disclosed hereunder is not confidential information shall rest on the licensee.
Show-how is a diluted form of know-how as even a walk-through a manufacturing plant provides valuable insights to the client's representatives into how a product is made, assembled or processed. Show-how is also used to demonstrate technique.
An enlarged program of show-how is the typical content of Technical Assistance Agreements where the licensor firm, if one is involved, provides a substantial training program to the client's personnel on-site and off-site. (Note: such training does not imply any grant of 'license'.)
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There are two sets of agreements associated with the transfer of know-how agreement:(a) the disclosure and (b) the non-disclosure agreements which are not separately parts of the principal know-how agreement.
The initial need for 'disclosure' is due to the requirement of a licensee firm to know what is the specific, unique or general 'content' of the know-how that a licensor firm possesses which promises value to the licensee on entering into contract. Disclosure also aids the potential licensee in selecting among competitive offers, if any. Such disclosures are made by licensors only under non-disclosure or confidentiality agreements in which there are express undertakings that should the ultimate license not materialize, the firm to whom the disclosure is made will not reveal - and equally important - by any manner apply, any part of the disclosed knowledge which is not in the public domain or previously known to the firm receiving the information.
Non-disclosure agreements are undertaken by those who receive confidential information from the licensee, relating to licensed know-how, so as to perform their tasks. Among them are the personnel of engineering firms who construct the plant for the licensee or those who are key employees of the licensee who have detailed access to disclosed data etcetera to administer their functions in operating the know-how-based plant. These are also in the nature of confidentiality agreements and carry the definition of know-how, in full or truncated part, on the need-to-know basis.
Outside usage in terms of industrial property, know-how is viewed as procedural knowledge (which term also reveals its nature).
- Manual on Technology Transfer Negotiation, United Nations Industrial Development Organization (A Reference for Policy-makers and Practitioners on Technology Transfer), United Nations Industrial Development Organization, Vienna, Austria (1996) ISBN 92-1-106302-7
- Internal Revenue Service: Final report on Treatment of Services under Section 482-9T; US Dept. of the Treasury, August 2006.
- Licensing Guide for Developing Countries, World Intellectual Property Organization (WIPO), Geneva, 1977, ISBN 92-805-0395-2