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Know-How as a Legal Term

Know-how lies at the intersection of what we call trade secrets on the one hand, and general technical or commercial information on the other. Know-how can be of industrial, commercial, financial or administrative nature. However, it is usually industrial know-how we have in mind when using the term. Improvements of production techniques may often be of minor importance when taken individually, but when combined they can be decisive for the competitiveness of a business. Knowledge and experience gained by trying to master a technical process is what we often call know-how, but the term is also used to refer to major advances (inventions).

The terms trade secrets and know-how are often used interchangeably, and there is, in fact, often a high degree of overlap between these terms. Information that can be protect- ed as trade secrets may also fall under the protection provided by marketing control legislation. Although there may be varying country-specific requirements, the following two requirements must usually be fulfilled in order for information to be considered a trade secret:

•   The information must be worthy of protection. This status applies to information which is specific to, and developed by, the company in question and is relevant to its operation. Such information may be embodied in particular machines or machine parts, particular combinations of machines, or specific raw materials or raw material compositions. Product development activities or testing of sample products may be trade secrets (and know-how).
•   The company must take protective measures, or at least show a certain amount of protective effort, in order for information to be considered a trade secret.

Protection of know-how and trade secrets

Know-how and trade secrets do not enjoy protection unless the company actively adopts measures to keep information secret (confidential). Therefore, companies should imple- ment several measures to make sure confidentiality is maintained. Below you will find a list of measures your company can and should take in order to safeguard the confidentiality of information that you want to be treated as protected know-how:

•   When displaying products, manuals, descriptions of production methods etc. to external clients, investors or partners, always assess whether such a display is necessary. If the display is deemed necessary, the recipients of the products or other material should first be asked to sign a confidentiality agreement. Note that this will not necessarily guarantee that protection and confidentiality will be respected; however, it can serve as the basis for claiming damages if the recipient does not comply with the agreement. In addition, the confidentiality agreement allows you to maintain the patentability of the displayed know-how in case you decide to seek patent protection.

•   Your company’s employment contracts should always include a clause on the confidenti- ality of know-how (and trade secrets). In addition, your company should make sure that key employees working with production and innovation are bound by a non-compete clause. Moreover, the contract should include clear provisions on the transfer of IP rights from the employees to the company, within the limits set by the law that governs employee inventions.
•  When hiring external consultants, it is even more important to include regulations on confidentiality and transfer of ownership of IP in the agreement.
•  Documents containing information that can be characterized as know-how or trade secrets should be labeled confidential or similar.
•  Your company should set up instructions/guidelines for the employees on how to man- age their know-how.
•  If possible, only a limited number of persons within your company should be familiar with the company’s collective know-how. This may be achieved by limiting access to stored information both electronically and physically.

Proof of ownership of know-how

In order to make the most of your company’s know-how, it is essential that you can document the know-how your company owns. For a technology company, for instance, documenting the IPR owned would be crucial for determining the value of the company as such. If you can document your property, it is easier to exploit it commercially by licensing or assigning it to others. This holds true also for research co-operation agreements and other co-operation deals.

When it comes to know-how, it is therefore important to examine your business’s company-specific knowledge which goes beyond the general knowledge in the industry. After having identified this type of knowledge, it should be rendered tangible by putting it down in form of illustrations, descriptions or similar. Also, an often highly useful tool for innovative businesses is to keep an IP log, i.e. a logbook to regularly write down and keep track of new know-how. This tool provides you with an updated overview of your company’s IP (innovations) at all times.

zacco_wp_know_how_as_a_legal_term.pdf