Licensing or Assigning ‘Know How’

Know How is essentially confidential information to one party. Unfortunately it is not a clearly identifiable proprietary right, like for example a trade mark, patent or registered design. With these latter forms of Intellectual Property Rights a statutory forms of registration, protection, licenses and assignments exist.

Know-how is regarded as a ‘chose in action’ and so is capable of being transferred either by (i) equitable assignment or (ii) by a statutory assignment under section 136 of the Law of Property Act 1925, which requires a written assignment by the assignor and notice to be given to the other contracting party.

The Law Commission has stated on this point the fact that “It is not possible to lay down specific rules for the assignability and formal requirements of assignment of obligations of confidence in relation to such a wide range of information”.

How do we deal with this in practice? the preferred method of dealing with this is to document the confidential information and all materials in support of the same and for the transferor to agree with the transferee that upon delivery of the information by it, it shall not use the information again itself, nor disclose the information to any other third party. Further if any assistance is required to confirm the assignment in the future, the transferor shall provide the same.

For the sake of completeness, it is advisable to also include provisions that provide for the transferor not to compete with the transferee, limited in terms of scope and duration because under competition laws in order to enforce such a clause there must be a legitimate business interest to protect (the transfer of the Know How and Confidential Information) and the clause goes no further than is necessary in order to protect such an interest.

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