Know How License Agreement

---
name: know-how-license-agreement
description: >-
  Drafts U.S. know-how (trade secret) license agreements covering scope,
  exclusivity, field-of-use, territory, consideration, confidentiality,
  tech transfer, diligence, and compliance. Use when licensing confidential
  technical information, manufacturing processes, trade secrets, non-patent
  IP, or process know-how; trigger keywords: know-how license, trade secret
  license, technology transfer agreement, confidential information license,
  process license, technical know-how, manufacturing know-how.
tags:
  - agreement
  - drafting
  - transactional
---

# Know-How License Agreement

License agreement for confidential technical information and trade secrets where the licensed IP is not covered by patents. Sensitive know-how detail belongs in confidential exhibits, not in the agreement body.

## Prerequisites

1. **Parties** — legal names, entity types, jurisdictions, signatory authority.
2. **Know-how scope** — technical description, confidentiality level, exhibit references.
3. **Field & territory** — permitted uses, industries, geographies, manufacturing vs. sales scope.
4. **Exclusivity** — exclusive / sole / non-exclusive; sublicensing position.
5. **Economics** — upfront fee, royalties, milestones, minimums, audit terms.
6. **Transfer plan** — documentation, training, support, timelines.
7. **Diligence** — milestones, reporting, commercialization obligations.
8. **Compliance** — export controls, regulatory approvals, industry rules.
9. **Prior agreements** — existing NDAs, collaboration agreements, or IP licenses.

If any prerequisite is missing, flag it as an open item and proceed with labeled assumptions.

## Step 1: Deal Intake

Populate the intake table from term sheet, tech schedule, and counsel input.

| Item | Required Detail | Source |
|---|---|---|
| Parties | Full legal name, entity type, jurisdiction, address | Term sheet / records |
| Know-how | High-level description, confidentiality qualifiers | Tech schedule |
| Field of use | Industry, product, application limits | Term sheet |
| Territory | Countries/regions, manufacturing vs. sales scope | Term sheet |
| Exclusivity | Exclusive/sole/non-exclusive, licensor carve-outs | Term sheet |
| Sublicensing | Allowed scope, consent requirements, pass-through terms | Term sheet |
| Consideration | Upfront, milestones, royalties, minimums | Term sheet |
| Royalty base | Net sales definition, deductions, bundles | Finance notes |
| Support | Training, tech transfer, validation, response times | Tech plan |
| Improvements | Ownership, grant-back, joint development | Negotiation |
| Compliance | Export, regulatory, anti-corruption | Compliance team |
| Disputes | Governing law, venue, arbitration | Counsel |

## Step 2: Draft Definitions

| Term | Drafting Notes |
|---|---|
| Know-How / Licensed Technology | Identify by category + confidential schedule reference |
| Confidential Information | Standard exclusions + trade secret status |
| Field of Use | Clear boundary conditions and examples |
| Territory | Manufacturing vs. sale/import scope |
| Net Sales | Allowed deductions list |
| Improvements | Scope definition and ownership triggers |
| Affiliate | Control threshold and inclusion criteria |
| Milestone | Objective criteria + dates |

## Step 3: Draft Agreement Sections

Follow this section order:

- [ ] Parties, recitals, background
- [ ] Definitions
- [ ] Grant of license — scope, exclusivity, field, territory
- [ ] Sublicensing — consent, flow-downs, termination effects
- [ ] Improvements/derivatives — ownership and grant-back
- [ ] Consideration — upfront, milestones, royalties, minimums
- [ ] Reports, records, and audit rights
- [ ] Confidentiality and trade secret safeguards
- [ ] Tech transfer — deliverables, training, support
- [ ] Diligence and performance milestones
- [ ] Representations, warranties, disclaimers
- [ ] Indemnification and procedures
- [ ] Limitation of liability and carve-outs
- [ ] IP ownership and enforcement
- [ ] Term, termination, wind-down
- [ ] Compliance — export control, regulatory
- [ ] Insurance (if required by risk profile)
- [ ] Dispute resolution and governing law
- [ ] General provisions; signatures; exhibits

### Financial Terms

```text
Upfront Fee: $[amount], due [date], creditable against royalties: [Yes/No]

Milestones:
- [Objective event] -> $[amount] due within [days]

Minimum Royalties:
- Year 1: $[amount]
- Shortfall consequence: [pay shortfall / convert exclusivity / termination]

Royalties:
- Rate: [x% of Net Sales / $ per unit]
- Bundled products: [allocation method]
- Affiliate sales: [FMV or transfer price standard]
- Reporting: [quarterly/monthly] within [days]
- Audit: [once/year], underpayment threshold [x%] shifts costs
```

### Confidentiality Controls

- [ ] Care standard: at least reasonable, not less than own highest-value info
- [ ] Access limited to need-to-know personnel under written NDA
- [ ] Physical, technical, and administrative safeguards specified
- [ ] Compelled disclosure: notice + protective order + minimum disclosure
- [ ] Survival: perpetual or until public domain without breach
- [ ] Return/destroy materials on termination; officer certification

### Improvements Ownership

| Scenario | Ownership | License Back |
|---|---|---|
| Licensor-only | Licensor | Included or separate fee |
| Licensee-only | Licensee | Grant-back terms |
| Joint | Joint / by inventorship | Cross-license scope |

### Termination Triggers

| Trigger | Cure Period | Effect |
|---|---|---|
| Material breach | 30-60 days | Termination |
| Non-payment | Short cure | Termination or conversion |
| Confidentiality breach | None | Immediate termination |
| Insolvency | 30-90 days | Automatic termination |
| Diligence failure | N/A or short | Convert exclusivity or terminate |

## Step 4: Attach Exhibits

- **Exhibit A** — Confidential know-how description
- **Exhibit B** — Tech transfer deliverables and timeline
- **Exhibit C** — Milestones and reporting format
- **Exhibit D** — Royalty report template

## Guidelines

- Keep sensitive know-how detail in confidential exhibits, not the agreement body.
- Exclusivity must be paired with diligence milestones or minimum royalties.
- Define royalty base so it is mechanically auditable; specify deductions tightly.
- Include explicit export control language when export-controlled technology is involved.
- Use bold or caps for warranty disclaimers and limitation of liability.
- For international deals, confirm governing law and arbitration seat; flag choice-of-law concerns.
- Mark uncertain citations or statutory references with `[VERIFY]`.