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What is a know-how contract and how can it help you to protect your business?

Knowledge is the main asset of an organization, but also the most vulnerable in the face of increasing threats such as industrial espionage. Given the absence of uniform international standards for the specific protection of know-how, the contract becomes the best tool to regulate matters relative to its use and is especially valuable in the field of transnational commercial relations.

According to a recent study carried out by CorporateTrust consultants, the losses suffered by German industry as a result of the theft of industrial and commercial secrets through espionage exceed 11,800 million Euros each year. This means that at least one out of two companies in Germany has, during the past two years, suffered an attempt of industrial piracy by third parties (most of them from Asia), with the sole intention of appropriating their know-how.

This information undoubtedly speaks volumes of the enormous value that the know-how applied to their respective activities has for companies, but it also demonstrates that we are dealing with fragile and insufficiently protected intellectual property rights.

Not in vain is the European Commission accelerating the procedures for the approval of a new Directive, currently at the proposal stage, with the aim of providing, for the first time, a standardized regulation throughout the EU as to what should be understood by know-how as well as to establish the measures that Member states should impose in their respective territories to guarantee the protection of this right which, moreover, is the main asset of our industry.

I imagine that this is not only to fight the increasingly more real menace represented by phenomena such as piracy and cyber spying, but also in order to provide the EU with a legal framework for the protection of business secrets that would put us on the same level as another major power, the United States, in order to achieve what seems to be the most important commercial alliance with this country in recent history: the Transatlantic Trade and Investment Partnership (TTIP).

Despite this promising horizon, a series of factual issues will still exist, making it necessary to continue to protect know-how by contract in order to make the said protection really effective. The fact is that it will still often be difficult for us to prove that the know-how was stolen or unlawfully used by who, in theory, was obliged to keep it a secret.

On other occasions what will be difficult is to assess the damage actually caused to our business as a consequence of the loss of know-how. This could prevent us from obtaining a proportioned and just economic compensation from the courts.

These and other factors, which escape all legal provisions but which, without doubt, compromise the value of our know-how, can be included in a contract. This is why it is especially important to regulate any operation involving know-how by means of a contract, and even more so when it is being ceded or transmitted to a third party.

The know-how contract, understood to be that, by virtue of which secret information that has commercial value due to the fact that is secret, and which has been the object of the necessary measures to keep it secret, is transmitted, places the sufficient means and guarantees at the disposal of its owner to prevent third parties from appropriating it or using it illegitimately. Should this not be the case the said parties will be penalized, which means that in one way or another it will be possible to maintain the competitive advantage and increase the level of economic returns expected from the effort put into innovation. In this case we are dealing with an innovation which takes place in an almost imperceptible manner and without a making a fuss. This is precisely why what is generated is useful knowledge which helps the owner in the everyday performance of his activity.

Carmen Sánchez-Puelles