Know-how licence in India: how a company buys unpatented technology safely

Many of the technologies Indian companies license are not patented at all. A lab may have a process that works but was never filed. A university may have published the science but kept the recipe that makes it work at scale. A small company abroad may sell you a formulation it protects only by secrecy. In each case you are buying know-how: practical, unpublished technical information.

Know-how deals go wrong more often than patent deals, because there is no public document that says what you are getting. This guide explains how a know-how licence works in India and how to structure one so you actually receive a working technology.

What know-how is, and why it needs a different deal

Know-how is the information you need to make something work that is not in any patent or paper: process parameters, recipes, tolerances, supplier specifications, test methods, troubleshooting notes and the skill of the people who run it.

Three things make it different from a patent:

• There is no register. A patent has a number, claims and a status you can check on IP India, and a patent licence ends when the patent expires. Know-how exists only in documents and people's heads.
• There is no statute. India has no separate trade secret law. Know-how is protected by contract and by the courts' willingness to stop a breach of confidence. So your agreement is the main protection, for both sides.
• It cannot be returned. Once your engineers have learned it, they cannot un-learn it. That shapes what happens when a licence ends.

Many licences combine both: a patent licence plus the know-how needed to use it. Our guide to technology licence agreements covers the patent side. This post focuses on the know-how.

Step 1: Define the know-how in writing

The biggest risk in a know-how deal is vagueness. "All know-how relating to the process" is not a definition. Ask the licensor for a know-how schedule attached to the agreement, listing:

• documents: process descriptions, batch records, drawings, bills of materials, specifications, standard operating procedures, test methods,
• data: the results that show it works, with the conditions used,
• materials: samples, reference standards, cell lines or strains where relevant,
• people: who will train your team, for how many days, where.

If a document is not on the schedule, assume you will not get it.

Step 2: Check that it works before you pay most of the fee

With a patent, you can read the claims. With know-how, you have to see it work. Before signing, or at least before most of the money moves:

• ask for a demonstration at the licensor's site, run by their team,
• review the data under an NDA, with your engineers present,
• agree acceptance criteria in numbers: yield, purity, throughput, defect rate, cost per unit,
• plan an acceptance run at your site, run by your team with the licensor's support.

Tie payments to these events. A common structure is a smaller payment on signing, a larger one when the documents and training are delivered, and the rest when the acceptance run meets the agreed numbers.

Step 3: Confirm the licensor owns it

Ownership of know-how is easy to assume and hard to prove. Ask:

• Who developed it, and were they employees, students or consultants?
• Do their contracts give the licensor the rights?
• Was any of it developed with outside funding or with another company, and does that agreement give anyone else rights?
• Has the same know-how been licensed to anyone else in your field?

For a university or lab, the institute's IP policy usually decides ownership. For a company, check employment and consultancy contracts. Ask for a warranty in the agreement that the licensor owns the know-how and has the right to license it.

Step 4: Write the clauses that protect you

These are the clauses that matter most in a know-how licence.

• Scope. What you may make, in which field, in which territory, and whether you may sublicense or use contract manufacturers.
• Exclusivity. Whether the licensor can give the same know-how to your competitors. If it can, the price should reflect that.
• Confidentiality. Obligations on both sides, who inside your company may see it, and how long the duty lasts. Confidentiality usually survives the end of the licence.
• Training and support. Days of training, site visits, response times for technical questions and the cost of extra support.
• Copyright in documents. Drawings, manuals and software are copyright works. Under Section 30 of the Copyright Act, 1957, a copyright licence must be in writing, so make sure the agreement expressly licenses them.
• Improvements. Who owns improvements each side makes, and whether the other side gets rights to them.
• Warranties. That the licensor owns the know-how, that the documents are complete and accurate, and that the process performs as described in the acceptance criteria.
• Termination. What you may keep using after the licence ends. Because know-how cannot be returned, many companies negotiate a paid-up right to continue after a fixed term.

Step 5: Watch the limits on restrictions

Licensors often want non-compete clauses. Under Section 27 of the Indian Contract Act, 1872, an agreement that restrains anyone from carrying on a lawful trade is void, subject to a narrow exception. Courts have generally been more willing to uphold restrictions that apply during the term of a contract than restrictions that continue after it ends. Confidentiality obligations are treated differently from a ban on competing. The law here turns on the wording and the facts, so get legal advice on any restrictive clause before you sign.

Step 6: Get tax and payments right

Know-how fees are royalty for tax purposes in many cases, and GST and withholding tax may apply. If the licensor is outside India, the payment goes through your bank and must follow foreign exchange rules and any tax treaty. The rates and forms change, so involve your chartered accountant before the term sheet, not after. The structure of the payments (upfront fee, royalty, milestones) also changes the tax position.

If a patent is involved

If the deal also includes a patent or patent application, register the patent licence with the Patent Office on Form 16 under Section 69 of the Patents Act. The e-filing fee is ₹1,600 per patent for a natural person, startup, small entity or educational institution and ₹8,000 for others. Check the patent's status and renewals first. Our patent due diligence checklist explains how. The know-how part needs no registration, which is why the contract has to be complete.

Common mistakes

• No know-how schedule. You cannot enforce delivery of something that is not defined.
• Paying everything upfront. Keep the largest share for after the acceptance run.
• Training too short. Two days of slides is not a transfer. Plan hands-on runs.
• Forgetting the documents' copyright. Manuals and drawings need an express written licence.
• No plan for the end. Decide what you may keep using when the licence ends.
• Over-reaching non-competes. They may not be enforceable and can sour the deal.

Finding know-how worth licensing

Much licensable know-how sits in Indian universities and labs, attached to patents or published research. Zernyx Hub indexes about 6.5 lakh technologies from the last ten years, with AI business insight on each, including commercial applications, which helps you shortlist technologies before you ask owners about the know-how behind them. For how to approach the owners, see our guide on technology scouting.

FAQ

Can I license a technology that is not patented?

Yes. You license the know-how under a contract. Your rights come only from the agreement, so define the know-how precisely and include confidentiality, acceptance tests and warranties.

Does a know-how licence need to be registered in India?

No. Registration on Form 16 under Section 69 applies to patent licences. A know-how licence on its own is not registered, so keep the signed agreement and the know-how schedule safe.

What happens to the know-how when the licence ends?

Whatever the agreement says. Since your team cannot forget it, many companies negotiate a paid-up right to keep using it after a fixed term, with confidentiality continuing.

How is a know-how fee usually structured?

Often as a signing payment, a payment on delivery of documents and training, and a final payment on a successful acceptance run, sometimes with a running royalty on sales.

Is a trade secret the same as know-how?

They overlap. Know-how is practical technical information. It is protected as a trade secret only while it is kept confidential. See our guide on protecting a trade secret in India.