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Know-How License Agreement

THIS AGREEMENT, made, entered into, and effective this [date], by and between [name] (Licensor) and [name] (Licensee):


WHEREAS, Licensor is the owner of certain know-how incorporated in Proprietary Data (as hereinafter defined) useful in the development, production, and use of certain Products;

WHEREAS, Licensee wishes to obtain from Licensor the right to use the Proprietary Data in connection with the development, production, and use of Products; and

WHEREAS, Licensee further desires to obtain design and engineering assistance from Licensor from time to time in connection with the development, production, and use of Products and to engage Licensor as a consultant for that purpose;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows:

Section 1


As used herein, the following terms shall have the following meanings:

1.01. Licensed Territory. [Designate territory].

1.02. Products. [Designate products, such as particular named software programs.]

1.03. Proprietary Data. Unpublished "know-how," which shall include (without limitation) computer program designs, algorithms, subroutines, system specifications, test data, charts, graphs, operation sheets, and all other technical information, owned by Licensor or under Licensor's control, relating to the development and production or use of Products and the design, configuration, programming, and protocol of the Products.

1.04. Royalty Revenues. (1) Licensee's gross revenue received by Licensee with respect to the use, distribution, licensing, or other transfer by Licensee for value of Products, less trade discounts, commissions, and transportation costs actually and reasonably allowed or incurred (but Royalty Revenues shall not include fees or proceeds resulting from the preparation, licensing, distribution, or support of any modification, correction, update, or enhancement of the Products) and (2) gross royalties and other payments received by Licensee with respect to sublicenses granted by Licensee pursuant to this Agreement. To the extent Licensee may prepare, license, distribute, or support any Product in a modified, corrected, updated, or enhanced form, the fees or proceeds attributable to the Product, as distinguished from fees or proceeds attributable to the modification, correction, update, or enhancement, shall be prorated in good faith by Licensee based on the fair market of each component, and such portion of fees and proceeds shall be deemed revenues received with respect to the distribution and licensing of the Products.

1.05. Annual Period. Each period of twelve months from [date] until [date], inclusive.

Section 2


2.01. Grant of License of Proprietary Data. Licensor hereby grants to Licensee, and Licensee hereby accepts, a perpetual, nonexclusive, and irrevocable right to use and employ the Proprietary Data in the development, production, modification, use, and distribution of the Products in the Licensed Territory and the right to sublicense others to do so on the same terms as set forth in this Agreement. Subject to the provisions of this Agreement, Licensee is authorised to modify, correct, and enhance the Proprietary Data as it may deem appropriate, and Licensee shall be entitled to exclusive ownership and control of the resulting modification, correction, or enhancement, including any patent rights available with respect thereto, any trade secrets pertaining thereto, and any copyrights subsisting therein as derivative works, but only to the extent that they shall be separate and clearly distinguishable from the underlying work.

2.02. Grant of License to Product Rights. In connection with the rights granted to Licensee, Licensee shall receive a perpetual, nonexclusive, and paid-up license to all proprietary technology that Licensor may own or control relating to Products, including patents, patent applications, trade secrets, know-how, license rights, and copyrights therein.

2.03. Right to Sublease. The foregoing rights include the right to sublicense the proprietary data to third parties for reasonable compensation and under terms that maintain the confidentiality of all Proprietary Data.

Section 3


3.01. Disclosure and Transfer of Proprietary Data. Licensor shall furnish to Licensee the Proprietary Data in a form sufficient to enable Licensee to use and practice the Proprietary Data and to modify, use, and transfer Products.

3.02. Confidentiality Obligations. Licensee shall use Licensee's best efforts, consistent with the efforts Licensee uses to protect Licensee's own most valuable and sensitive trade secret data, to maintain the confidentiality of all Proprietary Data. Such confidentiality obligations shall not apply, however, to Proprietary Data (1) in the public domain at the time of its use or disclosure; (2) already known by Licensee at the time is as made available by Licensor; (3) independently developed by Licensee; (4) required to be disclosed pursuant to official process, order, or demand so long as Licensor shall be given prior notice of such official process, order, or demand adequate to enable Licensor to oppose the same; or (5) necessarily disclosed in the marketing and sale of Products.

3.03. Copying of Master Copy. Within [number] days after the execution of this Agreement. Licensor shall make available to Licensee a master copy of each software program included within the Proprietary Data, including both source and object code thereto and all available system documentation, in the form then existing, for reproduction by Licensee at Licensee's cost. To the extent reasonably possible, each master copy will be in a form reasonably suitable for copying. Since it may not be practical or desirable to duplicate all of the Proprietary Data, Licensor, during the term of this Agreement, shall cooperate with Licensee in providing all further Proprietary Data and documentation that Licensee from time to time specifically requests.

3.04. Consultation by Licensor. Licensor, at Licensee's request, will evaluate information supplied by Licensee with respect to a specific use, design, or modification of a Product and provide consultation and advice based on Licensor's evaluation. If Licensee wishes to engage Licensor to perform design, development, testing, or other work relating to Products, Licensee will specify the work that is desired to be performed and request a quote for such work from Licensor. In response to such request for evaluation or development, Licensor will prepare an estimate of the time and cost required by Licensor to perform such work, and, if Licensee accepts such estimate, Licensor shall proceed accordingly. The results of such work shall become Proprietary Data for all purposes under this Agreement.

Section 4


4.01. Licensor, on such terms as may be mutually agreeable to the parties, shall assist Licensee in the development and use of the Products by providing to Licensee's personnel such instruction and advice as Licensee shall reasonably request. Licensor, upon Licensee's request, shall arrange for Licensee to obtain the services of a consultant in the Licensed Territory who, in Licensor's opinion, is qualified to provide technical advice and instruction relating to Products. Licensee shall engage and shall pay all fees and expenses associated with such consultant.

Section 5


5.01. With respect to the Licenses granted herein, Licensee shall pay to Licensor:

a. An initial disclosure fee of .......... dollars ($..........).

b. Additional payments of .......... percent (.....%) of Royalty Revenues from the distribution by Licensee of Products within the Licensed Territory;

c. Additional payments of .......... percent (.....%) of all Royalty Revenues with respect to sublicenses to the Proprietary Data granted by Licensee.

5.02. Upon expiration of [number] years from the effective date of this Agreement, all royalty obligations shall expire and all rights and licenses granted hereunder shall become fully paid up.

Section 6


6.01. The term of this Agreement shall be for [number] years, commencing on the effective date hereof. Notwithstanding termination of this Agreement, the licenses granted in Section 2 shall remain in effect in accordance with their terms.

Section 7


7.01. Initial License Fees. Upon the effective date of this Agreement, Licensee shall pay Licensor the initial disclosure fee owing under Section 5.1(a) by certified cheque.

7.02. Continuing Royalties. From and after the time that Licensee has Royalty Revenues, Licensee shall furnish Licensor with a report, on or before the first day of each calendar [month; quarter] of each Annual Period, setting forth in reasonable detail the applicable Royalty Revenues during the preceding calendar [month; quarter]. Concurrently with each report, Licensee shall pay to Licensor the amount of royalty payments indicated as due in such report.

7.03. Books and Records. Licensee shall keep accurate records and books of account indicating in detail the Products distributed, licenses to the Proprietary Data granted, and the Royalty Revenues. Such records and books of account shall be open to examination at all reasonable times by representatives of Licensor. Licensee shall permit Licensor's representatives to take excerpts from, and make copies of, any entries therein. Licensee shall furnish such other reports as may from time to time be reasonably requested by Licensor, provided that the requisite information is reasonably available to Licensee and properly relates to transactions under this Agreement.

Section 8


8.01. Representations of Licensor. Licensor represents and warrants to and for the benefit of Licensee, Licensee's sublicensees hereunder, and transferees of Products that:

a. Licensor has full right, and interest in and to the Proprietary Data, free and clear of any encumbrance, charge, or restriction;

b. Licensor has the right and authority to enter into this Agreement and confer to Licensee the rights granted by this Agreement;

c. The Proprietary Data to be conveyed or disclosed to Licensee pursuant to this Agreement is sufficient to enable Licensee to [designate tasks to be performed by Licensee]; and

d. No consent, approval, or authorization of or filing with any public or governmental body on the part of Licensor is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated thereby.

8.02. Protection of Confidential Information. Licensor and Licensee acknowledge and agree that the Proprietary Data comprises commercially valuable technology, the design and development of which reflect the effort of experts and the investment of substantial time and money. Licensor and Licensee both recognize that the continued value of the Proprietary Data depends on the preservation and enforcement of the trade secrets, copyrights, and other proprietary interests embodied therein and to be embodied in Products developed pursuant to this Agreement. Therefore, Licensor and Licensee agree, for their mutual benefit, to apply their reasonable efforts to protect and defend the trade secrets and copyrights in the Products against unauthorised use or infringement. Licensor and Licensee shall each take reasonable steps to ensure that all persons afforded access to the Products protect the Products against unauthorized use, dissemination, disclosure, reproduction, or distribution. Licensee shall impose and enforce consonant restrictions upon any sublicensees of the Proprietary Data. Furthermore, Licensor and Licensee shall each reproduce and include in all copies of Products appropriate copyright legends and proprietary restrictions.

8.03. Patentable Improvements.

a. Licensor shall advise Licensee in writing of any improvements to Products of which Licensor becomes aware during the first [number] years after the effective date of this Agreement that are or may be patentable under the laws of the United States, including any such improvements made by any employee of Licensor or by any contractor of Licensor to whom Licensor has contracted work relating to the Products. Within a period of [number] days after each such notification, Licensee shall notify Licensor in writing as to whether or not Licensee intends to file for patent protection on such inventions or improvements. Licensee's failure to notify Licensor of an election to file for patent protection within the [number]-day period shall constitute an election of Licensee not to file for patent protection. If Licensee elects not to file for patent protection on any such inventions or improvements, or to file for protection on any inventions or improvements only in certain countries, Licensor shall have the right to file for patent protection in any and all countries in which Licensee has not elected to file; provided, however, that, if Licensor obtains patent rights in any country within the Licensed Territory of this Agreement, this Agreement shall be construed to grant Licensee a royalty-free, nonexclusive, nontransferable license to make, use, and sell under such patents within such country for the full life of the patents, and Licensor shall take such further actions and prepare and

furnish such further instruments as Licensee may reasonably request to confirm the same.

b. As to any countries in which Licensee elects to file for patent protection on any inventions or improvements and thereby obtains patents, Licensee shall grant to Licensor, at Licensor's request, an irrevocable, royalty-free, nonexclusive license to make, use, or sell under such patents within such countries for the life of such patents.

Section 9


9.01. By Licensor. Licensor shall indemnify, defend, and hold harmless Licensee from and against any and all claims, demands, or actions and any losses, expenses, and damages resulting directly therefrom (including court costs and reasonable attorney fees) (1) based on a claim against Licensee that the Proprietary Data infringes or abridges a third-party right in the United States of America in a validly issued patent, copyright, or trade secret and (2) based on an error in the representations made pursuant to Section 8.01. Any such indemnification by Licensor pursuant to (1) above shall be contingent upon Licensee giving Licensor prompt written notice of the claim for which indemnification is sought, Licensee allowing Licensor to control the defense and/or settlement of such claim, and Licensee cooperating with Licensor in such defense and/or settlement.

9.02. By Licensee. Licensee agrees to, and shall, indemnify, defend, and hold harmless Licensor from and against any and all claims, demands, or actions and any losses, expenses, and damages resulting directly therefrom (including court costs and reasonable solicitor fees) based on any use, modification, or distribution by Licensee of the Proprietary Data or Products. Any such indemnification by Licensee pursuant to this subsection shall be contingent upon Licensor giving Licensee prompt written notice of the claim for which indemnification is sought, Licensor allowing Licensee to control the defense and/or settlement of such claim, and Licensor cooperating with Licensee in such defense and/or settlement of such claim.

Section 10


10.01.No Agency. It is understood that, in giving effect to this Agreement, Licensee shall not be deemed to be an agent or employee of Licensor for any purpose, and Licensee's relationship to Licensor shall be that of an independent contractor, Licensee shall not have the right to enter into contracts or to incur expenses or liabilities on behalf of Licensor.

10.02. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of [state].

10.03. Binding Effect; No Assignment. This Agreement shall be binding upon and inure to the benefit of Licensee and Licensee's respective successors and assigns. Licensor may not assign Licensor's rights under this Agreement, or delegate Licensor's obligations, without the prior written consent of Licensee (which consent shall not be unreasonably withheld or delayed), and any such assignment or delegation in the absence of such consent shall be void.

10.04. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and it integrates all prior statements and agreements respecting the same. This Agreement may be amended only by a document executed by both parties purporting to effect such an amendment.

10.05. Survival of Terms. The provisions of Sections 7 and 8 of this Agreement shall survive termination of this Agreement for any reason.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective authorised representatives.



By: [signature]




By: [signature]


This Section for Notary:


State of _________

County of ________ [COUNTY]

On [DATE] before me, [NAME OF NOTARY], notary, personally appeared [NAME OF PERSON(S) INVOLVED], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand and official seal.

Signature ________

My commission expires: _____