Next to classical protection of intellectual property in technical inventions like patents or utility models, the protection of trade secrets plays a key role. The root of know-how protection in Germany is the German Act against Unfair Competition which incorporates the protection of trade secrets of enterprises. At present, such trade secrets are protected under section 17 of the German Act against Unfair Competition. Requirement for the protection of know-how and the enforcement of this position is that the know-how has been kept secret at any time. This requirement has its justification in the circumstance that different from patent or utility models no registration of the know-how takes place and therefore any license agreement on know-how is invalid if the license know-how is not kept secret for all the time by the licensor. Within an enterprise trade secret will be secured by non-disclosure agreements concluded between the enterprise and its employees. For example, if the trade secret relates to a special process for producing medical tablets. This might be a trade secret, which in case of continuous non-disclosure will be protected by section 17 of the German Act against Unfair Competition. However, such a trade secret, which is non-disclosed to the public, is also entitling its proprietor/the enterprise to conclude a license agreement on the know-how.
In any case for a license agreement relating to know-how it is mandatory that in case of concluding as well a license fee both parties are obliged to non-disclose the trade secret to any third party. In case the trade secret is not kept secret continuously, then the licensee may refuse to pay any license fees as this will be a disadvantage against any third party which may use a disclosed know-how without payment of any license fee.