KNOW-HOW IS A SUBJECT OF INCREASING IMPORTANCE in international agreements and international investment. The subject matter designated by it has come to be the handmaid of progress and the core of industrial competition. Efficiency of production, effective pricing, superior quality standards, are based on know-how. The success of an industry in the competitive market depends on its being able to develop know-how by research of its own or its ability to obtain the benefits of know-how developed by others. New inventions permit an industry to make a leap but these have to be set in a broader technological framework and supplemented by the practical procedures which will make them workable particularly by resolving the cost problem. Know-how has also assumed an aura of fascination for newly developing countries which see in it a mystical factor which may resolve or bridge over the difficult initial steps of technical and economic development.

In international trade, know-how may be involved in various forms. It may be part of an agreement relating to patents, designs or trademarks, and may be secondary to those rights or, on the contrary, these may be mere appendages to the principal grant of know-how. Or know-how may be the sole subject matter of a license agreement. Finally, know-how may be in a package deal of a construction or engineering contract under which a firm undertakes to erect a plant and supply the know-how for the construction and operation of the plant. Newly developing countries, because of their general lack of traditional techniques and skills and inability to invest in local research, depend even more heavily on foreign know-how. Indeed, in such countries, it is not the local industrialists or inventors who are the prime movers but rather the Governments who see the political future of their country in industrialization and are pushing their citizens along the road of progress. In such cases, know-how agreements replace even patent agreements since foreign patentees do not generally take out patents in under-developed countries in view of the lack of local industry that may use the inventions covered by the patents.