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Beyond prices, and quantities and payment terms, manufacturing agreements establish the working relationship between a purchaser (such as an inventor) and manufacturer.
Manufacturing agreements may deal with complex issues such as
- confidentiality provisions for proprietary technology
- licensing of technology
- product marking to preserve rights of the technology and intellectual property and comply with patent, trademark, copyright, product origin and import/export regulations
- minimum purchase commitments and exclusivity
- warranties and repair obligations for defective products
- lead times required for long lead time supply materials
- the party responsible for regulatory compliance
- record keeping
- title and risk of loss
- forecasts for better production management
- substitutions and modifications
- quality assurance
- how product changes will be handled
- who pays for technical expertise supplied by the manufacturer to the purchaser to develop the product for manufacturability
- who supplies, pays for, owns, stores and maintains custom tooling used for manufacturing purchaser’s products
- product recalls
- indemnification
- what happens if one party is bought by another entity
- ability of manufacturer to outsource the manufacturing, labeling, packaging or shipping
- what happens when orders cannot be fulfilled on time
- who is responsible for taxes and other government fees
In our experience, creating the working architecture between the parties at the outset avoids conflict and disruption of a long term business relationship. Parties contemplate realistic solutions to potential problems that may arise, allocate cost and risk. Our office can assist both inventors and manufacturers in negotiating and drafting cost-effective agreements.