Designs are key assets for many businesses and there are several aspects that are vital to success. In this guide from our Designs for Life series, we take a look at bringing a design to market.
- Background. Arguably the most important step in bringing a design to market is choosing the right manufacturer. Not only must the candidate have the capacity to make the product, and do so at the right price; but it will also potentially be involved with, or at least have access to, the most intimate details of the product's design process. This makes it extremely important to carry out proper due diligence on all prospective manufacturers before entering any arrangement with them. It is sensible to consider hiring an agent to help assess a potential manufacturer and provide a detailed view on their competencies and capabilities, particularly when dealing with manufacturers overseas who cannot (easily) be seen face to face.
- Confidentiality Agreement. Rights holders should be wary of the potential for counterfeiting too. The wrong manufacturer may see the product and decide it wants to cut out the design owner and make its own version, so a confidentiality agreement should be put in place before discussing any details of the product with any prospective manufacturers. To help minimise the risks, avoid providing overly detailed specifications or explanations of the design to manufacturers unless it is necessary - only provide them with what they need to do their job. If a business operates in a market where counterfeiting is a particularly serious concern, one practical option to minimise risk can be to engage multiple manufacturers and task each of them to make different parts of the product embodying the design, thereby preventing any one manufacturer from having access to information on how to make the whole product
- Manufacturing Agreement. From the legal
perspective, the next important step is to make sure the
manufacturing agreement is right. Prevention is better than cure,
and many disputes can be avoided in advance by a properly drafted
and carefully considered agreement.
- Scope of licence. For a manufacturer to do its job, a business will need to give the manufacturer rights to use its existing intellectual property (IP). Commonly this will be done by licence. Ensure the scope of this licence is clear. It should give the manufacturer the rights it needs, but clearly limit it to only those rights it needs. Giving a manufacturer an exclusive licence can also be tempting, but be wary that while exclusive rights can be a valuable tool to forge a strong commercial relationship, markets can change as products grow and being tied to one manufacturer can become difficult if the market outgrows their capacity. An alternative is a sole licence which will permit both the rights holder and the licensee to exploit the design, but exclude anyone else. Finally, a non-exclusive licence permits a business to grant further licences to anyone else, even if they overlap with the rights in the licence.
- Ownership. However, it is often the case that a manufacturer would also be asked to help develop a product. Even if a manufacturer is not expressly asked to help in the design process, issues encountered during manufacturing (for example, in relation to tooling) and their solutions can easily lead to the creation of additional IP rights. Ownership of such rights can become complex. Who actually came up with a design in the heat of the moment can very quickly become unclear, and if this is not dealt with upfront in the manufacturing agreement then it can be a recipe for future trouble. Generally any new IP that is specific to the product should vest in the design rights holder. In return, the manufacturer may seek to take ownership of any IP it develops for the manufacturing process. However, care needs to be taken here that the manufacturer does not gain ownership of any IP that is essential to make the design. Allowing a manufacturer to do so can hamper or even halt a business's ability to go elsewhere if needed.
- Warranties. Finally, another important part of the manufacturing agreement is the warranties. Both parties should give warranties that their existing IP is valid and does not infringe any IP of a third party. This is essentially to prevent a party from suffering loss due to an IP infringement, where it had no hand in causing that infringement. However, these warranties should always be limited to only validity and infringement issues within the knowledge of the party giving the relevant warranty (unless a broader warranty can be secured from the other party). It is functionally impossible to say with certainty that a design does not infringe any third party rights, not least because of the existence of unregistered designs. Similarly, it can never be said with absolute certainty that a right is valid. The iconic Club World seat tangerine created for British Airways - the world's first fully flat bed in business class, which, since its launch in 2000, has remained the profit engine for British Airways.
- Similar considerations as with manufacturers come in to play when selecting distributors for a design. Again, a distributor may require a licence to the design, so a business should think carefully what type of licence should be given.
- Also, be sure to consider the ownership of any new IP as well. If the distributor is involved in marketing or design activities (for example, designing packaging) you should agree in whom the resulting IP will vest and ensure that the other party is licensed to use it.
- Finally, it is worthwhile keeping in regular contact with manufacturers and distributors. Explain how important the IP is and seek notification from them if they should encounter any copies on the market. Manufacturers and distributors can be invaluable sources for keeping track of new infringements, especially where manufacture is based overseas in markets that are harder to monitor, such as Asia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.