Original Design Manufacturer Agreement Sample

These problems can become even more complex if the product developed contains a technology or relies on technology that is clearly owned by the plant. In this attitude, the factory will often say that the buyer can go anywhere he wants to manufacture his own part of the product design, but no third-party plant can use the proprietary technology of the Chinese factory in the manufacturing process. Consider this deal for a foreign buyer who has spent a lot of time and effort developing a product design, just to learn, after a year, that the Chinese factory has decided to terminate the manufacturing contract. Contract MDG Design and Development Since the OEM product (finished product inventory) will be based on OdM`s design (and most likely because each OEM will have its own modifications), OEMs will need to pay particular attention to the development/engineering modification process within the MDGs and the IP allocation of finished products to avoid potential legal problems in the future. Despite these challenges and risks, partnering with an ODM OEM supply chain can accelerate and help reduce costs. However, it remains imperative that OEMs receive adequate compensation when working with an MDG, as the final product will adopt a considerable amount of initial design from the ODM. In addition, IP laws differ from country to country and OEMs must be aware of the legislation of certain countries where their products are sold to ensure that the MDG has the appropriate intellectual property protection for those countries. (See also “Responsibility and Compensation – Contract Language” and “FOREIGN IP Strategy for Manufacturing Executives”) In this context, the obvious question is who owns the design in the resulting product? In our experience, the foreign buyer will take the position of owner of the design, since he developed the original concept and then brought it to the Chinese factory. However, the Chinese plant will generally take the opposite position and asserts that the plant, having undergone all the research and development and marketing work, has the IP in the product design. Often, the Chinese factory will agree to make this product on an exclusive basis for the foreign buyer, but the foreign buyer is not allowed to have the product manufactured by a third-party factory. This position can be a bad surprise for the foreign buyer, especially if the factory suddenly announces that it will double the price of manufacturing the product. Once again, the only way to resolve these problems is to confront them in advance with a detailed MDG agreement containing a solution to these issues that is fair to both parties.

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