IP Best Practices with Outsourced Manufacturing Suppliers

Taking care to protect intellectual property, also known as IP, is at the front of mind for hardware developers and product designers in most start-ups out there. The intangible creations that make their way from your imagination to paper have the potential to change the world and you want to ensure that the IP stays with you. Patents, trade secrets, copyrights, and trademarks are some of the most common legal ways to go about this. Each way has merit and should be considered during project planning. Using outsourced manufacturing suppliers often requires IP to be shared and is a regular part of many start-ups process. There are many ways to go about allowing outside entities access to your IP safely, the most common of which is an NDA (non-disclosure agreement).

In this article, we’ll outline some best practices for IP when working with outsourced manufacturing suppliers.

Decide Internally Before Sharing IP

You’ve found some manufacturing suppliers that you want to explore the next level of development with. Great! Now is the time to have a discussion with the other decision makers on your team about how IP gets shared. Every company has a slightly different approach to patent/trade secret/copyright/trademark/NDA strategy. E.g. We went for a utility patent and an internally written NDA instead of a provisional or design patent because it made the most sense for the stage of our development.

If your IP strategy has been worked out internally, has the patent or other IP been filed for, registered, or otherwise finalized? Involving a lawyer at this step for consultation is common.

Now that the internal strategies and paperwork is in order, let’s look at IP when outsourcing with manufacturing suppliers.


The NDA and Outsourced Manufacturing Suppliers

The idea here is to sync your internal IP strategy with a fitting NDA. When working with an outside entity (manufacturing supplier or other), either you or they provide the NDA.
Creating one of your own or using the one provided by the outsourced manufacturing supplier are both fine. But you should know the ins and outs of either before you sign. Here are a few things to look closer at when pouring over an NDA:

  • Define Confidential Info – This is the meat of the document. This is where you get to say what, specifically, needs to stay ‘just between us’.
  • Who Info Can Be Disclosed To – This is a pretty straight forward idea, this says who the main parties are and who they can share the IP with.
  • Terms and Duration – This part will talk about how long after the project people need to wait before they can talk about the IP involved.
  • Permitted Use – This is outlining how the other person can use your IP.
  • Legal Obligation – Responsibility is what this area is all about.
  • The Returning of Info – This section covers how the other party will deal with the IP once the project is finished; in a lot of cases this outlines deletion protocols.

Other things that are most likely to be in the NDA but we won’t cover today are: jurisdiction, remedies for breaches, non-binding statements, and legal fee outlines.

At this point, it’s normal for a start-up to begin talking with a lawyer to get professional advice and assistance with these things. Some people don’t mind reading every NDA and trusting their judgement while others prefer to ask a lawyer to read it and advise to next steps. Alternatively if you use TechDesign’s supplier matching service, you can simply use our standard NDA to ensure you stay protected.

Having said that, once you’ve read the NDA, read it again and then sign it before discussing any IP with the outsourced manufacturing suppliers. Talking about IP before you both sign an NDA defeats the purpose of an NDA because it’s only valid from the time you both sign.

Now that everyone is happy and not disclosing things to others, it’s time to look at contracts like Statements of Work (SoW).

Protecting IP During the Project

We’re on the home-stretch and almost ready to get working with our outsourced manufacturing supplier. Let’s look at and then sign the SoW or other project contract before we jump into the work.

These contracts should almost always include who the IP owner is, a definition of what’s in the project in regards to work and IP, who’s got approval to see how much of the IP and other aspects of the project, project phases in a timeline with milestones, what will be made, a solid estimation of cost, and also an assumption of what’s not included. These contracts vary from project to project and company to company so for now, we’ll leave it at that.

Keep in mind that the supplier doesn’t need to know every single detail about your IP and you should be comfortable in sharing only what is necessary for the supplier to get the job done properly. Also at this stage, you can quantify the project scope – splitting up the IP into multiple bits across multiple suppliers may be something for your team to consider.

Practice IP Safety with Solid Outsourced Manufacturing Suppliers

While NDAs and contracts will help protect you legally, getting stuck in a prolonged legal battle with a supplier is not where any startup wants to be. Finding a supplier you can trust is just as important as making sure you are protected legally. Do your due diligence on potential suppliers to check for previous projects they’ve done or any previous customers they can reference. Visiting the supplier to audit their facility and find out more about them is another way to get a sense of their trustworthiness.

At TechDesign, we provide verified manufacturing suppliers with sound backgrounds and do the due diligence ahead of time so you can rest easy. We ensure NDAs are signed before any confidential info gets shared and can also provide a deeper understanding on how to handle IP. TechDesign’s Project Managers will search through our curated network of 450+ verified suppliers and 800+ hardware solutions to find suitable suppliers and/or solutions capable of delivering your product.

Our project managers will then work to ensure all of the technical details are aligned and that nothing is missed.

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