How do we set terms with a manufacturer, hold the line on quality and protect our trade secret?
Hello, I am a small decorative concrete products manufacturer who has a lot of demand for our diverse product portfolio. We are looking to find a manufacturing partner who can take over and expand our manufacturing so I can have time to make deals happen.
Our question is how do we fairly compensate the manufacture, set terms, protect from backdoor selling, and hold the line on quality? Also, how do we protect our trade secret?
Working in the concrete and masonry industry can be challenging but at some point, it is about making sure your clients get the best out of every project. It will be best to get a finance expert to make sure the manufacturer is compensated well. Both of you benefit from the transaction.
Lindsay from Yorba Linda Concrete Pro
Dear Mr. Aron Buterbaugh,
I understand that you are representing a company which is already manufacturing small decorative concrete products (like tiles, small bricks by example ?).
Probably that you are looking for a manufacturer in this field in order to transfer him some part of your production, because of the high demand for your product and limited production capacity of your company. Am I right ?
So you need a second manufacturer interested to overtake part of your production and expand it, in order to allow you to involve more of your job time in marketing, promotion and sales. I suppose this part of your own production you are going to transfer to another manufacturer will be marketed and sold by your company; I mean your company will be the exclusive seller and distributor of the products , as result of the transferred part production.
I am working since over 35 years in the international business and was involved in complex business projects including also contracts for transfer of know-how and technology for production of industrial products.
You have some alternatives to transfer part of your production, protect your company and your trademark, and control the market and quality of the products etc.
A first alternative could be a contract for co-production of the goods on demand, with various terms and conditions mutually settled with your new partner, including clauses like territory, confidential information, know-how and trade secret protection, limited duration of the co-production etc.
A second alternative could be a partnership agreement with similar clauses, terms and conditions like in the case of a contract for co-production on demand.
A third alternative could be a contract for transfer of know-how and technology for production of your products on a limited period of time and on a limited territory, with specific terms and conditions for protection of your know-how and trade secret, no rights for sales etc.
For al the above alternatives keep your exclusive rights for sales and distribution for external markets, or/and give sales rights to the new manufacturer just only for his local market but not for third markets.
NEGOTIUM OVERSEAS ltd/Czech Republic
You should consult an intellectual property attorney to have a non-disclosure agreement prepared as well as protecting any and all related intellectual property that you could claim. That means registering trademarks for any brand names, logos and product or packaging designs, if used in look-for advertising; registering copyrights in artistic, sculptural, text and software code works, if any; and possibly filing patents for designs, processes and/or chemicals or materials if novel and qualified for patent protection. Such registrations tend to deter licensees and possible infringers better than any agreement can do so and can prevent their illicit registrations and attempts to misappropriate your IP without necessarily having to resort to a lawsuit.
You should do all of this before entering into any negotiations with a third party and certainly before disclosing anything to the prospective partner.
Have the manufacturer sign a non-compete, non-disclosure and confidentiality agreement. List out your specifications with tolerances defined and have the manufacturer guarantee them. Have a process defined in the event ranges deviate from the specified ranges.