Are You Considering an Outside Suppler for Your Critical Materials?  
There's Much You'll Need to Consider.

When contracting with outsiders, be sure to determine the ownership of patents, trademarks, and trade secrets involved in making components for your product. I've seen some real horror stories here. Company A took a new product design to an outsider, Company B. Company B developed a novel manufacturing process to make the product for Company A. AND COMPANY B PATENTED THE PROCESS WITHOUT TELLING COMPANY A.

When Company A tried to begin manufacturing the product "in-house," they immediately discovered that it was taking them far longer than when Company B made them. Soon Company A and Company B ended up in court fighting over patent rights and trade secrets.

Whenever an outside vendor will be making parts or components, you must include a clause in your Agreement which states that any trade secrets and patentable processes derived from your contract with the vendor are YOUR PROPERTY.

In another instance, a computer chip manufacturer was selling one of my clients thousands of custom, patented, computer chips per month. The chip manufacturer couldn't keep up with my client's demand. My client demanded that the chip company have other chip companies manufacture the product until they could keep up with demand on their own. The chip manufacturer refused, citing trade secrets and patent pending processes as the reason.

Anytime a critical part or component is patented, trademarked or otherwise protected through trade secrets, etc., you had better get a binding written agreement from the owner of the intellectual property which states that in the event the vendor is incapable of delivering the parts or components per the delivery schedule, you automatically become a "licensee" for the time the vendor can not perform.

As a "licensee," you can contract with other manufacturers to make enough components to keep you going while the first vendor gets it act back together.

The above article was taken from James F. Riordan's classic book, HOW TO EVALUATE THE POTENTIAL FOR SUCCESS OF A NEW PRODUCT OR TECHNOLOGY. Riordan's highly-acclaimed, 36-point system is a valuable tool for inventors, product evaluators or anyone interested in the invention process. Each section is followed by a comprehensive questionnaire that can be used to evaluate your product.

The highly-recommended book can be ordered through the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501. The phone number is (310) 328-1925.

      

         

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