I need advice on a few items in a design agreement with a manufacturer. I am a artist and do not have a clue about design agreements with manufacturers.
Brief History: I designed a lamp & posted it on the internet. It spread around the web. A company contacted me by phone and is interested in producing the lamp for royalties. They sent me a standard contract to review.
My questions:
(1) what is a royalty payment range to be paid quarterly?
(2) what number do they take the royalty payment from? do they deduct their expenses first?
(3) they requested prototypes and drawings and 12 months exclusive on the design for research & development with no earnest money payment. is this common?
Thank you very much.
Royalty is really what you can negotiate. I think 5% -15% range shoul cover most kinds of products.
They should be calculating it from net sales which is the invoice price to customers minus taxes and freight.
Give them a license but if you can, don’t assign the design. If assignment is needed, be sure to use a “conditonal assignment.”
Many thanks MpDesigner. I really appreciate the help. I am steel worker and fine arts trained & unfortunately I have zero knowledge of mass production. The manufacturer is calculating royalties from total invoiced net price minus 20% for expenses. They want all rights for said period of contract. I am not sure what conditional assignment is, but I will research. Also, I am curious if it is o.k. to send the prototypes and drawings without a signed agreement? Perhaps it gives me an ‘out’ if they do not produce the design instead of losing all rights for 12 months with no revenue on the design.
I wouldn’t send them anything especially if they’re overseas, thats the best way to get screwed over. That stuff basically makes it your IP and if they have the drawings and models, they couyld completely push you out the project.