Wednesday, December 1, 2010

Needs a contract for Chinese toy manufacturer

Dear Rich: I wanted to know where I would be able to find an agreement between a toy company and the vendor/manufacturer making the prototype/product for them? It would be a U.S. company having the product made by a Chinese manufacturer. The answer depends on what the Chinese company is doing for you.
If the Chinese company is creating a prototype. If the company is creating a working model that you can pitch and later manufacture, you would need an agreement to create a prototype (sometimes called a model-maker's agreement). We included an "Agreement for Creation of Prototype or Patent Drawings" in this book. That agreement preserves your IP rights and provides for confidentiality.
If the Chinese company is manufacturing your work. If the company is providing you with completed toys that you will sell and distribute, then you need a manufacturing agreement. Quite often the manufacturer supplies that type of agreement in the form of a deal memo or detailed work order/invoice.You can find a Contract for Manufacture of Goods in this book.
If the Chinese company is manufacturing and distributing the toy. If the Chinese company is actually marketing your toy and paying you a percentage then it sounds as if you need a license agreement and we would recommend you consult this book, which also contains a discussion about the challenges when contracting with a company in another country.
Whatever agreement you use ... Keep in mind that when international contracts go bad, it's often difficult to obtain contract remedies. You may have trouble with issues such as jurisdiction, foreign patent rights, arbitration, and the ability to audit foreign records. Not to bring your head down, but when the Dear Rich Staff used to do foreign toy licensing for a client, we remember when our client learned that the manufacturer did two runs of each of his products: one for the client and the other to sell out the backdoor to a network of foreign distributors. Ouch!