[Mike Emilio]

Two weeks ago I was approached by a company that showed an interest in manufacturing one of my designs. Yesterday, I took the day off work and went to the company to see if it was for real. Sure enough it's a small company that does fiberglass work. I spend a few hours there and the owner is quite serious on producing kits off my design.

My dilema . . . I've never done anything like his before.

- How do I charge the company?
- What exactly does "royalty" mean.
- How would I know how many kits the company sells? Should I care??
- What about kits sold "under the table" with no reciept??
- Should I possible ask for a flat rate of royalty per year??

Would anyone know of any web site that has a basic manufacturing agreement that can be downloaded and modified, without goingto a $$ lawer $$.
Anyone have any good ideas/advice to consider?????

[WhoFan]

My 2¢, and I have never been in that situation, so its just a guess.

I guess look at the history of the company, BBB, see if they are willing to let you look at the books to see how many are sold and work out a %. Also, what are their projections. 10, 20, or less? still, a few $$ here and there would still be nice.

A fix rate, I dought that would happen. A small % of each item, maybe. I guess also if this company will sell in bulk or just manufacture it them self's and sell directly.
Lots of options, and maybe they just want to buy your design and that's it, and that would be just a lump sum.

Just don't do that the girl from flashdance did, sold the rights of the story for something like $2,300 and never saw a penny from the movie

Like I said at the start, this is just generic ideas from me

[propnut]

What a cool dilemma to be in... Congratulations... I hope it works out for you!!

[JimMcIntyre]

Great news Mike,

First, get a lawyer to create/review a contract.

That said, personally I would go for royalties, aside from the problems you mentioned, the manufacturer may have difficulty paying you any other way, unless you want to sell your rights.....

[Terry Gauvin]

Originally Posted by JimMcIntyre

Great news Mike,

First, get a lawyer to create/review a contract.

That said, personally I would go for royalties, aside from the problems you mentioned, the manufacturer may have difficulty paying you any other way, unless you want to sell your rights.....

Royalties are great if you have some confidence the manufacturer will sell lots of your deisgn. Otherwise a lump sum up front may make more sense. With a lump sum the manufacturer bears all the risk so the offer will reflect that. With royalties the risk is shared, you get nothing (or very little) if the plane doesn't sell well. Do your homework and learn what you can about the manufacturer, if he typically sells hundreds of a particular design per year it is unlikely that he will sell thousands of yours. Make your decision accordingly.

[igor_throw_the_switch]

I'd go for the lump sum up front. If it's a really good/popular design, it will take the Chinese about 3 milliseconds to create a knock-off selling for a lot less than the original.

Brad

[nony]

It is a good position to be in, but I wouldn't hold out any high expectations..the model manufacturing industry in canada is pretty small, and costs of production are high relative to the offshore stuff that populates the hobby shelves...

[Guest]

the truth of it is, unless you hold a design patent on your design, now that they've seen it they can just go ahead and use it with no legal repercussions. I've been down the road of patenting, licensing, royalties etc. Once you've made the design public you will have a hell of a hard time getting a patent as well. And the downside is, Patents are expensive.

So, that being the case, assume that the company doesn't know about the patent laws, and settle on one lump sum for use of the design, otherwise, they might discover after selling a few that they don't have to give you anything and you end up with very little in the end.

[yabut]

I had a product that I invented or reinvented that I manufactured and marketed and it sold quite well because i new the product and did my best to market it.
A marketing company got interested in it and wanted to buy me out
at first we talked about royalties and later decided on a strait one time buyout. the money was payed so much at a time and I did get 90 % of it ununtilhey stopped paying
Anyway im glad i took the one time buyout because they did a lowlousyb selling it and the royalties would have been slim
even though I didndidn't all i was supposed to I did end up with a lot of money
dont don'tr anything other than the design dont don't any promises just give them a price and if they want it they will buy it
get a good lawer
lawyerake sure that once they own the product that u r not responsresponsibleything
rule of thumb when u buy a business u pay about 3 years worth of income
thats about all i have to say

[Mike Emilio]

Originally Posted by LGM Guitars

the truth of it is, unless you hold a design patent on your design, now that they've seen it they can just go ahead and use it with no legal repercussions. I've been down the road of patenting, licensing, royalties etc. Once you've made the design public you will have a hell of a hard time getting a patent as well. And the downside is, Patents are expensive.

So, that being the case, assume that the company doesn't know about the patent laws, and settle on one lump sum for use of the design, otherwise, they might discover after selling a few that they don't have to give you anything and you end up with very little in the end.

---------------------------

The drawings have been officially copyright registered in Ottawa sometime last year. My certificate hangs in a picture frame. I was told at that time that it was classified as "artistic work" and that "patent" was a whole different ball game. I think I'll revisit the patent subject in case anything has changed in the legal world. Thanks LGM.

I was told that the royalty way is ok, but based on production and not sales. So much $$ for every kit produced. Marketing strategy is the manufacturers responsibility.
A lump sum % based on an estimate sounds like a better idea though because then there is no need to monitor the company's production - if they produce at all.
Thanks Terry/Igor.