Design Rights?

Hi Everyone,

I have a customer that has asked me to design and build a specialty flashlight for him. He brought his commercially available and terribly expensive light in and I have reverse engineered it to accommodate cheaper and readily available innards.

The idea is that I would make them until he wants such quantities of this product that I cannot economically make them.

This constituted quite a bit of work, and I have come up with a design and prototype for him. When I presented him with the bill ($1700. so far) he now requested the cad file for the light.

For the promise of more work, I have not billed for everything I could have, and now it looks like the customer will go look for another shop to work with.

My question is how to deal with this situation in the future? It's very interesting to me to make something from an idea, but how do I manage the situation to my advantage?

Thanks,

Grant

Was your agreement that you would supply parts/lights, or that you would supply a design? If the former, you are not obligated to turn over your design. Your customer is buying an "own product" that you developed. He is not entitled to your plans any more than you are entitled to the plans to tooling or other products you happen to buy directly from the maker.

However, if the agreement was that you would supply a design, then you were doing "work for hire" and the design belongs to your customer. The work of engineers, patternmakers, architects, etc. usually falls into this category.

The fact that your customer came to you, and you worked together to some extent on the project, is not enough to distinguish between "own product" development and "work for hire". Many new products have been developed based on customer input.

In the future, make sure this distinction is clear and have an explicit agreement with your customer up front about what they are buying: parts or plans. For better or worse, this is what written contracts are intended to nail down. A formal lawyer-written contract may not be necessary, but I would put future agreements of this kind in writing, even if it's just a letter or text on a quote response.

Edit: I just took a look, and "work for hire" only applies to some very specific categories, none of which would apply in this situation. Furthermore, the US law (which differs from the rest of the world wrt copyright, etc) is pretty clear that even a written agreement that says "work for hire" is invalid if the work doesn't fall into one of those categories. So, while I'm still comfortable with what I wrote above, a lawyer would no doubt tell you it's all wrong. Bottom line remains the same: in the future make it explicit whether your customer is buying parts or plans.

Your profile says Seattle. Call up Mike Atkins at Atkins Intellectual Property (Intellectual Property - Litigation - Intellectual Property Litigation - Atkins Intellectual Property, PLLC). He's pretty sharp and very helpful. He also runs a blog on Intellectual Property (Michael Atkins - Seattle Trademark Lawyer).

I imagine, assuming there was no contract and no non-disclosure agreements as part of this, that it would come down to what was the deliverable. Were you contacted to provide a physical good or a service. I would guess if it was goods, any creative work done in order to deliver the good (jig, fixtures, drawings, models, etc) are yours. If it was a service (designing) I would think the deliverable would then be the prints. Keep us posted, this is interesting.

It's in the contract. That's where I would look first.

If there's no mention there, the owner of the IP is the party that paid for it. Itemize your work and prepare.

Midnight Machinist said:

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My question is how to deal with this situation in the future? It's very interesting to me to make something from an idea, but how do I manage the situation to my advantage?

Thanks,

Grant

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Did you actually build one or more for him?

If you did, and unless it was clearly understood in the beginning that your customer was to get the CAD files, and you didn't include the charges incurred to make them, I would not give him the CAD files unless he was willing to pay the extra costs incurred... All of them.

In the future, as mentioned by others, a clear purchase order would prevent this from becoming an issue.

If you modified the original flashlight design, the new design is your intellectual property lacking a clear, different, understanding ahead of time.

Midnight Machinist said:

My question is how to deal with this situation in the future?

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This is a recurring problem for some shops, and with some customers. I solved it years ago by letting each customer know up front that internal drawings are not customer property. I also advise them to state in their RFQ that all drawings created for the work become their property.

There is no contradiction here. By advising the customer to make sure they get the drawings I am looking out for their best interests. Thus, the customer is less likely to complain about the added cost of drawings in the quote.

Doug

Register your part as an Industrial Design. You should be able to find the info online. Here in Canada we can register online and you should be able to do that in the States as well. The cost up here is about $300, so it's not a huge investment. This can also be done world wide, don't know the cost for that. Just check under "Registering an Industrial Design". It carries a lot of weight. My 2 cents.
Rolf B.

Great suggestions everyone!

I did in fact charge him for the development of the light. I made an initial design in solidworks, and he approved it.

Upon atempting to make the design I came across several impedements that required design modification, and also had a devil of a time finding a source for affordable tempered round glass disks in quantities of 2 with a tolerance of +/- .001. That alone was half a day of web search and phone calls.

At this point I should have alerted the customer that this is taking more time than I thought, but in an attempt to get through the process in order to get his part off my only CNC lathe, (so I could use it for something else) I just put my shoulder down and powered through the next day and a half.

Now I've completed the prototype which he needs to pick up and test to 250psi (did I mention that it's a dive light?). I alerted him to my efforts and to my success, and included a bill that was substantially larger than he or I thought.

I'm still waiting to see what this customer decides in this case, but I've made the offer to him to split the difference in price between what I originally indicated I thought it'd be, and what it turned out to be.

I think the transaction here has largely gone wrong due to my relative inexperience marketing design work.I'll be more prepared for the next time someone comes in with a napkin drawing and a part to emulate.

I particularly like the idea of being clear that the drawings are MY property, unless they pay for them. More clear is more better, I just hadn't considered all the possibilities here, and therefore did not forewarn the customer.

Thanks again everyone.

Cheers,

Grant

Midnight Machinist said:

More clear is more better, I just hadn't considered all the possibilities here, and therefore did not forewarn the customer.

Thanks again everyone.

Cheers,

Grant

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No one ever does until they get burned :P. We all know how you feel.

A friend that owns a shop says he now starts all projects like these with some sort of agreement, typically some sort of partnership. I think that's good advise for future projects.

Mark

1700 for the part, I wouldn't let the file go for any less than an additional 10k
You did all the hard work, don't just let him give it to a competitor.

Dave

Midnight Machinist said:

Hi Everyone,

I have a customer that has asked me to design and build a specialty flashlight for him. He brought his commercially available and terribly expensive light in and I have reverse engineered it to accommodate cheaper and readily available innards.

The idea is that I would make them until he wants such quantities of this product that I cannot economically make them.

This constituted quite a bit of work, and I have come up with a design and prototype for him. When I presented him with the bill ($1700. so far) he now requested the cad file for the light.

For the promise of more work, I have not billed for everything I could have, and now it looks like the customer will go look for another shop to work with.

My question is how to deal with this situation in the future? It's very interesting to me to make something from an idea, but how do I manage the situation to my advantage?

Thanks,

Grant

Click to expand...

If you had an agreement stating you would do the development, and you have written that on the invoice, that is one thing. You have developed it to a stage where you can start manufacture as agreed.

Giving him the CAD files is another matter. As a part of the same agreement was that you would make the parts, then he shouldn't need them. You have done the development, and charged for that, and once he has paid you will be ready to make him the parts as agreed.

If he contends that, then just say that was the agreement, and that the CAD files were not part of that. He might argue, but the agreement between you seems wooly both ways. In wooly agreements I've always found that whatever is status quo tends to win... (And if he didn't have the money to pay for the development straight up in the first place he certainly don't have them for some deadbeat small stuff lawyer either). You can also use professional photographers as an example; you might have them take your photo but the files themselves are their property unless agreed otherwise up front.

Another issue altogether if you really want to try and force a customer into staying. That just seems like self inflicted torture. Offer him the files for some extra amount, and make it clear that it will also signify the end of your business relationsship as that action implies going elsewhere for manufacture. Hence you feel mislead as per original agreement, can't work that way, and life is just too short for that kind of crap. (Well, my life anyway).

partner up

Looks like you have sort of painted yourself into a corner, by accident. I'd go with KMmachine's suggestion of a partnership. Since the ownership of the design is sort of a gray area, and it has a potential value in excess of the $1700, offer the customer a 50/50 (or whatever works) partnership on the design going forward. That way you could both pursue production with the understanding that half the net belongs to the other guy. Bonus: you will undoubtedly find significant design improvements that would make the Mk2 version a new product with separate rights, wholly yours. He probably does not have that capability

Not machining, but similar in all aspects on the legal/business side.

I had a company reach out to me for a custom piece of software. Yup, I can do that. Quoted them a price that was beyond fair. They wanted to be able to sell it. Well, I didn't charge them for a resellable, I charged them for a license (just like you can't buy and re-sell Windows). That was a deal breaker for them, so what I did was rewrite it to where they could sell it, with a royalty. Again, they pitched a fit. The final compromise was that I retained full copyright, as well as right to develop and redistribute. This was a custom piece, not an off the shelf. A further non-compete was added stating that I could not approach clients in their region until their business was concluded (at which time I could pick up individual contracts for further development, implementation etc.)

Not optimal, but they got what they wanted and I retained a legal means to further the product and profit off the design.

This was a reach, each new client has different aspects, but it pays to sit back and think about how to protect yourself. Had I not, I'd have wound up with a product I designed (and mine fits work for hire BTW) that I couldn't make further money off of.

Best to do is to be up-front, lay out what is being paid for, what is to be delivered, and who has what rights with each component at conclusion of business. NEVER deal with compromise based on 'promise' I screwed myself that way a couple times. Did a chunk of work at slashed rates because there were other systems to get built, they took what I did and found a trained monkey to continue on at a fraction of my rate once the hard work was done.

Well, i don't think you own anything at all. Did you patent your design? If not its free game and if he paid you for the design work (if thats what you billed him for) then you just sold it anyway.

"I have a customer that has asked me to design and build a specialty flashlight for him. He brought his commercially available and terribly expensive light in and I have reverse engineered it to accommodate cheaper and readily available innards."

Regardless, it doesn't matter anyway because you reverse engineered another persons product so there is nothing lost on your end. What was taken is the IP of the part you reverse engineered, unless you substantially changed it. Witch isn't reverse engineering, so what did you do? or is your product completely new and improved? If you just changed the inside and the outside is the same then consumers CAN be confused and now your violating someone else's property. I would hope you gave it to him and he knows you don't own the design because if thats the case and the other manufacture gets pissy then i promise you don't want your name associated with it.

If i design a new product for a company (and do all the time) I make sure its know that i own the design (unless they come to me with cad files) and as long as the company is buying the design from me, then i don't share or try to sell it myself. IF they stop buying it then i retain the right to sell it as i see fit. Nothing is on paper, but i NEVER EVER bill for anything other than a part with my name on it and my part number. I don't ever bill them for my design time, cad time or anything other than the part itself.

Seekins said:

Well, i don't think you own anything at all. Did you patent your design? If not its free game and if he paid you for the design work (if thats what you billed him for) then you just sold it anyway.
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It's not so much a question of owning the design, as owning the cad files for the design. If I'm understanding him correctly, he made the cad files for his own use in creating the prototype and didn't charge the customer for that work. He did this with the understanding of producing more product to the limit of his economic capacity.

If the customer wants the benefit of the cad files, he should pay for them.

I'm with Seekins on this one...you billed him for CAD work, so...

Another thing that I can't believe hasn't been mentioned: If you are doing design work, ALWAYS CHARGE A RETAINER!!!!!!!!

Ya know, if you refuse to give him the CAD files, he'll just take the prototypes down to another machine shop...you won't get any money or his production work.

fpworks said:

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Ya know, if you refuse to give him the CAD files, he'll just take the prototypes down to another machine shop...you won't get any money or his production work.

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If he wants the CAD files, it's not likely he'd give the production work to Midnight anyway. Otherwise, why would he need the files?

rj newbould said:

If he wants the CAD files, it's not likely he'd give the production work to Midnight anyway. Otherwise, why would he need the files?

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Same reason most people, if they think about it at all, want the source code to applications I write. It gives them a warm fuzzy glow inside to know they've got it.

I always give them source code with a licence attached that basically says I own the IP but they have the right to do whatever they like provided they supply the same code & rights to any 3rd party they want to sell/give/license/lend the application to.

Other conditions cost more. A *lot* more as, to satisfy them, I may have to write new code that does the same thing as some of my existing code just to avoid future copyright hassles.

PDW

PDW said:

Same reason most people, if they think about it at all, want the source code to applications I write. It gives them a warm fuzzy glow inside to know they've got it.

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I think there is an important difference between software source code and CAD files. While the customer would need both if he was to change anything, he does not need the source code in order to "manufacture"/ make copies of the program itself. The customer would however need the CAD files in order to manufacture this thing elsewhere.

That said, I agree that the customer might just have wanted as much backup possibilities as he could possibly have. He might not have realized the full extent of the signal his request is sending, but if so he should be told that in clear terms.

Seekings do have an important point about the whole reengineering issue and IP though. If that expensive original is a protected design then the OP as a reengineer and possible manufacturer might find himself in the searchlight. (Some pun intented, but eh...)

I don't think that business relationsship is going to pick up, and the customer suddenly seeing the OP as a partner. He probably thinks about this as a way to get cheap CAD production files, with the promise of manufacture as a weasly means to that end. Which would be to shop for the cheapest manufacture. (How many of you haven't had inventors and others stumbling in the door wanting you to make a prototype of something for less than cost against a promise of future production, share of the profits, ownership in the company or similar? If it was a marvelous idea and project they would have financing, so in my mind money now will do just fine: They should be happy too as they get to keep their future fortune).

I say charge the real cost for the CAD files, and walk away. You are already bickering over relatively little money in your very first dealing, so this business relationsship doesn't really strike as a match made in heaven. (If the OP do have the faith in the customer, and this particular light, then he can always invest that money back into the project at some terms. If nothing else it will make the OPs contribution a visible and tangible one, not just some literaly unspecified "free work").