This is the second of today’s two posts on intellectual property and sewing contractors. On this one, I need a reality check so I’d really appreciate your feedback. Forgive the lengthy preamble, I need to establish context.
This issue has to do with having a contractor or product development person sign instruments or contracts regarding the protection of your ideas and concepts. As I have said many times, many contractors or service providers are going to be ticked off if you ask them to sign a non-disclosure agreement. To reiterate, it’s because they don’t want to be held liable for the actions of outside parties once your product hits the market because most contractors are scrupulously honest. When I wrote this interview with an inventor, the inventor concurred and said she did not have a confidentiality agreement with a company with whom she was in discussions. However, she added the caveat that the only thing she would have done differently (reminder: she’s an engineer with extensive IP experience) would have been to have had the manufacturer sign a contract saying they agreed they would not be manufacturing her product. After all, in discussions they declined to take on the manufacture and licensing of her idea so having them sign a statement to that effect would have made their position official. I mean, if they said they didn’t want her product, what harm is there in signing a paper to that effect?
As it happens, the dirty dogs did go behind her back and manufacture the product but never fear, the story had a satisfactory ending. All of those emails going back and forth constituted sufficient evidence so it never went to litigation. Now, at the time we were discussing this, I commented that although I’d be offended if someone wanted me to sign a confidentiality agreement, I wouldn’t have a problem signing an agreement that stated I agreed I would not be manufacturing an item. I mean, I laughed. If a client wanted that, no problem. Maybe you all think it is a very fine line but I don’t find this the slightest bit offensive and I also realized that was all most clients really want. I think most clients are concerned the contractor will produce the items for themselves; it’s not the issue that the contractor will blab it all over creation which is all a non-disclosure agreement covers. Is my perception accurate? Anyway, it was after this that I started suggesting that DEs concerned about IP should have their contractors sign an agreement to this effect if this was a concern for them. My feeling is that a reputable party won’t have a problem with this but maybe I was wrong? You tell me.
[edited: many people’s comments show they didn’t read the issues carefully or they don’t know the difference between a contractor and a manufacturer. Or, didn’t understand that while this manufacturer in question is a contractor if they agree to provide that function, their operational and strategic interests remain as that of a manufacturer. Please read carefully, then comment. thanks]
After this lengthy preamble, we get to the question at hand. One of our regulars went to a manufacturer who already manufactures a line of similar products. In other words, the DE went to her competitor, got it? Contrary to what many think, this can be an ideal situation for a DE because the manufacturer often knows more about the minutia of construction and production demands of the product than a client does, providing an unparalleled level of insight and targeted advice. However, because the DE was using a manufacturer who competes in the same market with her, she had some IP concerns. My recommendation was that she could get the manufacturer to sign an agreement saying they wouldn’t be manufacturing these specific goods for themselves or anyone else because you can’t have them sign a “non-compete” since they already are. However, much to my surprise, the manufacturer became very angry with the suggestion. The DE says:
Just wanted to run something by you~ I went ahead, pursuant to our conversations and asked the [manufacturer cum contractor] for a “non-compete” clause. My request was as non-confrontational and gentle as could possibly be done [it was]. Needless to say, she has terminated work with my company. Did I make a horrible error, or is this a sign? I am really beating myself up, but at the same time I am surprised.
Technically, a non-compete isn’t appropriate since she already does compete with you but I think everyone concerned understands you mean to say that the manufacturer cum contractor agrees she will not be producing your styles to sell for herself. Regarding the manufacturer’s response, I was more than surprised, I am shocked. Am I all wet here? To those of you who work with DEs, do you find a non-compete offensive? To the DEs, do you take the manufacturer’s response as a sign? I am certainly rethinking this issue. At the same time, I’m wondering if this is a sign and thinking that the DE has sidestepped a potential problem in the making. What say all of you?
Reminders before you comment.
* Contractor does not mean manufacturer (read the book).
* Both parties are manufacturers who compete with each other in the same market.