Supply Chain Solutions No.28 – MOU – Intellectual Property Agreement

This document serves as an MOU (Memorandum of Understanding) IP (Intellectual Property) agreement example for any business engaging a vendor in a product development project for consumer goods where the item has a high level of IP.  The MOU sets the tone for IP Rights of a specific project for both the BUYER and SELLER.

MOU – Intellectual Property

BUYER and SELLER wish to cooperate to develop one or more Products. Openness, transparency and fairness are keys to benefical cooperation. Both SELLER and BUYER agree on the principles and terms in this Memorandum of Understanding (“MOU”) regarding development of the Products.  This MOU shall act as a master agreement setting forth the understanding of the parties regarding intellectual property management for all Product development projects (“Projects”) between BUYER and SELLER after the effective date below. The parties may cover additional terms concerning specific Projects in separate written agreements (including general commercial terms as well as terms specific to the Product or Project such as the project name, codes and dates) but the terms of this MOU shall control with respect to its terms, unless and only to the extent specifically overridden in any such subsequent agreement.

Confidentiality

BUYER and SELLER have previously executed or will execute a confidentiality agreement that will apply to protect all confidential and proprietary information related to the Projects and Products and those applicable terms are incorporated in this MOU.  The concept and design of a Product shall be protected as Confidential Information of BUYER.

Disclosure

As part of the kick-off for a Project BUYER may disclose some or all of the following confidential information to SELLER: a Design Concept, a Marketing Brief, a prototype of the Product, a Program of Demand, a pre-BOM, pre-Qualification Plan, a Quality Requirement and any drawings that are ready.  BUYER will also disclose all of its patents and other Intellectual property rights that are related to the Product.

Within one week, SELL will provide and disclose to BUYER in writing all of its patents and other intellectual property rights that are existing or filed as of the date of Project start and that could cause an infringement issue with the Product (“Existing SELLER IP”).  SELLER warrants and agrees that it will not assert against BUYER or the Product (or derived products) any patents or other intellectual property rights of SELLER that existed or were filed as of the Project start and that were not disclosed as Existing SELLER IP.  SELLER agrees that it will not at any time bring any action or suit making such claim.

To avoid future misunderstandings, SELLER will also disclose to BUYER within one week of Project start, any concept that is already in development by SELLER that is similar (in whole or part) to the Product. These disclosures will be documented and dated and will be considered the confidential information of SELLER.

Evaluation and Collaboration

Following disclosure of Project information, BUYER and SELLER will mutually evaluate the disclosed materials and determine SELLER’s willingness to develop the Project with BUYER.  If they decide to continue, the parties’ engineering teams will collaborate together to refine the Product to meet BUYER’s requirements.

During the Project or during subsequent production (including the case that BUYER asks SELLER to provide design & engineering efforts to develop a new platform meeting a BUYER marketing brief), if SELLER creates inventions related to the Product that are subject to patenting (“New IP”), SELLER will promptly inform BUYER of such New IP.  In the case where BUYER can be fairly considered a co-inventor of a patent covering New IP, SELLER will designate BUYER as a co-applicant and co-owner of the patent.  Otherwise SELLER hereby grants to BUYER a perpetual, worldwide, royalty-free, paid-up license to practice such New IP and any resulting patents, including the right for BUYER and its designees to make, sell, distribute and import products using such New IP and patents (a “New IP License”).  In the event that BUYER commences use of the New IP pursuant to the New IP License, BUYER will guarantee SELLER involvement in the production of the initial Product embodying the New IP for a minimum of 2 years with the quantity and other terms of the parties’ arrangement to be negotiated and set forth in the Award Letter or Letter of Engagement as set forth below.

If SELLER develops an ODM (SELLER’s Product/Platform) product for BUYER with an interface developed to match designated BUYER parts or components, and SELLER has developed New IP around this interface, SELLER will inform BUYER and hereby grants BUYER a perpetual, worldwide, royalty-free, paid-up license to practice such New IP and any resulting patents, including the right for BUYER and its designees to make, sell, distribute and import products using such New IP and patents (even if SELLER is not involved in production of such products).

During the parties’ collaboration on the Project, BUYER and SELLER will mutually agree upon the commercial conditions required by each party to commercialize the Product.  If either party determines that it does not wish to proceed with the Project, it retains the right to withdraw from the Project and terminate this MOU without further penalty.  Should the Project be stopped due to commercial reasons, SELLER agrees not seek to continue developing the Product by itself.  If BUYER is satisfied with the results of the parties’ collaboration on the Project and wishes to proceed with commercialization it will issue an Award Letter or Letter of Engagement to SELLER.

Commercialization

If BUYER awards the Project to SELLER, the Award Letter or Letter of Engagement will set forth the terms for commercialization, tooling and supply of the Product, including the following points:

  1. Pricing, Launch Date, Item information.
  2. Whether BUYER wants to use Existing SELLER IP, and how much royalty BUYER should pay for it if, later on, production of the Product is transferred to a SELLER other than SELLER.
  3. The minimum production level (Product quantity and/or a specific time period) that BUYER will guarantee to SELLER. If this production level is not ordered by BUYER, BUYER will not be permitted to move the production of the Products to another SELLER without SELLER’s agreement.

The Award Letter or Letter of Engagement will also include such other commercial terms mutually agreed upon by the parties.  The Award Letter or Letter of Engagement will be effective when signed by both parties.  In the event of a conflict between the Award Letter or Letter of Engagement and this MOU, the terms of the Award Letter or Letter of Engagement will control.

General

Any dispute under this MOU will be submitted to arbitration to be conducted in Hong Kong in accordance with the Rules of China International Economic and Trade Arbitration Commission, in effect at the time of the arbitration, and shall be conducted in the English language by one or more arbitrators.  In the case of a conflict between translated versions of this MOU, the English version shall prevail. Except as explicitly provided herein, nothing in this MOU will give a party any rights or interest in the equipment, materials or intellectual property rights of the other party. SELLER shall not use the trademarks or name of BUYER, and any press release, advertising or other publicity related to this MOU or the parties’ relationship is subject to the prior written approval of BUYER.  The provisions of this MOU regarding confidentiality, non-assertion of Existing SELLER IP and licensing of New IP shall remain in effect even after termination of this MOU or a Project or if BUYER and SELLER cease working together.  This MOU (together with the confidentiality agreement) constitutes the entire agreement between the parties with respect to its subject matter and it supersedes any prior agreements or understandings with respect to the subject matter of this MOU.  Signed facsimile and PDF copies and counterparts of this MOU are legally binding to the same extent as original documents.

Written and agreed on DATE, XXXX.

For SELLER: For BUYER:
[SELLER Name] BUYER
[SELLER Address]
   
On Behalf of SELLER On Behalf of BUYER
Name:  Name: 
Title:  Title: 
Signature: Signature:
Company Seal Company Seal

ID Global Concepts are experts in supply chain management. We add value to your supply chain through consultancy or management contract to ensure the business has the best practice systems that are the right fit for your business, customer and meet your value expectations.

If you would like to learn, please email us at info@idgc.co or visit our website www.idgc.co

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