Manufacturing Agreement: Intellectual Property Rights and Confidential Information Clause

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Table of Contents

• Mutual Confidentiality Clause
• License v Assignment
• Confidentiality Agreement
• How Can the Manufacturer Use the Intellectual Property?
• Conclusion

During the manufacturing process, you will most likely provide your manufacturer with detailed specifications, trade secrets, intellectual property and other information that you would not want on-sold or used inappropriately. Your Manufacturing Agreement should then comprehensively outline any issues relating to intellectual property and confidential information.

Mutual Confidentiality Clause

Typically, Manufacturing Agreements will include a mutual confidentiality clause that sets out that neither party will use each other’s confidential information except as required under the Agreement. It also provides that each party will not disclose confidential information to external parties.

License v Assignment

If you are the customer, you should confirm the Agreement says that you are only licensing and not assigning the material to the manufacturer, and it is for the purpose of creating the product only. Notably, the customer needs to ensure that they own the product’s intellectual property or that they have the appropriate license.

You are also able to include more specific obligations in the Agreement. For example, the manufacturer must return the materials when the relationship ends.

Confidentiality Agreement

Before signing a Manufacturing Agreement, both parties should strongly consider entering into a Confidentiality/Non-Disclosure Agreement. This document ensures that during preliminary discussions, both parties protect their confidential information. It can sometimes be difficult when working closely with a manufacturer to develop a product who owns what intellectual property. The Agreement should address this to avoid any potential disputes later down the track.

How Can the Manufacturer Use the Intellectual Property?

Your Agreement should set out how the manufacturer can use the intellectual property. For example, setting out that they must comply with reasonable requests as to how they can use the material and taking reasonable steps to prevent the infringement of your intellectual property rights.

You may also consider applying to register your design or patent rights with IP Australia. This best places you to protect your intellectual property before it is disclosed or licensed to the manufacturer. 

Similarly, manufacturers particularly in the Research and Development space, commercialise their product before considering a patent application, at which point it is often too late because their product is in the public domain. 

Of note, both parties are interested in protecting their intellectual property so it is commercially sensible to discuss this at the outset of drafting and negotiating your Manufacturing Agreement. 

Conclusion

Unquestionably, your product’s intellectual property and any associated confidential information is paramount. If you are the customer, then you should then take steps to ensure that you adequately protect your rights in your Manufacturing Agreement.

LegalVision’s lawyers have extensive experience drafting these agreements as well as Distribution and Reseller Agreements. So if you are in need of legal advice, or if you have any questions, please contact LegalVision on 1300 544 755 and speak with one of our experienced solicitors today!