Do You Own Your Product Design? 3 Ways to Protect Your IP-Related Assets

What would happen if Coca-Cola lost the key to the vault that famously holds the formula of Coke? For a while things may seem normal. Coke would still be available at your local corner store and the facilities already producing their product could still conduct business as usual. But what if they needed to open a new factory? What if they needed to make a change to the recipe? In the long-term, without access to the proprietary information that defines their business, they’d be in hot water.

In the world of product development, your design assets are what allow you to truly own your design. They are your Coke formula. Failing to protect these assets can be a costly mistake. You’d be surprised how often companies come to us to redesign and reimagine their products without bringing their own design files and documentation to the table.

Why does this happen? Some company’s viability hinges on a product’s success, so leaders do whatever it takes to efficiently deliver the ROI their company needs. This intense focus on delivery means the details of design ownership can be compromised or completely overlooked. Some value the ease of outsourcing the entire product development process over the value of owning their design. And others simply don’t have the experience to know any better.

But don’t feel bad, we see this issue with start-ups and Fortune 500s alike. It can happen to any organization where the leaders don’t take time to solidify ownership and control of their product’s design. So here are 3 ways to CYA (cover your assets) and put your business on the path to success.

In the litigious world we live in, gracefully navigating the IP landscape of your product offerings is essential to protecting your brand. Remember that this process goes both ways: you want to insure you aren’t infringing on anyone else’s IP and protect your IP from being infringed upon.

Protect your company from litigation

It doesn’t matter if your product is one of a kind or if you’re launching in a crowded market. The last thing you want to see upon a successful product launch is a cease and desist letter and court summons for violating someone else’s IP. Remember the infamous billion dollar Apple vs Samsung battle that went all the way to the supreme court? Samsung was forced to pay hefty settlements and royalties to use Apple’s now-ubiquitous innovations as Apple had patents protecting their designs.

Of course, your research may show your company would benefit from using someone else’s IP as part of your product’s design. There is nothing wrong with that and it happens all the time. If that is the case, you’ll just need to factor the cost of royalties and/or licensing into your financial projections on the front end to ensure your plans are feasible.

Protect your IP from competitors

Conversely, when you do have a truly novel concept, it’s imperative to proactively safeguard the related intellectual property against outside threats. Working with a savvy product development firm can remove the mystery from this process. For example, M3 can help you understand which design concepts are novel and patentable and, often just as important, create an “IP moat” to keep competitors at a distance. We can help you develop and patent alternative ways to solve the same problem and ideas that are adjacent to your product.

Violating someone else’s IP — or failing to protect your own — are the kinds of mistakes that can tank your business. So complete your due diligence. And remember, an IP lawyer can help you navigate any legal intricacies your product development firm isn’t equipped to handle.

One of the differentiating hallmarks of working with a product development firm is that you’ll always walk away from the engagement with all your design files. Drawings, schematics, prototypes, native CAD files, revision history — they’re all yours.

That means you can take your design to any manufacturer to bring your product to life. The same might not be true if you work with an Original Design Manufacturer (ODM) or a Joint Design Manufacturer (JDM). Engagements with ODMs/JDMs offer design, development, and manufacturing services all under one roof. These arrangements can be contractually quite complex and it’s good to know what to look out for.

Check the fine print before signing with an ODM/JDM

True, working with an ODM or JDM can be an attractive option for startups short on cash or larger organizations that would rather outsource some of the overhead associated with the design process and control. But often the lower front-end price tag may come with strings attached. For example, ODMs or JDMs might:

• Not release your design files to you. Things like CAD, PDFs, BOMs, are the files that are needed to make your product. Some ODMs/JDMs may only give you partial or limited design files. They may not send you updated files as changes are implemented. This could be due to the fine print of the contract, or you may have become lax in your documentation control. We see this all the time. Either way, it can make it very difficult for you to move your production to another manufacturer. This effectively prevents you from shopping your product around, which can cost you significantly more in production costs in the long run.
• Not protect your product from white labeling in the manufacturing contract. That means after they design, develop, and manufacture your product for your market, they can strip it of its branding and release a knock-off somewhere else. To be fair, this could be a lucrative option for your business in some scenarios, but you need to enter into these agreements eyes-wide-open.
• Not design the optimal product. They may be more inclined to design a solution that works within their existing workflow (machinery, systems, manufacturing or assembly processes) rather than explore different innovative ideas that would enable your product to reach its full market potential. This is a classic case of when you have a hammer, everything looks like a nail.

There absolutely can be viable business reasons for choosing an ODM or JDM over a product development firm, but it’s crucial to understand what you’re getting into. If you go this way, we highly recommend that you insist on retaining ownership of — and access to — all your design files as part of the deal and ensure you have internal processes in place to keep those files up to date and secure.

Owning your files protects you against market disruption

Choosing a product development route that gives you complete ownership of your design and manufacturing documentation might require a larger initial investment. But it’s the best way to prepare for the unknown. That’s particularly important in today’s tumultuous global environment in which circumstances can change quickly and unexpectedly. You need to be able to pivot easily if and when things shift.

We had countless clients learn this lesson the hard way when the perfect storm of a US/China tariff war and supply chain issues due to COVID-19 resulted in manufacturing costs skyrocketing. Companies were left scrambling to quickly redesign products and even move production to other countries. Those without access to their design and manufacturing data found themselves up a creek without a paddle and were effectively held hostage by their current manufacturers. Owning your design — and keeping all the related files and documentation on hand — means you’re not at the mercy of these changing tides.

Most products are manufactured using custom tooling, specialized fixtures, and other complex technology. Typically manufacturers source these tools or create them from scratch. They are expensive and time-consuming to produce, and you can be sure they’re building these capital expenditures into the amount they charge you to produce your product.

Therefore, make certain your contract specifies that you — not the manufacturer — own these critical assets.

There are numerous reasons why you may need to switch manufacturers down the road. Ensuring you have the ability to transfer the equipment you paid for will save you time and money as well as enable your new manufacturer to quickly pick up where your previous partner left off.

One final thought here. Be sure your contract specifies if your manufacturer can use your equipment and tooling for any purposes other than producing your product. This could be another way to protect you from white labeling and other product-pirating techniques.

Launching a new product is simply a tool for reaching a larger business objective. And to bring your goals to fruition now and in the future, it’s vital to take care of every behind-the-scenes detail that impacts your company’s ultimate success — especially when sailing into unfavorable economic headwinds.

Admittedly, it can be a real challenge to get your arms around all your product’s design assets. That’s why you need the right partner by your side — one that’s fully invested in your business’s overall well-being.

M3 knows what it takes to bring products from concept to completion, and we’re committed to protecting our clients’ interests every step of the way. So if you need help, just reach out. We’d love to hear from you.