1. An Industrial Mold is a Terrible Thing to Lose
Every month or so, someone calls or emails one of our international manufacturing lawyers for help in “getting their molds” back from their overseas manufacturer. Whenever you terminate your overseas manufacturer, there is a good chance your manufacturer will keep your tooling/molds. The manufacturer typically holds on to the tooling/molds to extract money from the foreign company, but sometimes it does this simply for revenge.
If your tooling or molds are not expensive and do not contain valuable IP and can easily and quickly be replaced, this is not a big deal. But for many companies, their tooling/molds are their lifeblood and being without them can mean the end of their business.
2. Getting Tooling/Molds Back Can be Very Difficult or Very Easy
Getting a company’s tooling/molds back is usually not a fast, cheap or easy process and so it seldom makes sense. This is particularly so if you do not have a contract that makes clear that the tooling/molds belong to you and your manufacturer’s failure to quickly return them to you means it will have hell to pay. Without such a contract, you will typically be looking at months — perhaps years of litigation — during which time you likely can have new tooling molds made sooner and for less.
The key to “getting molds back” is setting yourself up so that they are not taken in the first place. None of our clients for whom we have crafted a tooling/mold agreement or a manufacturing contract (these nearly always contain tooling/mold ownership and recovery provisions) has had a problem getting their tooling/molds returned. We have had a couple instances where the overseas factory asserted that it would be holding on to our client’s tooling/molds, but they quickly changed their tune after we pointed out what we could do to them under the contract they signed.
3. Good Contracts are the Key to Keeping Your Molds
The way to avoid having your overseas manufacturer run off with your tooling/molds is to require your manufacture to sign (and in some countries you will want a company seal/chop as well) a contract that makes clear the molds belong (to you) and sets out the specific and substantial damages your manufacturer will need to pay you if it does not quickly return your molds to you. It is critical this contract be written for the legal system of the country in which your manufacturer is located, and not for an American/European/Australasian court.
In addition to a good contract, you should, if possible, get a deposit from your overseas manufacturer for your molds, which deposit you will return to your manufacturer when it returns your molds to you. If your manufacturer will not give you a deposit for your molds, (most will not), it is absolutely critical that your contract mandate your manufacturer pay you a specific amount in liquidated damages if it fails to return your molds when specified. This provision alone goes a long way towards eliminating any incentive for your manufacturer to hang on to your molds.
When our manufacturing lawyers are retained to draft a stand-alone mold/tooling agreement or when we put a mold/tooling provision in a Manufacturing Agreement, we usually start by sending the following questionnaire to our client, which in turn is typically followed by a subsequent set of more specific questions:
1. Please provide a 1-2 paragraph description of what you will be doing that you want to be covered by this mold agreement. This is essential: we need to know, in layman’s terms, what is going on.
2. What will be the subject of the agreement: molds, tooling, equipment?
3. Where will the molds/tooling be located? With one manufacturer? With many manufacturers?
4. Do you have a direct relationship with the manufacturer, or are you working with an intermediary, like a sourcing agent or a broker?
5. What agreements, if any, do you have in place already concerning the basic business relationship with the various parties involved with your manufacturing? If you have any written agreements, please send them.
6. Do the molds/tooling already exist?
7. What will be the source of the molds/tooling? Will the manufacturer design and manufacture the molds/tooling? Will the manufacturer purchase the molds/tooling from others? If yes, under what kind of agreement? Will you be providing the molds/tooling to your manufacturer? Will your sourcing agent or some other entity do this?
8. What will be the method of payment for the molds/tooling, and who will pay?
9. Who will design the molds/ tooling? In what form will the design be provided to the entity that will be manufacturing the molds/tooling?
Protect your molds/tooling before they are gone, because once gone, getting them back is usually not possible.