Exclusivity Agreement Manufacturing


A customer`s ability to insist on a non-compete clause depends in large part on the nature of the proposed manufacturing agreement and the relative bargaining power of the parties. For example, in the context of a traditional contractual agreement in which the product is specified by the customer, the customer may instead insist on some kind of exclusivity. On the other hand, it is less likely that, under an ODM agreement (original design manufacturer), the customer may insist on exclusivity of any kind if the product is specified by the manufacturer. ALAMEDA, CA — February 12, 2007—Proton Laboratories Inc., (OTCBB: PLBI), a biotechnology-focused company producing “Functional Water,” announced today that it has signed an exclusive manufacturing agreement with AquaThirst Inc., a private company. One of the ways in which brands and manufacturers can deal with these risks is an exclusivity clause that is very different depending on whether they are designed for the benefit of a trademark holder or manufacturer. An example of this application can be found when a company A connects to a B manufacturer and makes it its exclusive partner for the production of a future generation of smartphones. One of the most important things to note here is the fact that the product or service that is done by the exclusive partner has only the brand name of the parent company or organization and not the second part. A typical exclusivity clause that benefits a trademark holder requires the manufacturer to limit the production and sale of the same or similar products for a specified period of time. An exclusivity clause for a trademark holder may exist during the duration of the employment contract. However, a trademark holder often wants the exclusivity period to be extended beyond the duration of the contract, so that a manufacturer cannot immediately start manufacturing competing products when the relationship ends. The scope of this exclusivity clause generally also applies to products that are identical or substantially similar to the trademark holder to products for which the contract manufacturer has been responsible by the contract manufacturer. Some brand owners may also wish to identify competitors with whom a producer cannot cooperate.

Here we see the close link between contractual exclusivity and intellectual property rights. If a product is designed by the customer and protected by IP rights, the contractual exclusivity clauses may be less cumbersome for the manufacturer. If a product is designed by the manufacturer and protected by IP rights, then it is unwise to contractually limit the manufacturer`s rights to do things that fall within the IP protected area of exclusive measures. Host a meeting between the two parties and discuss the terms of the exclusive delivery contract. For example, the precise specifications of the product or service to be provided, the amount of funds that must be paid to meet the terms of the agreement, and the date on which the contract is legally binding.

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