How To Protect Your Ideas, Compliance, And Payments [Podcast Ep06]
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In this brief yet impactful episode, David gives you tips on how to protect your intellectual property, make sure your products comply with government or commercial regulations, and negotiate payment terms so your investments are secure.
- Why NDAs and confidentiality agreements don’t always work
- How common sense and prudence can keep your intellectual property safe
- What you need to ask manufacturers to give you to make sure they can make safe and compliant products
- The chicken-and-egg scenario of payments, and how you can manage payment terms as a buyer
- How to protect your deposit and milestone payments
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What is intellectual property?
Intellectual property (IP) is anything that’s propriety to you that you hold a patent for or a trademark.
IP is also more than that, in that you may not have a trademark or a patent, but it’s your idea, it’s your concept.
You wanna protect it so that you can be first to market with it.
This is where it’s important to deal with trusted manufacturers.
Only share your idea once you’ve done a certain amount of background checking with vendors and suppliers.
Anything can be copied in China, very quickly.
And if your idea is great, manufacturers have a string of customers (who buy big quantities) they can offer your idea or concept to.
So, practicing prudence and diligence is critical here.
There’s no shortcut secret.
You can sign an NDA or have an agreement with a manufacturer, both of which are helpful and important but very hard to enforce.
The most important aspect here is to deal with a supply chain you have experience with or that you’ve been referred to and have got a trusted reputation.
And just act with diligence.
Give as little information as possible at the beginning and slowly release more information as things progress, and your relationship evolves.
Make sure any files or documents you send through are watermarked so they can’t easily be shared without your company name branded across them, and the word “confidential.”
I would definitely not share anything related to good ideas or intellectual property with a manufacturer who hasn’t been vetted/background checked and does not have a reputation or history of dealing with other brands and other licensed, trademarked or patented product.
Do compliance and standards matter?
Hell yes, they matter.
Every country has its own regulatory compliance, which means any product sold in that country must comply with those standards.
It’s very important to do your homework in advance of placing an order for a product.
Make sure you know and understand what compliance requirements exist for your product in the country you want to sell it.
Whether or not your sales channels require compliance, like Amazon or retailers, etc., that’s a commercial matter.
But it is prudent that you’re very clear what is required and that you ensure you have a plan in place to get it.
Asking manufacturers for their compliance documents is acceptable, but make sure you verify those compliance documents are real and not fake, and that the tests are done to the correct standards.
This is what we call a compliance document review.
Standards are also critical because they take out the ambiguity of those ‘you don’t know what you don’t know’ issues.
So, having a product manufactured to specific safety or other regulatory standards (like EMC or toy standards.)
There are standards for every industry and every product.
Knowing these standards and asking manufacturers about them ensures you ultimately get a better quality product, and that you have a benchmark for determining if something’s acceptable or unacceptable.
The last thing you want is to have a product that doesn’t meet standards or doesn’t comply and then have a full recall on your hands.
It’s one of the most costly exercises any company can face.
Payment security is probably one of your biggest concerns.
Remember, suppliers are concerned about getting paid.
They’ve purchased goods and materials and produced the goods.
If they don’t get paid, they’re stuck with those goods.
They deal with thousands, if not hundreds of thousands of people around the world, and have been let down many times.
So, very often suppliers are as scared of payments as you are.
They’re as scared of you as you are of them.
So this is really a sensitive issue and a key topic for discussion.
Typically, your payment terms will get better with suppliers as your relationship with them grows and improves.
The things to look out for are paying for deposits and samples, and how you’re going to pay for your goods.
Are you doing a TT which is just simply a bank transfer?
Will they accept an LC, which is a Letter of Credit?
You’re opening a line of credit and it costs money to do that…but for large orders of high dollar value, it’s much safer.
Most manufacturers will only accept a TT for deposit and balance payment before shipment.
If you’re new to them, or if it’s a small order quantity, in which case vetting the supplier and having a very clear upfront purchase order signed off is critical before you pay.
Maximum deposit payable recommended is 30%.
You want to negotiate down to 20% or 10% or as little as possible, with the balance due on inspection.
And that’s another reason there’s value in having an inspection:
You get to pay for the goods after you’re happy and satisfied they’ve been manufactured to your specifications and standards…
And they’re comfortable to ship the goods out because they’ve received the balance payment.
It’s very rare that I’ve experienced the supplier produces goods, gets paid and then doesn’t want to ship them out.
Other payment methods include Western Union, PayPal, Escrow.
Not all suppliers will accept these, but they can be discussed with your manufacturer and considered.
Over to you
Do you have any questions about intellectual property, regulatory standards, or payment terms?
Leave a comment below and let me know.
I’d be happy to answer to the best of my ability.