In this blog post I’m going to highlight the tricks, schemes and downright cons that product design companies use to take your money and sometimes even your idea!
Design agencies con people every single day and it makes me really, really angry. The design company ends up owning the rights to the new design. So rather than you are owning the those Intellectual Property rights, they’re basically saying we have added something, or we have come up with a new aesthetic and we own some of the intellectual property around this idea.
Therefore, for every item that you go on to sell you end up paying the design company a royalty. Now this is a complete con and you’re going to pay the design agency to do a project for you (and you’re paying for that creativity and that ingenuity and for them to come up with the right product), but you shouldn’t have to keep paying for that, with every single unit that you make and sell.
We had a client come to us recently who had been to another agency and she was being charged £5 per product to use the agency’s design that they had come up with. So basically, every time she produced and manufactured a product she was having to add £5 on to pay the design firm but she had paid the design firm fees to design the project in the first place! They had this secret hidden clause within the contract that basically meant that they could charge her for rights to use the design on every product that she went on to manufacture and sell. And its only when she started questioning the manufacturer and saying “Why is this product so expensive? We have got to get it cheaper” only then that she understood from the factory that there was this design referral fee that no one had told he about and that was basically was making her product far too expensive and she couldn’t make any profit out of it.
Now this should be illegal. It isn’t illegal yet. You can make sure that you don’t fall into this trap by making sure that within the contract within the product design firm that all the intellectual property, including anything new that they bring to your design while working for you, belongs to you. You can make doubly certain of this by getting that design company to sign an IP assignment agreement at the end of the project that makes it explicitly clear that there transferring all the IP rights in the project.
And this is critical for investment because the thing is a lot of investors will do due diligence before they put any money into your product and investors, one of the things, they check for is that all the intellectual is retained by the company that they are investing in. If they find that a designer has still got some IP around your product or some rights to it or maybe your photographer has still got some IP rights to the photos that have been taken for your product, then that’s a big red flag for investors. You want to make sure that all the IP is within your business.
Having worked with hundreds of Start-Ups and SMEs we’ve learned a thing or so about getting a project off to the right start.
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