Licensing a Boat Design

When a builder wants to license a particular boat design from the designer, what is the common practice for the designer to confirm the production of each boat?

Trust……….or regular in person checks….or take all the money up front and don’t worry…….
Iron clad contracts help but lots of designers have been screwed…….

Boats have HINs. That would be the easier method of confirming.

I would think a flat licensing fee up front would be preferable to a royalty fee.

WAYNE OLSON said:

I would think a flat licensing fee up front would be preferable to a royalty fee.

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Preferable for who/whom?

Say a boat builder is planning to build 500 boats that the designer/licenser wants 1,000 per boat as a royalty. The builder has to come up with $500,000 before the first boat is built.
What a tremendous hurdle to overcome.
Certainly good for the designer but this would inhibit any builder using a designer/architect. It would be better for the builder to hire a designer as a regular employee and
just pay him an inordinate amount of money for the time that the designer works for him and then show him the door.

I understand that sometimes if you hire a designer even on a contract basis, the designer feels that he should be able to charge a royalty. Of course a contract can
determine the obligation of each.

Perhaps an Architect /Designer COMPANY can offer their reasons why they might feel that they can charge a builder a fee after the builder has already has already
paid for a design and provided a profit center for the designer.

Yike$. It would be cheaper to get a 4 year degree in N.A. and design it myself. Thanks.

The design firm that I worked for did design work based on one or the other of the options mentioned depending on the clients wishes, either a flat fee negotiated based ahead of the work beginning on the scope of work involved, or on spec based on a fee per hull based on the cost of boat as it left the factory. For a start up it can save on start up costs if you don't have to part with cash for the design until production starts, but you need to find a designer who believes you are going to be successful and can afford to take that chance.
I also worked as part of a design staff for a boat builder where we were all on salary and all on contracts of varying lengths, which could be an option then you both you and the designer know the terms under which the work is being carried out.

Thanks for the information. Making one boat model that is an also-ran among dozens doesn't interest me. I have a design in mind that would be for a niche part of the market, so demand would be an unknown. It would be ideal for me to build only when an order comes in until volume justified it, but it's not feasible to make big production plans initially to satisfy designer payment terms under those conditions.

WAYNE OLSON said:

... but it's not feasible to make big production plans initially to satisfy designer payment terms under those conditions.

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That's only necessary if you want to convince the designer to do the initial work for free.
In most cases you pay for the initial design commission, then agree on a model for the production run. There are several common models:
1. You buy all of the production rights outright. How expensive that is depends on what the designer thinks about the market potential of the boat. The design is now yours and you can sell it or license others to produce it.
2. You buy exclusivity and agree on a licence fee per unit. You are the only licensed builder for the duration of the contract, but you can't sell or license the design to others. Exclusivity price can be a one time payment up front, a yearly fee independent of the production numbers, a higher license fee per unit, a percentage of the sale price per unit, etc.
3. You only agree on a (fixed or not) fee per unit. The designer is free to offer the plans to others.

Boats aren't sold from the back of a truck, you issue HIN's, generate financial paperwork, etc. The designer can always sue you if he feels you didn't payed for all the units.
Contracts are a matter of negotiation. If he wants to stipulate that every year an outside expert checks your books to see how many orders you had, it's on you to accept or not.

Bottom line, you won't find out what it is until you actually negotiate with a designer.

Rumars said:

That's only necessary if you want to convince the designer to do the initial work for free.
In most cases you pay for the initial design commission, then agree on a model for the production run. There are several common models:
1. You buy all of the production rights outright. How expensive that is depends on what the designer thinks about the market potential of the boat. The design is now yours and you can sell it or license others to produce it.
2. You buy exclusivity and agree on a licence fee per unit. You are the only licensed builder for the duration of the contract, but you can't sell or license the design to others. Exclusivity price can be a one time payment up front, a yearly fee independent of the production numbers, a higher license fee per unit, a percentage of the sale price per unit, etc.
3. You only agree on a (fixed or not) fee per unit. The designer is free to offer the plans to others.

.

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The question that I have is this:
Why do designers feel that they should get a "fee per boat" royalty if the builder has paid for his time? Certainly if they did the work for free or a partial fee and a royalty.
But if a designer has a charge out rate of say$2oo per hour and spends 200 hours and his fee reflects this, 200 x 200=40,000, that should be the end of it. ( and lower talented/educated auxilary help charged out at a lesser rate

Barry said:

The question that I have is this:
Why do designers feel that they should get a "fee per boat" royalty if the builder has paid for his time? ...

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Try that with an author, or a rock band, or any another item that is reproduced...based upon an original piece of work.

Ad Hoc said:

Try that with an author, or a rock band, or any another item that is reproduced...based upon an original piece of work.

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Then a doctor who does a transplant should what get paid indefinitely if you keep living
An engineer who is paid to design a machine to a customers specification gets paid indefinitely
A lawyer who is paid to draft a complicated document continues to receive a fee.
Just picking some professional careers that might be similar to a boat designer, assuming that the level is on par with an NA or boat designer.

If a professional of any class or kind is paid to design a machine to a customers specification they should not feel entitled to further compensation

If a boat designer, author , on his own, paid by no one, finds someone who will buy his design AND pay a royalty. That is perfectly a perfectly legitimate process.

I guess I do not accept the entitlement concept for work that has been initially paid for.

Just a casual opinion.

Royalties are paid on reproduction not use, and unless otherwise specified you are actually in the same boat with whatever thing you have designed for you.
A doctor, plumber, acountant, etc. performs a service that you can only use, not reproduce and sell, so there can be no royalties.
If the result of a service is a physical (or digital) object, that becomes your property and you can sell it, but are prohibited to reproduce it even if you are able to do so. This by the way also applies to boat plans, you can sell the drawings, but the buyer isn't allowed to build from them unless specifically permitted.
So, if you pay an engineer to design you a machine, you are usually granted a license to build one (or several if that's what you need). If you want to start manufacturing those machines for the express purpose of selling them, you either buy the multiplication rights for that design, or you pay royalties.
It's the same for houses, boats, books, music, automobiles, engines, kitchens, etc.

Barry said:

Why do designers feel that they should get a "fee per boat" royalty if the builder has paid for his time? Certainly if they did the work for free or a partial fee and a royalty.

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In many cases, the builder can't accept full fee for a design.
Thus, the designer's fees are split into lump fee (to cover designer's expenses and show commitment of the builder) and royalty fees.

Designer is not paid for his time or for drawings. He is paid for his expertise. It is an expertise to produce a successful design which will be produced in numbers.

Barry said:

Why do designers feel that they should get a "fee per boat" royalty if the builder has paid for his time? Certainly if they did the work for free or a partial fee and a royalty.

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If the designer is your employee, the design is your property. Hire a Naval Architect and that will solve your issue.