Design Contrats And Intelectual Property Ownership

Discussion in 'Boat Design' started by zstine, Sep 23, 2022.

  1. zstine
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    zstine Senior Member

    If a client hires a Design firm/Naval Architect to take his/her concept and perform the design details (engineering drawings, calculations, etc.) for a new boat or for a modification to a production boat and the client pays many thousands for those products, who typically owns the IP? I'm curious what the 'normal' standard is in the industry for a recreational yacht below 20m in length. Does the design firm typically own the IP and can therefor sell copies of the design drawings/analysis to others unbeknownst to the original client or does the original client's payment to develop this IP cover ownership of the IP allowing the client to control the design drawings as he/she wishes? Assuming the Design Firm owns the rights to sell the drawings to a 3rd party, what would the typical cost premium be for the original client to keep the design confidential/client owned?
    I know "it depends" on the boat and contract details, but I assume this issue comes up all the time and there's a 'typical' language regarding IP and a price range for client owned vs non-owned IP.
    Thanks!
     
  2. baeckmo
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    baeckmo Hydrodynamics

    There may be a difference between "design" as in the creation of attractive (cosmetic?) shapes to a product, and the engineering value added to a machine or process. I'm hired by enterprises as a consultant in my specific engineering capacity, and in most cases my clients and I sign a mutual ("two-ways") Non-Disclosure-Agreement in addition to the job description. Principally, it is a protection against "muddy" interpretations of diffuse legal aspects, even if the basic standpoint is that he who pays the bill owns the result, whatever it may be. And the know-how that generated it stays with me.

    Edit: last statement added
     
    Last edited: Sep 24, 2022
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  3. zstine
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    zstine Senior Member

    Thanks for the reply. When I say Design, I'm referring to the engineering calculations and design drawings needed to construct the boat. Not cosmetic design, though some cosmetic work is inherent.
    I've found an old 2003 thread "Design Cost" (?) where Eric Sponberg stated the designer owns the design IP by default (he likened it to commissioning an art piece) unless the client pays for exclusivity. He even provided an example of a 44' sloop that a client paid to have designed, which he now sells plans for. He did mention that a lot of new designs are exclusive since any production type boats or one-design classes would obviously have to be owned by the production company/class.
    However, there's no mention of what IP exclusivity costs. Various prices for design estimates were provided $1500 - $3000 per sheet of drawing, $100/hr, 10% - 15% build cost, etc.. BUT no mention of what added cost is for exclusive rights to the IP. Anyone have a number? 20% premium, 50% premium?
     
  4. AJB
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    AJB Junior Member

    One pricing for exclusivity is the very simple x 2

    But this usually time limited, say 5 years exclusivity period?
     
  5. jehardiman
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    jehardiman Senior Member

    Personally, I've seen a "real" amount of money spent on a concept that never resulted in a working product with a big fight over who owned the actual "idea" and plans. My organization had to wade into that mess and duct tape a solution together with "previous art".
    I think the best advice is by baeckmo to put it in the RFP/contract with a non-disclosure agreement. If all you have is a thought and a sketch, and the engineer/s has to do all the basic research and detailed engineering then most of the IP is theirs, not yours as the real novel work (i.e. what defines IP) was not done by you. This is why Clare of Assisi is not the IP owner of television and nobody really owns the IP of the WWW and Internet protocols (cf. different html and GUI standards).
    So, if it can't be read, it ain't been said. Most contracts will state who gets paid, what is delivered and when, who owns the rights to the plans, and how copies can be made/shared by each party. This is part of the contract negotiation and/or in the RFP. The "risk" premium will fall out of these. I will not even begin to touch on how many traps and pitfalls there are in contracting design/build/delivery services, but read every word.
    And know the differences between these six words..... should : shall; can : will; may : must.... they drive risk, cost, and schedule.
     
  6. Ad Hoc
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    Ad Hoc Naval Architect

    Yup...and yet...i still get clients that think their "idea" is their IP.

    So, i give the following example.:- I draw a nice pretty picture of a red button, all shiny and high-tech looking. It has the words, "Press Here", embossed on the red shiny surface.
    The "idea" is that when you press the button, you are instantly teleported to another part of the world.
    So, when technology eventually allows such a device, WHO owns the IP??.. the person that drew the pretty picture in the first place ....or the engineers and scientists that created, from nothing, the means to do so?

    Just having an idea...boy, everyone has them. It does not automatically equal I own everything related to it, just because YOU had the thought.

    Amen to that!
     
  7. zstine
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    zstine Senior Member

    What if the client had a working model of the concept and was looking for help scaling it up. The client could even have a patent pending or trademark on it. Certainly then the 'idea' could not be owned by the design firm. Would a design firm/naval architect bulk at working on such a project? If AJB is correct that your looking at double the price for exclusivity, that could be several $100k's and a USPTO application could be cheaper and just as effective.
     
  8. zstine
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    zstine Senior Member

    Funny you mention that. One of my early assignments with GDEB was to go through a design specification with the Navy and change all the "should" "can" and "may" statements to "shall" "will" and "must". It was a good exercise to learn the specification in detail, but boring as hell.
     
  9. jehardiman
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    jehardiman Senior Member

    In that case you don't need a design firm, you need employees. This is what head hunting firms and starving naval architecture grads are for; as well as being cheaper overall. Most firms would baulk at doing all the work and getting none of the profits because the "profits" are stripped off by the principals (i.e. the people who fund the company). Also, FWIW, some things that work small never scale, see the Square-Cube Law or the Sea Knife hull form.

    A patent or copyright does not defend your IP, lawyers do. If you worked for GDEB then you now how much big companies steal IP, their legal pockets are simply deeper. Look what happened to Niels Christensen.
     
  10. jehardiman
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    jehardiman Senior Member

    So you were the one costing the US taxpayer all the money. The contract as originally written said basically "must provide a quarterly weight report, may use an automated system to do so". Then GDEB changed it to "must" to get the Government to have to pay GDEB the money it paid to Dassault to get CATIA to spit out NSTM 096 format. Still didn't get it correct
     
  11. zstine
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    zstine Senior Member

    This comment and the double cost for exclusivity surprise me because it doesn't jive with what Eric Sponberg said in the 2003 Design Cost thread I read. Basically, Sponberg said all cost to develop the design, including margin, is born by the client because even though the design firm owns the IP, it has very little real world value. He supported that by stating how many of his custom designs were purchased after the original contract and the number was very very low. Even a design that was promoted in a magazine article only sold like 6 copies at $200 ea. So if the IP is worth so little, why would a naval archy double a $100k job to $200k (potentially losing the work)? And how does a patent strip off profits if the design/development work contracted to a design firm has profit built into the price?
     
  12. zstine
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    zstine Senior Member

    Hey, somebody's got to pay the bills! haha :)
     
  13. jehardiman
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    jehardiman Senior Member

    You seem to miss the point that for a one-man office, Eric is the principal. That extra 100% is the "risk" he is taking to have to sit at his drawing board waiting for you to show up at his door; or after taking your contract, having to turn other more lucrative contracts away. Engineers are not photocopiers, just sitting at the library waiting for you to put your quarter in and have it pop out a set of plans. They have to be paid for, working or not.

    You say you have a concept, but based on your questions I wonder if you have a business plan to go with it? Though you said you worked for GDEB, do you have any work team supervisor or program management experience? Even in a small one man office a day-rate needs to be calculated and a man-day utilization factor needs to be managed.
     
  14. Rumars
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    Rumars Senior Member

    An ideea can not be protected, only work based on that idea. The protection relates to the use of that work, not to the work itself. Example, the idea of teleportation is not protectable, your specific way of doing it is. If somebody modifies or improves your work, that work is not yours to use. If a third party wants to build the improved device he needs a use licence from both entities. It doesn't matter that the improvements are worthless without the original work, it's just how it is.
    Protection only comes from public acknowledge of your work, meaning presenting it to the public or taking out a patent. Talking about it does not equal public presentation, that's why inventors are so tight lipped until they have a patent or formal presentation.

    So, when you go to a NA with a drawing, your drawing is your IP, as much as legally possible (underwater hull shapes are difficult anyway). All the engineering is the NA's property, but for practical reasons you can't build your ideea without his IP, so your property is useless. The moment the NA starts to modify your drawings it becomes his IP, because his drawing differs from your drawing. This is absolutely normal, hull shapes need adjustment in the design spiral. By the end of it the drawings are different enough that your IP is not related to his IP except in a general sense.
    When he draws you the n-th itteration of the portlights position and you say "let's move that one more to the left" it's not your IP unless you draw it yourself. When you say "this is it, let it be so" you are in the same situation as buying fruit from a stand, "I want to buy that one, not this one".

    The NA can sell you three things: the right to use his IP, the right to use the name of his IP, and the actual parenting right of the IP. Each of this is a separate thing, and ownership of one does not affect ownership of the other.
    First, the right to use, can be bought wholesale or en-detail. Wich means you own the right to build all or only a specified number of the thing on the plans, rights to resell, market limitations, etc. What you buy is a matter of negotiation as well as what you pay for that.
    Second is the right to use the name of the thing. For example the designer has trademarked the name Mermaid XY. If you want to present your yacht as Mermaid XY then you pay for that, otherwise you have to rename, for example Sirena XY. In the boat world it's rare that the build and name rights are sold separately, but it happens, and it's common in other industries like the car industry.
    Third the parenting rights, this is the name of the person doing the work. Example, you hire somebody to do the work but pay him enough that he sells you his name, this means that instead of "designed by Peter" you can say "designed by (insert your own name)". The actual person doing the work becomes a "ghost designer" and has no right to claim it as his work.

    When you commision a design, first thing you pay for is the time it takes to produce the drawings. The designer can bill you by the hour or for the entire package, the important thing is to specify what's included in the package. The more detailed drawings you need, the more time it will take and the more it will cost. Any modification, consultations, etc. will also cost something.
    Next is the build licence, and here it's a simple price negotiation. If the NA believes the design can be a commercial success he will make you pay exactly what he estimates he will make by selling individual building licenses. The thing is the two prices have nothing to do with each other. Let's say producing the drawings costs you 10k, and because you are the initial customer the licence to build one unit is free. Your invoice will read, "drawings for design nr. xxx, 10k", plus you get a piece of paper saying "Mister YZ has the right to build one yacht".
    You want to build more yachts from those plans you don't have to buy a fresh set of drawings, you only pay a licence fee, so the invoice reads "licence to build n units of design xxx, 100k".

    There is no "going rate" for buying rights. Some designers are completely against selling all use rights, and even when they deal with boatyards will not sell all of them, while others will sell you everything for the right money. Some will even sell you cheap, then one of those designs becomes a commercial success and the designer swears he will never do that again.

    For example one contract can read "Boatyard X is entitled to build unlimited numbers of design nr. xxx, and has to pay (insert number or sell price %) per unit. Boatyard buys geographical area A exclusivity for a one time payment of n$, designer is forbidden to sell design nr. xxx in geographical area A. Boatyard buys naming rights for design nr. xxx for one time payment of n$. Designer retains all other IP."
    What this means is that "Rumars boatbuilding" can build unlimited numbers of "Rumars 32" in Europe. Designer gets credit for designing "Rumars 32" and money for every yacht I build. If "Peter&Paul boatbuilding" contacts the designer to build the boat in America, I don't have a saying in it, since I didn't buy the american rights. But they can't sell it as "Rumars 32" because that's my name, they have to call it "Peter&Paul 32". If I want to sell the tooling and name to "Peter&Paul" I can do so, but they have to make their own licensing arrangements with the designer, if he refuses their money they can't build.

    If the contract says "Rumars buys every and all use and naming rights for the entire world for a one time payment of n$", the designer is out, he still gets credit for the design, but I can can sell, license, rename, the design however I like and he gets no money. All he can do is put it on his CV and give talks and write articles about what a great yacht he designed.
     
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  15. rxcomposite
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    rxcomposite Senior Member

    Sounds very familiar. A client comes with a nice set of drawings, properly done with subdivisions and partition details as he envisions. Gives you a set of Rulebook and ask you "Study this and and follow to the letter all the design structural details, power, et al". So who is designing? Or does the NA becomes an extension of the client "Design Office"?
     
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