[imaginemw]

Here's the scenerio....customer comes to my machine shop to have some parts machined for his upstart company. However, he does not have a product yet, just an idea. So I design, 3D model (for marketing) and machine the prototype parts, and only charge him for my drawing time, materials and machining time, thinking I was getting the rights to machine the production parts.
Fast forward almost a year and they have since brought in a new CEO to refine processes and now they are asking for the DWG's (China). My thought was I designed and egineered they're entire product line, and only charged for my time to do so, and when they asked for the files, I replied "you only paid for my time to design, not the engineering itself, the files stay in my computer". They seemed to think I was out of line.
Am I correct in thinking this, or should I pass the files on without compensation? If I am correct, what is the proper way of going about this? Thanks for any advise in advance, Dan.

[Peter H]

Dan,
This is difficult and legal advice may be appropriate. It is important to put away the emotional for the cold legal viewpoint. My thinking is that the paper trail, what there is, will ultimately most likely be what a court would decide on (hope it never gets that far) and more importantly guide what is morally right. If you invoiced them for design time (sounds like you did), they should own the fruits of that time. If you invoiced them only for parts, and provided them the parts, then they have received what they paid for and you are done. The wording on those documents is important. Those unfamiliar with what's involved think design is free if they ask for some vaguely defined item and you make parts from their vague concept. Design is work and should be compensated for. Another factor in the decision (although not a legal one) is if there is any potential for future work. A good relationship leaves the door open for future development work with them. You have to price that development work understanding that that it probably will not lead to volume production. If that door is closed, there is less incentive for you to be a nice guy. They can always get their Chinese supplier to reverse engineer the parts. In that crystal clear 20-20 hindsight, clear definition at the outset prevents this from happening down the road.

Our government is screwing over and over again and killing manufacturing in the US by letting China print massive amounts of money to keep their currency cheap relative to the dollar and relative to its real value.

[gurew]

the right thing is to give them the file since you charged for it..however...eff that mess...they played you and i personally wouldnt give them anything..its funny how a hard drive that crashes some how loses all the data....sad you didnt have a raid setup or offsite backups huh?

[DMF_TomB]

it should be stated in any contract who owns CAD files. Are they paying for Engineering services or just for parts??
.
We own Swiss and German made machines. We have many Assembly drawings that the manufacturer gave us a copy off. They usually will give us a part drawing but never have we been given us all the part drawings. Usually the original manufacturer retains the right to supply spare parts. They only give us any drawings as a sign of goodwill and to encourage further business between our companies.
.
As it was explained to me. if you buy a car, you do not own the Cad drawings and the technology to manufacturer the car. And some of it the manufacturer may consider trade secrets or have Patent protection on it. Some the drawings may be in German or have special words or terminology. The original manufacturer is free to sell "cars" to your competitors.
.
Sure you can reverse engineer it. But i would not expect too much help from the original manufacturer to give away their spare part business or give their technology away.

[OzyMark]

Here's how I do it. Customer wants stuff pressed in volumes. I design, develop and build the tooling. They pay a deposit for the tooling only and agree to a minimum supply from us. Eg he has forecast 10000 a month. Therefore he signs up for two years or 240000 parts. I still own the drawings but he owns the tool. In the fineprint I always have included that if for some reason he decides to get them made elsewhere (prc) he needs to pay for lost income, the remaining parts he signed up for. Here is the clincher, if they bail early the right to manufacture the part stay with me.

The reason I have gone to such drastic measures is simply survival. Most of my customers do the right thing and we always have good communications. I have been approached recently to let me know that I need to lower my prices for certain products as market downturns have thinned many of their bottom lines. Together we have worked out ways in which we could do that.

I guess what I'm trying to say is have a meeting with this new CEO and ask him face to face what his intensions are for the drawings. Then perhaps you may get the work if you can come to some mutual arrangement.

If all else fails and the CEO is a try hard looser trying to make a name for himself, then modify the drawings slightly and print them out undimensioned.

Good luck with it
Mark

[RomanLini]

I'm not a lawyer so this is mainly guesswork, but I have heard of instances where someone has developed a design while under the employ of another person. The person who asked for the design work to be done, and paid for the design work to be done owns the design and the files.

You may have some standing if you can claim you did not charge the full amount when you did the design work, as you expected to recover the full amount later in production. However in that case if payment has already been made in full with some invoice/receipt to show payment has been made in full you won't have much leverage there either.

I am NOT giving business advice, but if it was me I would probably do similar to OzyMark suggests, try to meet with the new CEO, explain that the deal was in expectation of you making money on the production. Ask him for some compensation or to allow you to do the production, and if he acts like a hard jerk who won't give an inch then play hard ball back.

Copy the files into a weird "proprietary format" as used by your machines alone, then give him those files. And say "Well, MY machines can do the production from those files... Can't China?"
(end joking)

[BurrMan]

He's not an "employee" of the other company... If he was an employee, then all the work/results belong to the company...

He has his own business... People pay him for a product... They do NOT own any part of his business or process that produces their product, unless explicitly contracted as such...

My CAD work is MY CAD work.. You paying for my time to create it is not you buying the rights to it... You cannot own or get my personal/business/intellectual rights unless I create a contract that definitively gives those away.

But, If you try to now manufacture/produce/sell the said product, that came from that paid process, you will be infringing on THEIR business, and may become liable...

Unless you plan on going to war and producing their product with another entity, then the files are useless to you and you keeping them from them is only distasteful... I would give them the files. (unless they somehow screwed you out of payment, then they cant have them until they pay up.. This includes an initial agreement that they were getting this work from me, with the understanding that there was to be "2 years work".... They would have to give me "severence" to get the files)

[OzyMark]

By reading everyones reply's, including my own, it's obvious that when a customer walks in without drawings, we as a buisiness try to help them to get their product to market. We make money out of manufacturing to feed our families, they make money to feed theirs. I'm sure that when we do these drawings that none of us charge the $100+ dollars an hour that a design firm would charge.

I have in the past made drawings for people that they paid for. I didn't make the product, just the drawings. Everyones happy.

I would in this situation, call a design company and get their hourly rate for designing the work that you did. Then I would send an invoice to the CEO and AFTER he pays for your services, I would release them(Still have a meeting with him though to try and secure their business):cheers:.

I guess none of us like to get taken for a ride especially when our skills and experience get a project off the ground. Over the years I have modified high speed food production machinery to suit customer needs, later models then have these inclusions without my consent. I don't mind though as the customers come to me for spares anyhow so I get a bit of my own back.

It would be a good idea for you though to seek some legal advice on writing up a generic contract for future work that clears up all the grey areas and to cover your ass.

One other thing I do always is to ask a new customer what their design budget is for their product. 90% of the time they don't have or account for one. That opens the door to explain what sort of costs are involved in design/R&D. That usually scares em off enough to let you absorb the costs through further production and signs em up for a lengthy term(Depending on volumes you add a small amount per article).

My 2c worth.

Good luck with it

Mark

[RomanLini]

He's not an "employee" of the other company... If he was an employee, then all the work/results belong to the company...

I understand that he is not an "empolyee" as such, but work done for a person under contract is "to employ a person to provide a service". The person is employed as a contractor to work on your property.

An example would be if you employed a lawn mowing guy one time, to provide work on your lawn. He owns his businss and his lawnmower and his proprietary lawnmowing secrets, but you own the lawn he worked on and it's not his to keep.

...
My CAD work is MY CAD work.. You paying for my time to create it is not you buying the rights to it... You cannot own or get my personal/business/intellectual rights unless I create a contract that definitively gives those away.
...

I admire the strength of your convictions here, but if you were paid to work on their design you are working on their property and in their employ!

Let's say I brought you my finished CAD file of my product, and employed you under contract to move a hole or change a dimension. Are you saying the file you created has now become totally YOUR property?

I'm pretty sure if you work on my idea, my intellectual property, while I am paying you to work on my property then the resulting files belong to me.

Either way I would have had a contract clearly stating that I own the resulting files before I contracted you to do any CAD work for me. I'm surprised that's not your standard customer contract? So you have a contract saying to the customer that after you work on their product/idea/files that everything then belongs to you??

[aarggh]

I would have thought it would be no different to other fields, such as photography?

When a photographer is hired, unless the contract specifically states it, you get a copy of the output or end result, but the IP, copyrights and ownership belong to the photographer. As I understand it in most cases you can't even legally reproduce copies for yourself, and in fact a lot of photo processing places state this as well.

A recent good case in point for U.S. law for almost (or part of anyway) this exact issue is the case by the enterprising guy who was sued by George Lucas for making copies of the stormtroopers outfits that he designed decades ago. Google it, he ended up winning.

cheers,
Ian

[Mike 1948]

Here's the scenerio....customer comes to my machine shop to have some parts machined for his upstart company. However, he does not have a product yet, just an idea. So I design, 3D model (for marketing) and machine the prototype parts, and only charge him for my drawing time, materials and machining time, thinking I was getting the rights to machine the production parts.
Fast forward almost a year and they have since brought in a new CEO to refine processes and now they are asking for the DWG's (China). My thought was I designed and egineered they're entire product line, and only charged for my time to do so, and when they asked for the files, I replied "you only paid for my time to design, not the engineering itself, the files stay in my computer". They seemed to think I was out of line.
Am I correct in thinking this, or should I pass the files on without compensation? If I am correct, what is the proper way of going about this? Thanks for any advise in advance, Dan.

I have been doing product and tool design for way to long and I think you said twice,"I charged for my time to do so". IMO you should give him the design, you were paid to do it. I've always been a firm believer that you "don't burn any bridges". More than once I seen customers go to "China" to get a product produced only to return to a "local" company because China did not work out. Overseas is great for for stuff that does not have any fit or function issues. You never know what you are going to get from one batch of parts to another.
I would give him the design and hope that China falls on thier faces. Then maybe you can fully recoup and posibbly make a return on the design.

Regards
Mike

[BurrMan]

I would have thought it would be no different to other fields, such as photography?

When a photographer is hired, unless the contract specifically states it, you get a copy of the output or end result, but the IP, copyrights and ownership belong to the photographer. As I understand it in most cases you can't even legally reproduce copies for yourself, and in fact a lot of photo processing places state this as well.

cheers,
Ian

This is a proper analogy to the situation at hand.. Romanlini states situations where "I am working on someone elses lawn" and would I then think I own their lawn?? Or, " someone gives ME one of THEIR CAD models to work on".. these are both completly different than what is presented here...

The contract was to provide an output to the customer, from my business.. The output is the "part" that was contracted for.. No other part of my business then becomes the payers property without written, contracted order.. This INCLUDES the model "I" make to produce his requested output (the nut and bolt)... It's not theirs.....

I had already stated though, as others have, I would give the files, Unless I was due (He did mention that the original contract was ordered with "250,000 unit stipulations) if they pulled the plug on the original contract, they dont get the files without the payment for the 250,000 run price.. If they didnt owe, then the file is no good to me (I cant re-create their product without infringment... Their product is the output part.. Not any part of my business that creates that. This includes the tooling, models and materials that make it and the part etc, etc..

With the other analogy, I own equipment and infrastructure in McDonalds that makes burgers, because I bought a burger there.. (All I own is the burger, even though my money "pays" everything about making that burger)

[RomanLini]

I'd like to apologise BurrMan, on re-reading my last post I did sound too opinionated, even arrogant. Sorry about that!

I've also been in that similar position being a programmer and was paid to create a software program under contract to a customer, and in that situation the source files belonged to the customer as they owned it and had the right to make changes and reproduce it fully under their control.

There are some good points for and against. The photographer argument is a good example of where the customer pays for the job and just gets one copy.

...
The contract was to provide an output to the customer, from my business.. The output is the "part" that was contracted for.. No other part of my business then becomes the payers property without written, contracted order.. This INCLUDES the model "I" make to produce his requested output (the nut and bolt)... It's not theirs.....
...

That is a very good point too and an excellent way of looking at it! I was referring to the case where the "output" the person is paid to provide was the CAD design. Ie; if I paid someone to design a CAD file from my sketch of my widget, I would expect to own the CAD file when they finished the work.

But if I paid someone just to make 5 widgets based on my rough sketch and they did a CAD file themselves to help them make the widgets, then I would expect to get the 5 widgets I paid for.

I think the burger argument says it all; If you pay someone to make the burger and give you the burger you expect to get the burger.

So if the customer paid you to design a CAD file they would expect to get the CAD file they paid for.

So to the OP; if your invioce reads;
2hours - make CAD file $$
materials $$
1hour - machining $$
total $$$
I think you would need to give them the CAD file?

[mactec54]

imaginemw
only charge him for my drawing time, materials and machining time, thinking I was getting the rights to machine the production parts.


You just said it in your post#1 You charged him for the drawing time, materials,& machining

If you did not charge enough for your time spent tell them, That you will have to charge them more for the real time spent on doing there job

But going by what you said, if you billed them as above, then they have already payed for your work/time & it belongs to them, or at least a copy of it

[Superman]

There are some good points for and against. The photographer argument is a good example of where the customer pays for the job and just gets one copy.
I think you would need to give them the CAD file?

No.
He should only get a 2D drawing at the very maximum,

and only charge him for my drawing time, materials and machining time,

You did say that you only charged him drawing time, OK, he got the drawing

He should not get the actual CAD file, that was created on your system for the purpose of using your CAM & getting your NC code for your machine. The processes you used to create the parts is also your key to their manufacture ( the "burger" example ).
Even the machining methods you used is your interlectual property, unless you contracted to sell it specifically.
When you get a new job, that has been done before by someone else, I know that the info on how they did it is NOT included.

[mactec54]

Superman

imaginemw had already given the company a cad 3D model, that the way his first post reads

As for the photographer argument it is not correct, the only time the photographer has the right to keep control of the photos is if he takes them on his own, if you contract the photographer to take your photos, & pay for his services everything belongs to the person/company that is paying

[aarggh]

Superman

imaginemw had already given the company a cad 3D model, that the way his first post reads

As for the photographer argument it is not correct, the only time the photographer has the right to keep control of the photos is if he takes them on his own, if you contract the photographer to take your photos, & pay for his services everything belongs to the person/company that is paying

I certainly can't speak for the laws in the US regarding photographers which I used as an example in this case as I don't see it as being too dissimilar, but here in OZ the IP definately belongs to the photographer, and I suspect it's not too different for the US. So far as I understand it, in most countries you are paying only for the end product and perhaps some basic descriptive documentation such as the 2d model as a previous poster suggested, unless the contract specifically includes the results of the intermediate processes.

Unless you write it into the contract, he owns all creative license to the photos he takes, it doesn't necessarily mean he has unlimited control and use over the images, but as I understand it, it's considered a form of copyright, and generally the customer is offered a range of portfolio or package options based on the selection taken. Usually at some point the offer is made to obtain a copy of the negatives purely for reproduction use, but this is an extra, and usually expensive option. Some 25 years ago when I got married our photographer wanted an additional $500 for the negatives, ( or a copy of anyway), quite a substantial amount for a small wedding back then I can tell you.

I do know there are differences with regards to cases like these with the artistic/mass produced aspect with copyright and IP thrown into the mix, so I don't know what would be accurate with the laws relevant with the US, but I can certainly say that over here anyway, if a client came to me and gave a napkin drawing or description of a door or cupboard he wanted made, he most certainly doesn't have any legal rights to my generated cad or cnc models unless he has paid for that. Just by creating an end product there is no implied ownership of all creative works leading to that end product.

Of course, good business management and wanting to not alienate current clients or affect future works is a separate issue and is purely a philosophical matter in cases like this. Sometimes to keep a good relationship, you need to show good faith. But if they think they got the better of the situation, to then ship it to China production, then by all means provide a very basic 2d layout, and nothing more.

cheers,
Ian

[prc104]

imaginemw
"only charge him for my drawing time, materials and machining time, thinking I was getting the rights to machine the production parts."

You stated you charged him for the "drawing time". The drawings at this point become a "works for hire". I would put everything on a CDROM with your company name on it.

Then I would personally deliver them to the CEO and at that point you need to put your sales hat on and talk to them about what value added services, immediate response, prototyping, and working with them locally as they refine the product will do to increase their ability to become a successful company.

If your customer feels that you are causing them to lose revenue because you won't hand over the intellectual property you were paid to produce, then you might be looking at a lawsuit.

I personally would look at this as a HUGE OPPORTUNITY to get in there and talk to the new management and show them what you can do.

Good Luck

[BurrMan]

It seems to come down to 2 statements of which none of us knows the answer..

What was contracted??

If a contract was drawn out to create a CAD model for a guy, and you made it and he paid you, you cant keep the model from him (I believe thats theft!)

If a contract was drawn out to produce a "widget" for you, and at some point you cancel the contract, you dont own any part of the process i used to make you a widget...

The contract was for a widget..

Worker: Here is a widget.

Customer: Cancel contract. How much did you charge me for that widget?

Worker: 500 bucks.. It took me time to design it, create it, package it and I also make a little money...

Customer: Ok, I own the models, the tooling that makes it, the equipment that packages it, and you still need to give me some of your overhead...What was that, 10%??

Me: doesnt make sense, does it?

[Geof]

imaginemw seems to have vanished.