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Re: Repetitive Use of Design

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> From: "Bill Marczewski" <bill(--nospam--at)bsmstructural.com>

> I've been asked to design the concrete work for some septic tanks for a
> local concrete plant.  I was not terribly excited about this request,
> but the concrete plant made me feel sorry for them as there are few
> other people in the area who perform structural design.  My question is
> whether or not I should request some type of repeat fee or other (?)
> related to the reuse of my original design.  Has anybody done a similar
> design task before, and if so would you mind sharing with me your
> contractual concept as presented to your client.  I'm not looking for an
> actual document, just some feedback as to whether or not you would
> request a yearly fee for use of the design in addition to the initial
> design.  Thanks.

Talk to your lawyer.

You are negotiating a contract for use of your original design AND your
on-going support for that design every time it is manufactured. It is
NOT the same as an employee design where the employee is covered by the
employment laws and corporate liability insurance, every time a unit is
made. It is NOT the same as a contractor/owner who builds 2 or 3
buildings from one design. The manufacturer will build HUNDREDS of
duplicate units. It is NOT a one-time design.

I think that a royalty per unit would be appropriate. The manufacturer
should be able to give you some projected annual sales quantities and
the royalty could be converted into an annual fee tied to sales.

Discuss the quantities and liability issues with your insurer.

There should be a method for each party to back out of the contract or
trigger changes in compensation. Set a time limit and a unit quantity
limit. Talk to your lawyer.

You could have the manufacturer establish insurance on your behalf to
cover your liability on units supplied during the term of the design
validity. This may reduce their direct unit costs but covers you in the
event of a class-action suit where a problem occurs with many units.

Your contract might need to stipulate that the designs cannot be used
outside of the legislative limits of your license and beyond legal
application dates of the current building code and design standards.
Talk to your lawyer.

The manufacturer should permit you on-going/random access to their
manufacturing, order fulfillment and marketing details. This will permit
you to verify that the the design is being fabricated/sold appropriately
and that you are receiving the correct royalties.

Consult with the manufacturer to establish the limits for their product
(e.g. dimensions, loads, materials, processes, regulations etc.). It may
turn out that they want several standard products rather than 1 for
their market.

Your contract should relieve you of liability due to improper
installation or use by the buyer/owner since this is beyond your control
(The owner/buyer should involve their own engineer as required). You
should ensure that the manufacturer provides adequate documentation to
describe limts of applicability, proper use and forseeable mis-use (like
the warnings in the manual for a toaster that says you shouldn't operate
the toaster while it is submerged in water ...). Talk to your lawyer.

Since you will not actually do additional work for each standard unit,
you could set the royalty to suit:
a) the percentage of the original design cost that represents your
pro-rata insurance overhead unless managed in other ways;
b) The percentage of the original design cost that represents your
pro-rata professional maintenance overhead (licenses, manuals and
standards, courses, etc.);
c) direct monitoring expenses;
d) a realistic profit to you.

Do not be concerned if this number seems large. The manufacturer needs
to determine if the total exceeds the market price point. If they are
unwilling to add your expense on their unit costs, suggest that they
hire an engineer employee with commensurate overheads and add that cost.

You will probably recieve related business through the manufacturer's
sales referals but you should ignore this for the purposes of royalties
for the original design.

Did I mention that you should talk to your lawyer ...

-- 
Paul Ransom, P. Eng.
Civil/Structural/Project/International
Burlington, Ontario, Canada
<mailto:ad026(--nospam--at)hwcn.org> <http://www.hwcn.org/~ad026/civil.html>

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