Agreement for electronic design

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
i have a situation where a guy was introduced to me by a customer who had a particular need. I’ve discussed with the guy a few solutions and he’s interested in a design and prototype. Is there some sort of standard design agreement and billing? I have since found out that’s it may go into mass production; the product they have is a little strange but was issued a patent. Planning on going off on my own within a few years as to design/manufacture for electronics. Please and thank you.
 
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jpanhalt

Joined Jan 18, 2008
8,079
They/it (the company and/or individual) have a patent. That covers a lot, but not all IP related to the item. They may get more patents based on your work.

The simplest thing to consider is doing it as a "work for hire." Everything you do belongs to them, and you should be compensated accordingly. They will probably present you with a non-disclosure agreement (NDA) to sign. That is not an uncommon arrangement.

If you want to share in the spoils of invention, you should hire an attorney to protect your interests. It is quite a specialized area of law. That might kill the deal, and "they" may find another person for the design.

Edit: Your last sentence about going it alone in a few years just hit me. Are you currently employed? If so, non-compete may come into play, and the aforementioned company may lose interest in you. If not, even a work-for-hire adds to your experience and credibility as an independent contractor. No work doesn't.
 
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Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
Currently employed in sales for steel industry so no conflicts.

The idea is already patented so the art is out there and already protected.

My device is not vital to theirs but if they use my design I would like to get paid for the use. I can see this device growing in capability in the future.

I am able to do low volume in house about 2000-4000 units month. It may be enough and that way I can share in profits.

You may be right about contract to hire scenario with option for us to manufacture. What’s the going rate for delivering microcontroller based prototype, gerbers and programming.
 

jpanhalt

Joined Jan 18, 2008
8,079
Currently employed in sales for steel industry so no conflicts.

The idea is already patented so the art is out there and already protected.

My device is not vital to theirs but if they use my design I would like to get paid for the use. I can see this device growing in capability in the future.

I am able to do low volume in house about 2000-4000 units month. It may be enough and that way I can share in profits.

You may be right about contract to hire scenario with option for us to manufacture. What’s the going rate for delivering microcontroller based prototype, gerbers and programming.
I don't have a clue. That is not my area, but you can estimate it based on double what a full-time person gets paid annually/2080 hours/year:

e.g., (100,000/2080)2 = $96/hour (not including benefits)

The double is because no one is productive 100% of the time and excludes benefits and overhead. Since this is "spot work," I would consider that calculation an absolute minimum, unless you have other reasons to do the work (e.g., excitement, experience, resume building).
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
I’m always excited and want to build things but I spent over 40 hrs designing something for a buddy recently and spent tons of money buying, trying and stocking components and even paid for 3 rounds of PCBs so he can get it for $5. Haha I gotta cover my butt. He wants me to design something similar to (but more complex) that another company took 6 months to R&D for about $10 each.
 

MrChips

Joined Oct 2, 2009
19,383
Don't short change yourself.
Let's start with $100/h as a baseline for technical work, for example, auto repair.
Now you are doing engineering design.
You will expend three times more time than your original estimate.
$300/h is not unusual for this type of work.
 

MrChips

Joined Oct 2, 2009
19,383
As for going off on your own, you are in a difficult position.

Everything you do will belong to them. You may/will be as asked to sign a NDA (non-disclosure agreement) with a NCC (non-compete clause). This will prevent you from doing what you propose.

Before you enter into such an agreement you need to get help from an attorney working in this specialty.
 

jpanhalt

Joined Jan 18, 2008
8,079
Re: NDA and NCC

Both are common, but in my mind, an NDA is much simpler, and I have signed many. An NCC is a wholly different animal, and I have never nor would I sign one.

For an NCC, I have been told you need to answer 4 questions: 1) Is the restricted area of endeavor reasonable; 2) Is there a legitimate business reason for the restriction (sometimes combined with #1); 3) Is the geographic region to which it applies reasonable; and 4) Is the duration reasonable.* I would certainly get advice from an expert before signing, but since I have never considered signing such an agreement that has been a non-issue for me.

*I would make the distinction between an NCC and a prohibition against competing during employment. For example, an auto mechanic at a Ford dealership who moonlights for another garage might be fired for doing that. The justification being that besides simply working for a competing company, as a Ford mechanic he may have proprietary information or specialized training. However, once fired, that mechanic would be free to work for whomever assuming no NCC.
 

MrChips

Joined Oct 2, 2009
19,383
There are ways for you to benefit from your design effort, over and above the initial contract work.
Since you will need to program a microcontroller, the code is your IP, unless you give them your source code.

1) You can charge a fee for every programmed MCU you supply them.

2) You can negotiate a royalty for every unit that they sell.

Again, seek legal advice.
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
I have no issues with NDA since their business is private. But whatever is available online including their patent is public and therefore not covered.

Non compete, I have seen some unconscionable agreements and have seen them overturned when too restrictive. Thanks for your perspective on this. I will have our lawyer go over if he sends one.

If the non-compete is restricted to his specific use it may be ok.
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
Nah one of my goals is to make a non profit place like maker space near me (Wendy thinks I should just do it but it would be easier with funding)... I love this stuff... want to see it continue to grow. Any help I get along the way should be appreciated.
 

jpanhalt

Joined Jan 18, 2008
8,079
If the non-compete is restricted to his specific use it may be ok.
Forgot to comment.
1) If the NCC is that specific, why won't an NDA suffice?
2) Watch out for "liquidation" damages. Easy to add. Difficult to enforce. But can be expensive for you to defend against. That is, they are for intimidation but can sometimes be enforced, thus burdening you with expense.
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
Would love a separate thread about Maker Spaces... and yes, I think that non-profit is the correct approach to this. Also there is a current trend for fix it or learn to fix it cafes or shops... it could incorporate this idea.

Sorry about going off topic.
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
So I’ve got a first draft of my proposal done. My initial quote won’t be as high as you suggested mr chips although it makes complete sense. Im offering a friendlier rate that will hopefully capture more on the back end and get me started. It’ll be a fun project. It’s funny when you think to yourself, this is so easy I could do this in a couple days. Then realize 80 hours into it it was quite a journey. And yes my silly project for my friend took almost 80 hours... I checked today. But it came out awesome. I’m sure bit of that is my fault cause I get to try some interesting things.

As long as butt covered I’m good. It’s a good start and you make your money when you’re working not quoting. I just need to be covered in case they keep changing things... cause that never happens.
 
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tindel

Joined Sep 16, 2012
667
TLDR: I agree with the very good advice to hire an attorney in your situation. Also consider an indemnity agreement to protect yourself from unintentional wrong doing.

I don't think $100/hr is unreasonable for a solo person just starting out and doing some easy work for a colleague in your basement. That should cover health insurance, basic small business company insurance, some attorney fees, basic used lab equipment, both halves of FICA, etc. At that kind of price I would want to see some royalties out of it though if sales start taking off. Again - seek legal council specializing in employment/contract law. It's a very niche field. Double bonus if they know anything about patent law in your situation - but you'll typically have to hire another attorney for this.

I agree NDA's aren't a big deal - in this industry loose lips sink ships - so you need to maintain some level of that at all times anyway. It seems prudent to honor an NDA for the person putting food on your plate.

NCC's are a HUGE deal and not generally enforceable, as I understand from my attorney, but it could scare away potential clients and employers. I try to avoid them, or know that it's a field that I'm not particularly interested in. I have signed them before, but not without careful consideration, and not without a termination clause based on being laid off or time away from the company (usually 1 or 2 years).

Something I've been very particular about over the years is having a good indemnity agreement. This means that if I provide my work in good faith/tort (again seek a lawyer) that I will not be held liable for any wrong doing - just as a full time employee would generally be protected from lawsuit. I won't work with someone without a indemnity agreement. Period end of story.
 

Thread Starter

Wolframore

Joined Jan 21, 2019
1,318
First proposal outside of my buddies... I feel comfortable at my quoted rate and time frame... now if I could get my buddies to pay for my time before they start thinking of things that would take months to create... if things were related it wouldn't be so bad but wow some of the interesting ideas they get once we get one project done... amazing.

Thanks for all your advice on this... this will pay for a small Chinese pick and place machine I've been wanting and a few other toys... :)
I have a 2 year time frame before I go full time. Meanwhile I can ramp up my equipment and do these smaller jobs which are always learning experiences... we learn a lot from each problem that arises.

I added an indemnity clause... very good idea.
 
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