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Sep 29, 2011

Getting your Molds Back from a Supplier in Asia

My friends at the China Law Blog have a good post on how to assist in guaranteeing that your molds are returned after the cancellation of an OEM agreement with a supplier in China.

The same advice is applicable when you are doing business in Korea, Vietnam, Laos, Cambodia, Malaysia, the Philippines and the rest of Asia.
The way to avoid having your Chinese manufacturer run off with your molds is to make sure you require the manufacture to sign a contract that makes very clear to whom the molds belong (to you) and what will happen to the Chinese manufacturer if it fails to return your molds to you.
Even better, you should, if possible, get a deposit for your molds, which deposit you will return when your molds are returned to you. If the Chinese manufacturer will not give you a deposit for your molds, (most will not), put in a liquidated damage provision that applies if your mold is not returned when specified.
To reiterate:
  1. Have all agreement localized and drafted in English and the local language.  Yes, an agreement from a lawyer in the U.K. or the states is not adequate for doing business in Asia;
  2. Have the OEM and other agreements formally executed (sealed);
  3. Include a liquidated damage clause in the agreement.  Also, you should have a valuation of your molds that can be substantiated or the clause may not be enforced in court;
  4. Request a deposit.  It will likely be refused, however, if it is not refused, the liquidated damage clause may not be necessary if the value of the molds equals the deposit.
I would add:
     5.  Due Diligence; and,
     6.  Register your IP.  Often your molds and other IP may be protected in Asia.  No, your 
          international filings are not enough.  These filings only give you a grace period for filing

What do you think?