PROTOTYPE AGREEMENTS from design to mass production

Businesses of technological entities, including production and industrial companies, involves ordering various types of robots and devices from external suppliers. Such orders often have a form of a contract for the production of a prototype of the machine, which is then to be implemented in the company’s current operations or otherwise dedicated to mass production. Apart from technological challenges related to the production of the device itself, prototyping is also often associated with legal challenges consisting of ensuring full rights to newly manufactured devices and regulating the entire process of designing, building, implementing and maintaining the product.

Stages

Any contract for the delivery of the prototype includes several essential stages that should be regulated and described in detail so that the process runs smoothly and without disruptions.

The first stage is the design stage. As part of this stage, the contractor develops equipment designs according to the guidelines and technical and functional specifications of the client. The second stage is the prototype production stage based on the developed design, and at the end of this stage the contractor provides the customer with a test version of the device. The next stage is that of testing and adapting the prototype to the customer’s individual production requirements, which, from a practical point of view is the most important – since it is here that the prototype is adapted to the actual customer requirements and the product itself is configured. Stage four is the delivery of the final device, its installation and implementation into production. As part of this stage, the contractor delivers the finished product in its serial version, along with all approvals, warranty and full technical documentation. After this, the device is ready for use at the customer’s site and is usually integrated with the machine park and IT systems. The fifth stage covers the maintenance and service of the device, although this stage is often omitted, depending on the client’s preferences; for example, he may have an internal ability to maintain the device himself, using his own engineers and  production department.

Acceptances

The contract for the production of individualised devices, first as the prototype version, and then as the serial version, should provide the detailed acceptance procedure within particular stages. At this point, it should be noted that there are different forms of acceptance depending on the stage – acceptance of the design documentation will be different from the prototype collection, and the serial version of the device will be accepted differently.

At all stages it is important to properly regulate the rules of submitting comments or objections to the received product. Prototyping in itself includes quite a large scope of freedom. Hence, disappointments may often appear at the acceptance stage, and consequently requests for changes that deviate from the initial technical specification which had been the basis for the production of the device.

Intellectual property rights

Provisions regarding intellectual property rights are an extremely important element of the contract for the production and delivery of prototypes and serial versions of devices. In contracts of this type, it is absolutely necessary to specify whether the client acquires these rights definitively or merely obtains a license, and if so, what scope it covers. In practice, very often customers decide to definitively acquire IP rights, which, however, significantly increases the price of the product. The price factor is crucial here – no contractor will decide to transfer the full rights to the device without the appropriate financial reward.

It should be added that the provisions on intellectual property rights should not be limited only to copyrights of the device (hardware) and its software (software). Usually, it is also important to properly regulate issues related to the acquisition or licensing of industrial property rights, including, for example, the right to obtain a patent for a newly manufactured device, as well as the acquisition of appropriate rights to know-how arising in connection with the performance of the contract.

Intellectual property rights are linked to the provisions concerning the obligation of confidentiality – without appropriate obligations in this respect, the technology developed by the contractor may be disseminated on the market, which will eliminate market advantages resulting from obtaining an innovative device.

Guarantee

By its very nature, the prototype is exposed to possible defects. This is due to its “novelty” or the use of innovative, previously-unknown technological solutions, so it is recommended to regulate the contractor’s liability for any defects in the contract. It is also recommended to describe in detail the contractor’s obligations regarding the method of removing the defects and – for example – reaction times to service requests (in the case of production machines, too long a repair time may put the entire plant on hold, with all the costs that that entails).

Conclusions

On the Polish market there are many specialised companies that create technologically advanced solutions dedicated to the industry and manufacturing sectors. They operate in various business models, from classic producers of high-tech equipment, to entities operating in the RaaS model (Robot-as-a-Service), and all such business models are technologically extremely interesting, and often require complicated contractual regulations. Polish producers are becoming more famous among foreign investors, while we also see a strong trend in the expansion of Polish technology to foreign markets. Both trends are strong signs of a market which is developing dynamically. The appropriate selection of legal tools is a guarantee of securing the rights of both creators and entrepreneurs interested in new technological solutions.

Author:

Jakub Pietrasik, legal adviser, senior associate, WOLF THEISS

Last Updated on February 16, 2021 by Karolina Ampulska