log in
All Articles | Back

Member Articles


Five Points to Negotiate in a 'Black Box' Product Development Agreement 

by Elisha Yang

Published: September, 2021

Submission: September, 2021

 



PDF 

Article PDF

Practical Insights


Five Points to Negotiate in a 'Black Box' Product Development Agreement


  • What is a “black box” product development agreement?


  • How do you protect your product idea?


  • What intellectual property can a Manufacturer expect to own?


  • Can a Manufacturer limit a Processor’s right to work for others?


  • What about co-manufacturing agreements?


What is a “black box” product development agreement?

A food manufacturer (Manufacturer) looking to innovate new products may engage a process specialist (Processor) to prepare product prototypes for assessment. The simplest of these arrangements are so-called “black box” agreements in which the Manufacturer supplies the product idea, ingredients, and specifications to a Processor with unique processing capability.  The Processor, in turn, delivers a product prototype manufactured with their proprietary process.


How do you protect your product idea?

The best way for the Manufacturer to protect its idea is to treat it as a trade secret. Prior to sharing an idea with a Processor, the Manufacturer should enter into a confidentiality or nondisclosure agreement that treats its product idea, specifications, and proposed formulas as confidential information. The black box agreement should include a provision to incorporate this confidentiality agreement.


What intellectual property can a Manufacturer expect to own?

The actual manufacturing process, in addition to any improvements to that process created during the product development trial, would be owned by the Processor. However, a Manufacturer can negotiate to receive and own the unique formulations, recipes, and specifications created during the trial.


Can a Manufacturer limit a Processor’s right to work for others?

A Manufacturer may want to limit the Processor’s ability to perform similar development services for the Manufacturer’s competitors. This is probably an unreasonable request. However, a Manufacturer may seek this protection in any co-manufacturing arrangement that might follow.


What about co-manufacturing agreements?

The Processor may seek to obtain a right to co-pack the product that it has developed under the black box agreement. Agreeing to this proposal, or even granting the Processor a right of first consideration, is likely to be premature unless the Processor is a sole source manufacturer.


 



Link to article

 

MEMBER COMMENTS

 

 

WSG Member: Please login to add your comment.

    Disclaimer

WSG's members are independent firms and are not affiliated in the joint practice of professional services. Each member exercises its own individual judgments on all client matters.

HOME | SITE MAP | GLANCE | PRIVACY POLICY | DISCLAIMER |  © World Services Group, 2022