Consumer Law, Warranties Negotiating a license agreement to manufacture

[markw33]

My jurisdiction is: Michigan

My partner and I have won a kitchen product design competition sponsored by a large US Corporation that manufactures and markets worldwide. We are to receive our award and recognition at an international trade show to be held at McCormick Place Convention Center in Chicago next month. We are fairly certain that this company will want to negotiate for ownership or manufacturing rights as per this paragraph of the design application:

SPONSOR'S RIGHTS TO NEGOTIATE FOR OWNERSHIP/USE OF ENTRY DESIGNS: By submitting an Entry, the relevant Entrant grants to Sponsor (a) a right of first refusal to acquire ownership of the design in the relevant Entry and/or a license to manufacture and sell products embodying the design in the relevant Entry, or (b) at Sponsor's sole option, the right to negotiate in good faith for such ownership or license, to which the relevant Entrant will respond in good faith.

We have have filed our patent application. We have not talked to our patent attorney yet re negotiating a business contract with the Sponsor but I am assuming that we will need to find a different attorney to handle contract negotiations:

1. Should we pay an attorney an hourly fee or work on a contingency basis? What would an appropriate contingency % be?
2. How do we get assurance that should the company license our design they will give us accurate numbers on the number of units sold worldwide?
3. Is there a standard % when asking for royalties?

Any help would be appreciated. And Thank You in advance.

Sincerely,
Mark

 

[Michael Wechsler]

1) What do you mean "contingency basis" for contracts work? I'm not sure such a deal with work for either of you.

2) You put a reporting mechanism into the contract and have a reasonable right to audit the numbers. A good attorney should have seen these before.

3) This is a business question and depends upon the industry. Royalties for a music song will be different than the sale of a kitchen appliance.

You may also want an attorney to look over the competition rules since there are words like "right of first refusal" in the clause you've pasted above. These things are important and perhaps you should start now by hiring your attorney to look over the agreement.