How to Protect Your Molds and Tooling When Manufacturing Overseas

Twice this week my law firm got calls from companies seeking assistance in getting their molds back from their former manufacturers. In both cases we had to tell these companies we did not think it worth the costs to pursue their claims. We get 2-3 such calls pretty much every month.

Typically, the foreign company (usually an American or European or Australian company) calls because they have ceased to use a particular manufacturer that is refusing to turn over the molds or tooling the foreign company supplied for the making of its products. The value of the molding/tooling typically ranges from $20,000 to $100,000, but sometimes it is considerably more than that.

There is one massive difference between the mold/tooling cases our international dispute resolution lawyers take and resolve and those we decline. We take the ones where the foreign company has a contract with their manufacturer that makes clear the foreign company owns the mold/tooling and we decline the rest. We decline the rest because the value of the mold/tooling usually does not warrant having to sue to try to get them back, particularly when the chances of prevailing are less than 50-50. Sometimes when the chances are not good, we write threatening lawyer letters to the manufacturer anyway, but they usually do not work.

If you do not take the right steps with your manufacturer before you ship them your mold or tooling, it is nearly certain you will never get them back. As soon as something goes wrong between you and your manufacturer, the manufacturer usually will seek to hold your mold or tooling for ransom, seeking either money or more product orders. It is the very rare buyer-supplier manufacturing relationship that lasts forever and if you do not take steps to protect your mold/tooling, it will be the even rarer relationship where your manufacturer does not end up with your mold/tooling, or at least with you having to expend considerable funds securing their return.

So what are the right steps?

First, get your manufacturer to agree in writing that the mold or tooling belongs to you. Make this clear and do it in a contract that is enforceable in the country to which you are sending your mold or tooling. Second, this agreement also should provide for jurisdiction in a court in that country because having to go to an arbitrator that lacks the power to order your manufacturer to return your mold/tooling will not cut it. Third, if possible, get a deposit for your mold, which deposit you will return when the mold is returned to you. Forth, and this becomes particularly important if you do not get a deposit (and you almost certainly will not), put in a liquidated damages provision that applies if your mold is not returned when specified. Fifth, mark your mold/tooling with something hidden and difficult to remove that indicates it belongs to you.

Taking these steps will not guarantee you will see the return of your mold/tooling, but failing to take these steps virtually guarantees you will not.

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