You’re all set for the autumn/winter 2012 season and certain that months of design, product development and sampling are about to pay off. When your show-stopping garment makes it to the runway, you look around to see mixed faces and wonder why your design isn’t the hit you thought it would be. When the dust settles, you learn that your show-stopper, the design you poured your creative heart and soul into, has been on sale elsewhere in the world. Naturally, you’re devastated, and wonder what happened? The answer might lie in your supply chain or, more specifically, your manufacturer. While using overseas manufacturers is attractive in some respects, it’s fraught with more disasters because you have less control over the process. And, if you’re not careful, you might find yourself in the same situation as Trelise Cooper at the end of her autumn/winter 2010 collection show in New Zealand. Much to her horror, it was revealed one of her designs – a grey sweater featuring a red sequin ribbon – was sold at UK High Street retailer Topshop months before her showcase. In fact, the garment was marketed under the Markus Lupfer for Topshop collection and retailed for just 85 quid. Cooper told the New Zealand Herald her Chinese supplier delivered the final piece “the same month it came out in Topshop”, making it logistically impossible for her to rip off the design. She suspected foul play somewhere along the supply chain, most likely with her offshore manufacturer or embroidery supplier. Designers for this autumn/winter season can learn from the incident and ensure their designs don’t ‘walk away’ with their manufacturers by having airtight manufacturing contracts in place. It’s incredibly important to ensure you have a very clear, precise and well-structured contract which sets out the obligations of you and your manufacturer. Important clauses that should be considered are:
Starting with a tight contract: In no uncertain terms, you want to clearly set out your rights in relation to your designs and other intellectual property (IP). These rights include that you retain ownership of your designs and that the manufacturer is prohibited from reproducing the designs (or a substantial part of them) for a third party. One issue not often considered is that your original designs may vary from the designs originally given to your manufacturer. Therefore, you want the contract to clearly state that any alterations to your designs remain your property. Otherwise, the manufacturer may have a reasonable argument that the designs vary from the original designs and therefore, are no longer your property.
Keeping the silence: A robust confidentiality clause is crucial to a well-drafted manufacturing contract. Not only do you want the clause to be drafted so your IP remains confidential, but the very nature of your relationship with your manufacturer may require you to discuss other commercial aspects of your business. Basically you’d want to ensure any information you provide to your manufacturer remained confidential.
Timing to perfection: It goes without saying that being able to run a successful fashion business means being able to meet deadlines. The rise of fast fashion retailers and pre-season collections have resulted in a much faster trading environment, with weekly and even daily product drops now occurring across major chain stores and independents alike. In this regard, it’s important your contract with your manufacturer states the time for delivery of the finished product. You will likely have retailers chasing you if the designs aren’t given to them by a specific date and you shouldn’t be disadvantaged because of your manufacturer’s tardiness. It’s worth considering whether penalty provisions for late delivery will be warranted or, in more extreme circumstances, whether you can terminate the contract. After all, it’s not just your brand’s reputation on the line, but its stockist base too. And with retailer conditions just starting to pick up in Australia, you want to make sure you hold on to your best clients.
Added protection: Warranties are very important to designers, both from a legal perspective and for peace of mind. Warranties are assurances which provide some comfort to the parties to the contract and are provided in relation to a variety of legal issues. For example: it’s important your manufacturer has all the requisite government approvals, licences or permits to run its business and perform the contract. It’s equally important your manufacturer has the appropriate insurances in place – for example, what would happen to your designs if the manufacturer’s premises went up in flames while your designs were being manufactured?
An exit strategy: A well-drafted contract would also include clear termination clauses which allow you to quit the contract when your manufacturer isn’t keeping up its end of the bargain. Imagine a situation where the samples you get back from your manufacturer don’t live up to the high standard of your label? If you don’t have express rights to quit the contract, you might be obliged to continue working with the manufacturer.
Monogamy: It’s important your contract prohibits any transfer of the contract to a new party. For example, you may have sourced the most reputable manufacturer, but who knows when the manufacturer might retire or simply want to sell its manufacturing business for an easier lifestyle? It’s important your manufacturing contract prohibits the manufacturer transferring the contract to any other person, unless that person is approved by you. Otherwise your manufacturer may be able to sell its business to anybody willing to pay for it and there will be no way for you to ensure the new manufacturer has the requisite skills to carry out its obligations under the contract. While imitation might be flattering, it’s hardly the type of compliment a designer wants to receive. Well-drafted manufacturing contracts are an important tool that can be leveraged to protect and enhance your brand for any fashion season.
