An OEM agreement is required when a company wishes to contract to supply spare parts to another company. The company that supplies the parts is referred to as OEM equipment manufacturer or front-line OEM. The purpose of an OEM contract is to define the conditions under which the OEM supplier delivers the spare parts to the buyer. Most of the manufacturing contracts we design include one of three different types of manufacturing agreements: original hardware manufacturing (OEM), contract manufacturing (CM) and original design manufacturing (ODM). These three different regimes influence different legal issues inherent in overseas production. While these five problems are generally difficult to solve, they are in fact the simple part of the process. The most difficult question is who owns what in terms of intellectual property in the product. The finding that your overseas plant owns 50% of it and that you own 50% of it may be relevant to the allocation of revenue from the marketing of IP, but that does not tell you anything useful at the practical level of the manufacture of the product. The initial equipment production agreement is a two-part agreement between the OEM manufacturer and the purchaser; It is therefore important that both names be included in the agreement. The agreement should also include the effective date of the agreement, the product delivered, the product quality specifications, the quantity of products needed for a specified period, the details of the delivery, the payment schedule, the applicable price for the product.
What is an OEM agreement? An OEM agreement – the initial equipment manufacturer agreement is an agreement between the first OEM of a product and a company that buys its products for resale under its own brand or to use as another product. Since two parties are involved, this is a two-part agreement. Type 2: Manpower-based manufacturing (CM). In this arrangement, the foreign buyer has a fully developed product design. Traditionally, it was a product manufactured by the buyer in his country of origin. More recently, the product is a new design manufactured for the first time abroad. In a CM agreement, the property may seem simple: the foreign buyer owns all the IPs, both in design and branding, and the factory owns nothing. However, in practice, the distribution is not always so clear.
For example, your factory may change the design of your product and use these design changes to modify its own products, which it sells in direct competition with your products.