Buyer questions · Purchase decisions
There is a dispute in the OEM contract regarding mold ownership; the client fears the factory will use the custom molds for other brands. Can the factory clarify the exclusive usage rights of the molds and confidentiality breach liability clauses in the contract?
Mold ownership and usage rights must be drafted as separate clauses in an OEM contract. If the client funds the mold creation, the contract must explicitly stipulate ownership attribution; upon termination, it must detail the disposition of the molds, such as return, destruction, or storage periods. If the factory agrees to 'exclusive usage rights', the contract must define the scope of products, regions, and time limits, along with minimum purchase quantities and auto-expiration conditions if targets are not met. Regarding confidentiality breach liability, penalties should have a calculable basis and an overall cap to avoid unbounded exposure. Always refer to the latest official legal texts and licensed attorney advice for these clauses.
1Separation of Ownership and Usage Rights Clauses
Stating who pays the mold fee is not the same as stating who owns it. If the client pays, the contract must explicitly assign ownership to them. Exclusive usage rights must be limited to specific product lines, regions, and time frames, with minimum purchase quantities and auto-expiration clauses.
2Post-Termination Disposition and Custody Mechanisms
Factoring in the reality of factory custody, the contract must specify the storage period for client-owned molds upon termination, transfer methods, and procedures for unclaimed items. It cannot assume the factory has the right to retain or destroy them indefinitely without liability.
3Confidentiality Clauses and Liability Caps
Committing not to use custom molds or formulations for other brands falls under confidentiality and IP protection. Breach liability must define calculation standards for penalties or an overall liability cap, excluding unforeseen indirect damages to prevent uncontrolled financial exposure.
Follow-up questions
- Q:Can the factory demand to keep the molds if the client hasn't paid?
- A:No. If ownership is explicitly assigned to the client, the factory can only assert a lien and claim storage fees, subject to statutory limits.
- Q:Must the factory prove the destruction of the molds to the client after scrapping?
- A:Yes. The contract should require a third-party destruction certificate or retain video evidence to eliminate client concerns about the molds being sold or reused.
Updated 2026-09-18
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