Enforceable Mold Ownership, Custom Formula IP Protection & Liquidated Damages Clauses for Contract Manufacturing
| Contract Clause | Standard Western NDA Weakness | Enforceable NNN Clause Provision | Recommended Liquidated Damages |
|---|---|---|---|
| 1. Non-Use (Formula & CAD) | Only stops public disclosure, not factory self-use | Manufacturer shall not use Buyer's formula, hydrocolloid bevel die, or blister tooling for any third party | $50,000 USD or 30% of annual PO value |
| 2. Non-Circumvention | Allows sub-contractors to sell overruns on Alibaba/1688 | Strict prohibition against selling production overruns or listing Buyer's custom packaging in showroom catalogs | Immediate tooling seizure + $50,000 USD penalty |
| 3. Mold & Tooling Title | Factory retains physical mold if buyer switches suppliers | 100% legal title to injection/thermoform molds vests in Buyer upon payment; must be released within 5 days | $1,000 USD/day delay penalty |
| 4. Quality & AQL 1.5 Holdback | 100% balance paid before pre-shipment inspection | 30% Deposit / 70% Balance payable only after passing third-party SGS/QIMA AQL 1.5 Major / 4.0 Minor inspection | 100% free rework within 15 calendar days |