Design Ownership – My Take

Posted: November 9, 2016 in Articles Worth Reading

15339-11575-151222-ceiling-3-lIn September, Elizabeth Donoff or Architectural Lighting wrote an Op Ed titled “Who “Owns” Lighting Design?”. It was a well written exploration of the topic. She pointed to one specific example, a ceiling that Apple now uses in its retail outlets, which it has patented extensively. She uses this as a case for questioning where the line of authorship and/or ownership of a technical solution is, and who owns the end product. the ultimate question is of who owns authorship?  I get the point, and have been confronted with it my entire career.

Product Perspective

I’ve designed more than 240 products that have returned an estimated $340MM in sales to the companies that sell and have sold the products included. The majority of these are still in production, even a few that are over 20 years old. There has also been around that amount sold again by those who knocked off the designs outright, and another half again by those who have tinkered with them to make them “unique” to their purposes.

I also have 14 patents (design and utility mixed), which have paid me… full disclosure… a total of… wait for it… ready? Okay, here goes… $1. Yep, one dollar.  As a contractor or employee, the designs and inventions were not mine to own. Some will argue that they could have finagled a deal to capture royalties or some form of return from the work. That’s fine. However, as a VP of Design and VP of Marketing, as well as design consultant since 1990, I cannot point to more than a hand-full of royalty agreements, and none that lasted more than a few years. None returned the designer any real income, certainly nothing close to what I was paid directly as an executive or contractor.

Independent of employment, any agreement can be made to the satisfaction of the parties involved. Some might retain a fee at the front end of a project, then a small royalty for products sold, usually based on some portion of a profit, either gross or net. These are very rare agreements. The more common and frequently requested approach I see coming to me, is where I am asked to design without compensation, where I am to be paid only a royalty on sold products. There is no guarantee that the product will ever be sold, so this approach can lead to a lot of time invested in a dead-end. I am sure there are success stories out there for both of these approaches. I am not aware of any directly, and find that if I open the door to free design, I will find myself very busy… and broke. So, I generally don’t bother. The majority of my work is fee based, where the design is understood to be the property of the customer that pays those fees.

The reality is, large manufacturers have the resources to do all their own design work, so don’t want or need outside help. This is particularly true for mass-produced high volume products. When they reach out, it is to get a fresh set of eyes on a project they have already defined and made progress on. They are not interested in paying royalties, nor are most of them interested in unsolicited design proposals. They will do a customization or special for a designer at various times, based on a specification or design request, but pay nothing for that input or contribution. The designers involved are hired by customers whoa re not in the product development business, so are not really interested in playing games around who owns the product designs involved.

Looking at this from a manufacturers vantage point, the cost of a product released to market is 50% materials and labor. The balance pays for some tooling, overhead, profit and some taxes. If a product returns 10% net to the bottom line, that’s a success. So, a designer that agrees to design that product for 5% of profits, for a product selling for $300, is around $1.50 per unit. If the manufacturer sells 200 units a year, that’s a payout of $300 to the designer. Not a lot to get enthusiastic about. Multiply the number by 10X and you still have nothing to really build a business around.

Design protection is not free. A Design Patent can run in the order of $10,000, taking a year to complete. A utility patent can cost three to seven times that, and take up to 3 years to complete. But that’s not the issue. This demands a product sell in a high enough quantity and at a high enough profit to return that investment. For arguments sake, a product that sells a few hundred units a year, at a net profit of 10%, is not going to get the job done. That means all those esoteric pretty designs in designers heads may be great, they are just not worth patenting. Protection can be had in the form of copyright, which can be a little tricky, but is less costly. Mitz Levin wrote an excellent article on this topic.

Design patent, utility patent, or copyright, the real issue is that none of this means anything if they are not enforced. This is where costs really add up. Defending an infringement can take years, and absorb thousands of dollars. Again, for large mass-produced items, in a competitive market, this may create a return on investment. However, for small limited production designs, it’s not an option, therefore, the interest in the entire patent process ends.

This comes back to the designer interest and ownership. Without protection, the design can be “adjusted” and marketed, separate of any prior agreements. Further, a designer without the resources to enforce a patent or contract, is not in a position to maintain it. This also raises a question – If the designer insists on maintaining ownership, with licensed or commissioned release to a manufacturer, is it not that designers responsibility to protect that design? In this, the cost of protection and the cost and effort of enforcement become the designers burden. Not exactly something a lighting designer can pull off.

15339-11574-151222-ceiling-xlTo that Apple Ceiling

The Apple luminous ceiling is covered by a utility patent, and it is extensive. Utility patents do not protect what an end product looks like, only how it works and how it is made. In this, it does not preclude anyone creating a ceiling that looks identical to the Apple ceiling, but does keep someone from using the same construction as was used. Further, there are features built into that ceiling, including how and where security cameras, spot lights, sound system, and HVAC components are integrated. Most of all, the patent describes the massive area of the luminous portion of the system, so their will be snags copying this appearance without employing similar construction. This was an ingenious design and patent approach costing hundreds of thousands to execute.

This is a bespoke product that fits Apple exceptionally well, forwards their design image and sense of technology. In this, the design belongs to them exclusively.

For designers who do similar custom image design for corporations, there will be times when this type of project comes to fore. There will be no royalties involved, nor will there be residuals. The design is a commissioned work, with the ownership defined up front. There will also be numerous NDA’s and other contractual agreements that pretty much state this is theirs, with all associated properties remaining that of the customer.

Does this preclude any designer from pursuing luminous ceilings with slots? Nope. It may preclude the designers involved from producing a similar product for another customer, for some stated period of time though. That’s the design practice.

Application Design  Ownership

In the work of developing a lighting design, there are numerous instances where a detail, or specific look may emerge that includes custom production by contractors and products made by participating manufacturers. In this, there will be instances where a design idea emerges that appears to have market value beyond the single project. The number of instances that occurs in are relatively rare, but they do exist. This raises an issue of ownership. If the design specifically developed for a customer are put into production, without that customers consent, there could be a conflict. The understanding with most design contracts s that the customer paying for the design retains ownership of it. If this is an issue, the designer needs to include conditions within the consulting agreement that this is not the case. For some small customers, this is unlikely to raise any eyebrows. For larger customers and image customers, this will likely disqualify the designer from the project. Large customers are very protective of their image and the designs they pay for.

I have had but two run-ins with lighting customers who discovered I recycled an architectural design that worked on their project on another project they became aware of. In both instances I changed the design for one or the other, to allow each to have a unique version or end product to their satisfaction. I have had one conflict with a product design that came too close to a target competitors design. That took more time and effort to resolve, but ended in a similar way. A small detail was changed to create a more unique differentiation and the conflict was resolved.

Is There a Path to Profiting from Ownership?

In the end, who cares who owns what, unless there is a path to exploiting that position into profit. In this, beyond the fees earned on a project and the experience of using a lot of someone else’s money to see a design dream realized, there is no way to convert that position into an ownership for profit position. If the customer decides to take what they paid for and protect it in some way, on their financial nut, that is definitely within their rights. The real question comes down to how much of that design can be used by the designer on future work? The answer to that is not easy. In the case of Apple’s ceiling, the range of motion is going to be pretty tight, and is well-defined by the patent they own on it. Further, that design is the product of these inventors: Behling; Stefan (London, GB), Nelson; David (London, GB), McGrath; James (Cupertino, CA), Muller; Wolfgang (London, GB), Poli; Lorenzo (London, GB), Richter; Bernd(Heubach, DE), Bridger; Robert (Woodside, CA), Siegel; Jonathan P. (San Francisco, CA), Agnoli; Vasco (San Francisco, CA), Feeney; Casey (Palo Alto, CA). This pretty much puts a lot of wall between any one of these participants and the design itself.

If a product is for a less noteworthy customer, and is of a single source author, the issues becomes much softer. In my experience, modifying the design in some way to make it unique to another customer is well within acceptable bounds. In this, I have designed and been part of designs of luminous ceilings and lighting products that have similarities between end products and customer applications, but were individually unique. However, there are no long-term benefits from owning a core design, beyond selling service expertise on a fee basis.

This leads back to the question of product designs developed during project work, that are marketable. The rules still apply, the product designed for a specific project remains the property of that customer. Versions of the end product may also be claimed by the manufacturer involved, as they use project input for new product development all the time. These are normal market behaviors, unlikely to change any time soon. There may be instances, rare but not impossible, where the manufacturer engages the designer to develop a product along the lines of that created for the project, for production purposes. But, in these cases, ownership will be assigned back to the manufacturer, with the compensation for design services the limit of the profit realized. Some, in very rare and unique situations, may agree to pay a small bonus or royalty for some time based on product sales… but this will generally not produce a significant income to the designer, and is virtually impossible to track.

There is a Path

Now, say a great product idea does emerge from a project, that has mass appeal potential. How can this be kept from being absorbed into the pool of ownership rights beyond the designer? Simple enough. Do not say a word, quit the project and develop the product independent of the project, including engineering, and development of it. If the product discovered is important enough to the market to be attractive to manufacturers, one project using it will not make a big difference at all. In fact, this is a perfect qualifier. If the product design is solid enough to stand beyond the project, it is worthy of a manufacturers attention. But, the issue there may be that the manufacturer isn’t going to be interested in paying a fee for an unsolicited product, or will only pay a fee and no long-term royalties. The fact is, by the time the product is designed, engineered, tooled, tested, listed, marketed and then put into production, the contribution of the designer becomes a very small portion of the total.

Design independent of lighting customers also avoids conflict of interest, where a design owned by the design author is included in projects the designer is contracted to complete for owners. Some have no issue with this, but it can be sticky, especially if the customer finds the product being used by another designer on a project that competes with them. That could be an ugly mess.

Design is not like being a published author, nor do we want it to be. Authors invest a lot of time writing before collecting anything. Few actually make a real living from their effort, and then only after years of being paid little for their effort. Artists suffer even more. Designers in the building and building product industry  actually are some of the best paid in the design business. Industrial designers may be a close second, and have essentially the same ownership dilemma as the building industry, or worse, since most of their work is directly image work covered under not only NDA bu non-compete agreements that preclude them capitalizing on an inspiration that transcends the customer work in hand. They too find that manufacturing is the path to ownership and control.

This leaves the path to product ownership only through manufacturing, or contracting the product to be manufactured to specification independent of a project. But, how many designers are going to take such a route? Well, Bill Lam did and Sylvan Shemitz did.. out of thousands of designers that have come and gone in their careers. Both made the transition from application design in their own way, to product ownership and profited from that – beyond design and design consulting work.

Ownership is Paid For

Who owns the product of designers? This goes back to the works of master painters. The one who buys the art, owns the art. In architecture, that means the building owner, whether or not they were there for the construction, just as anyone owns the work of an artist purchases at auction. Who owns product design is the manufacture producing it. Who owns the pattern on fabric is the producer of the fabric. Who owns the Apple ceiling and its wonderfully clever patent? Apple does, it has been assigned to them, end of story.

The only way to truly own a design is to produce it for oneself and never allow another to take possession, or to get into manufacturing.

In Elizabeth’s editorial, she raised the question of whether a design concept can be owned to the exclusion of others, like the luminous ceiling Apple created.  The answer to that is clear. Yes, and no. Apple cannot own luminous ceilings, only the one iteration of that, covered by their patent, for 14 or 20 years depending on their patent approach.  This does not preclude another from creating a similar looking end product using different construction, or creating a prettier design using novel materials. Vira Wang cannot own white on white retail, as that would preclude Apple from their own design. So, unless a design is so important to a brand or customer that they must have it protected, there is no real path to keeping it from being copied or used as an iterative foundation. There is virtually no path to an artist or designer owning a design after it has been executed at another’s expense or purchased at some point beyond. This includes owning product designs put into production, that are not developed under previous exclusive agreement, which is a very rare thing in this business. Designers will never make the kind of income manufacturers do. However, designers are not exposed to even a small percentage of the risks manufacturers face attaining those gains. No pain, no gain, and the one who MAKES the most toys wins in the end.

Thanks for the inspiration to think about this topic Liz…

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