Manufacturing Rights

Manufacturing rights are the rights that allow the holder to manufacture an item. They are acquired through contracts or other arrangements, and they can include the use of a licensor's patents and designs. The term is used in defence manufacturing and in intellectual-property licensing.

In Canadian federal procurement, the term appears in two main places. Public Services and Procurement Canada (PSPC) guidance on CanadaBuys treats manufacturing rights as part of royalty payments and licence agreements. Department of National Defence (DND) solicitations use the term when they define who may supply deliverable items. Suppliers working on defence contracts will meet it in both settings.

What manufacturing rights cover

The UK Ministry of Defence's Defence Advanced Manufacturing Strategy describes manufacturing rights as rights the Ministry has acquired through contracts or other arrangements, along with time-expired patents and designs. The definition is about the permission to make a thing, not the physical item itself.

CanadaBuys guidance uses the same idea. It states that manufacturing rights can include the use of the licensor's patents and designs. A company that holds those rights is the party entitled to build the item to the licensor's design.

How CanadaBuys guidance treats manufacturing rights

The CanadaBuys page on royalty payments and licence agreements places manufacturing rights within licensing considerations. Its main points are:

• Some defence contractors may need to obtain technical assistance or manufacturing licences from third parties.
• Where royalty payments, technical-assistance agreements or manufacturing licences are required or anticipated, the contracting authority must account for them in the procurement strategy.
• When a licence must be in Canada's name, negotiations should consider manufacturing rights, including the use of the licensor's patents and designs.

Manufacturing rights are therefore a possible component of a manufacturing licence or technical-assistance arrangement. They are not a standalone category with their own procurement process.

Manufacturing rights in DND solicitations

DND bid solicitations for aircraft parts, parachute items and other defence materiel use the term to define acceptable sources. A DND request for proposal allows new deliverable end items to be supplied by the owner of the design or manufacturing rights, or by that owner's authorised manufacturer, agent or distributor.

Another solicitation, the parachute items RFP, requires traceability documentation back to the owner of the design or manufacturing rights. Both solicitations also require bidders to identify the manufacturing entity's NATO Supply Code for Manufacturers (NSCM) or Commercial and Government Entity (CAGE) code.

• Acceptable sources: the rights owner, or its authorised manufacturer, agent or distributor.
• Documentation: traceability back to the rights owner.
• Identification: the NSCM or CAGE code of the manufacturing entity.

What it means for a supplier bidding on Canadian public contracts

Read the source requirements in each DND solicitation before you price. If you are not the owner of the design or manufacturing rights, confirm that you can show you are the owner's authorised manufacturer, agent or distributor. Gather your traceability documents early, and have the NSCM or CAGE code of the manufacturing entity ready for the bid.

If your product depends on a third party's patents or designs, expect a technical-assistance agreement or manufacturing licence to be part of the discussion. Contracting authorities must plan for these arrangements in their procurement strategy, so state your licensing position clearly in your bid.