Sandra's Electronics a Canadian manufacturing company that produces semi manufactured electronics. Sandra's Electronics has a solid reputation for meeting customer demands for quality products on time and on budget. The majority of Sandra's Electronics customers are international, mid-market manufacturing companies that produce generic electronics such as cell phones, digital media players and game consoles. Retail stores in foreign countries purchase the generic products and rebrand them for sale.

Recently, Sandra's Electronics has been approached by Mobility ONE to act as a supplier in their supply chain. Based in Japan, Mobility ONEis an original design electronics manufacturing company specializing in high-end mobility devices including cell phones, navigation systems and PDAs. Mobility ONEis impressed with Sandra's Electronics' reputation and wants Sandra's Electronics to supply several components for its next release of legacy products.

Mobility ONEis recognized for cutting edge technology and aesthetic design. It has built a loyal following from electronics enthusiasts in its native Japan as well as other Asian and European electronics markets. Mobility ONEwants to extend its brand into the highly competitive North American market and sees standard Internet and GPS functionalities in its cell phones and PDAs as the key to its success.

In order to offer its products as a high end alternative to the established North American competitors and at its existing top market price, Mobility ONEhas decided to spend millions of dollars on aggressive marketing. It plans to cut production costs by having Sandra's Electronics produce its computer chips instead of its existing supplier.

Let the chips fall where?

Sandra's Electronics has enthusiastically accepted Mobility ONE 's invitation to join its supply chain. If Sandra's Electronics can maintain its track record for supplying cost efficient, quality products on target, it could open an entire new customer market for expansion.

Sandra's Electronics current manufacturing plant in Brazil is not equipped to meet these new demands, and an upgrade at this stage in a new customer endeavor is not economically feasible for Sandra's Electronics.Sandra's realizesthe memory in its current computer chips will have to be significantly increased to support the technical capabilities of Mobility ONE 's electronics.

Sandra's Electronics realizes it must find a quality subcontractor with the capabilities to manufacture the Mobility ONEcomputer chips, including the enhanced memory requirements.

Cash in your chips...

After careful market research and consideration of options, Sandra's Electronics decides to subcontract the computer chip manufacturing to Metallicatron, a relatively new electronics manufacturer in Singapore. Singapore has been a hotbed for electronics manufacturing, and Metallicatron was created by venture capitalist hoping to get a foothold in Singapore's electronics market, specifically, in the next generation of computer chips. Although Metallicatron markets itself as a top quality manufacturer, its lack of experience is proving to be a major obstacle to it winning contracts.

The subcontracting offer from Sandra's Electronics has the potential to be mutually beneficial for both parties, because they both have a market entry opportunity to prove they are a viable subcontracting option for high end electronics manufacturing.

Questions from case study:

1. Both countries are common law countries. Metallicatron and Sandra's Electronics get together andafter initial negotiations a LOI is created. If the deal falls through, will either party be bound to their commitments as detailed in the LOI? What can the parties do to limit the obligations to the terms of the LOI?
2. List general topics that Sandra's should include in the contract to have manufacture computer chips?
3. Metallicatron will now ship to Mobility ONE 's assembly plant in Japan.A new contract is also required to cover the new shipping requirements. Which of the three parties is responsible for the transportation? In addition to contractual issues such as timelines, payments and packaging, list at least two issues Metallicatron lawyers should consider to reduce risks associated with transportation delays or losses when contracting a third party for transportation?
4. What are some IP areas that can be at risk for infringement for Mobility ONEand Metallicatron if not properly mitigated?