Author Topic: MUST KNOW legal aspects about selling your first kit  (Read 4111 times)

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Offline dorin

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MUST KNOW legal aspects about selling your first kit
« on: July 11, 2017, 08:59:24 pm »
So I decided to try out the entrepreneurial route and sell my own products, but I got stuck at the legal aspects. I was able to find very little information about what you must know as a starter so you don't get later into trouble, from the perspective of a single business owner that doesn't yet afford a lawyer or other specialists.

If this has been thoroughly discussed or presented on this forum or somewhere else then I apologize and kindly request some pointers, but if not then maybe we can make this thread as complete a guide as possible together with the questions of others in a similar situation to me.

First, I read a bit about certification and I'd like to avoid it as much as possible, and it seems like selling the product as a kit is the way to go but I think there is a lot of clarify about what does and does not qualify as a kit and what are the international restrictions that still apply to kits.
My point is that I want to have the product assembled to the maximally complete state that still legally qualifies as a kit.

Does soldering a pin header qualify a kit? What about connecting a JST cable, or simply screwing the PCB into place?
Does the kit still need to be RoHS compliant? Can it contain lithium batteries (excluding the air shipping ban)?

What happens when in your kit, along standard unmodified items like power supplies you also have modified OEM items? Do you need to contact the OEM company and have an agreement if you want to include parts of their product (even if you don't make use of their brand) or the modified product?
For example, I want to sell a reflow oven kit. The PCB controller uses a plastic case from another disassembled product (cheap enough to discard the other components), and the electric oven is modified at both mains wiring, thermal insulation and front panel. You might say I can leave the oven hacking to the customer and just provide the controller, but I've spent quite some time researching on how to obtain satisfactory thermal parameters out of a kitchen oven and it's plenty of modifications required that I as a customer, would happily pay away to the manufacturer to have them properly pre-made.

Does all this depend on whether you sell in EU, US or somewhere else? From a crowdsourcing perspective, you've got to be able to ship to any country. Now, suppose there is a country that has specific import regulations, you surely want to find out such as to either make your product comply with it or just exclude the country from shipping. I don't think reading all countries' legislation is feasible, the question is if you will be notified by the post company or by some state authority before being sanctioned or not. Simply put, when you are shipping a crowd funded product, are you walking on a mine field or can you have a good level of control?


« Last Edit: July 11, 2017, 09:04:44 pm by dorin »
 

Offline jpanhalt

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #1 on: July 11, 2017, 09:04:25 pm »
Don't you think a Romanian lawyer would be advised?  If not, why not?
 

Offline dorin

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #2 on: July 11, 2017, 09:14:56 pm »
Don't you think a Romanian lawyer would be advised?  If not, why not?
If I could figure out everything from a single consultancy session, I'd go for it. But as I said, I can't afford constantly having a lawyer around. Especially before I get any funding, because there might be considerations that require changing the design before campaigning it. I mean, has everyone here hired a lawyer for their projects?
« Last Edit: July 11, 2017, 09:19:53 pm by dorin »
 

Offline jpanhalt

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #3 on: July 11, 2017, 09:36:23 pm »
One can always find an excuse for not doing the wise thing.   Good luck going it alone.

John
 

Offline janekm

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #4 on: July 12, 2017, 01:59:26 am »
In my somewhat  controversial opinion, any business venture involves a certain degree of risk and if that's not something you can accept it's not really worth getting involved with. As a small business, trying to lawyer up for any eventuality is going to be so expensive to make the large majority of projects simply not worthwhile.

When it comes to certification / CE / legal requirements, I would suggest that you think in terms of making a best faith effort to protect your customers safety rather than thinking in terms of how you can work around the legislation ("does soldering on a pin header count?" is very much the wrong question to ask).

I don't know the zeal of consumer protection offices in Romania (you should inform yourself about that, and perhaps could even talk to them, or a small business bureau, which in many cases can arrange a no-fee orientation session with a lawyer too), but in most countries they are a) interested in protecting consumers b) aren't that interested in pursuing legal actions against small producers unless they see a pattern of wilful infringement... They are more likely to talk to you in case of any problems and agree a course of action.

It is worth considering whether you can set up your venture as a limited liability company to protect your personal assets (though this will not protect you in all cases).
 
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Offline T3sl4co1l

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #5 on: July 12, 2017, 06:32:52 am »
FWIW, the FCC has clauses covering kits.  The kit has to pass regulations when constructed, by a typical skilled technician, per the build instructions provided with the kit.  (Which, things being what they are, probably means you want a generous margin to allow for, ahem, tolerances, when anyone else builds it.)

That would apply if you want to sell into the US.  I don't know what CE has for kits specifically.  There may be similar clauses.

You may want to sell it as exempt test equipment, or as a component.  Assuming they will be sold to technicians, and used in laboratory environments.  You may want to add warning statements to this effect on the manual, or even on the part itself (if it's got a big enough label).

On the practical side, no one much seems to care if you make a thousand of something kind of noisy.  For production in the 10-100k range, they're probably going to put your thingy on a list and test it sooner or later.  Or if your device accidentally ticks off the wrong people, like emergency services, or HAM radio operators, you may find a C&D notice in your mailbox...

(And yes, I mostly concern myself with EMC, as that's my specialty; but similar procedures and reasons apply to safety and so on as well.)

Tim
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Offline dorin

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #6 on: July 12, 2017, 07:53:56 am »
When it comes to certification / CE / legal requirements, I would suggest that you think in terms of making a best faith effort to protect your customers safety rather than thinking in terms of how you can work around the legislation ("does soldering on a pin header count?" is very much the wrong question to ask).
It is a given that the product is engineered in a responsible way as I am a top notch professional in the field, so I am not trying to work around legislation but simply deal with it smoothly.

FWIW, the FCC has clauses covering kits. The kit has to pass regulations when constructed, by a typical skilled technician, per the build instructions provided with the kit.
What do you mean 'has to pass'? How is that verified? The way I get this is that the kit is legally not much different from a product finished by you as manufacturer, because you take instead the responsibility for a finished product assembled by someone else.

You may want to sell it as exempt test equipment, or as a component.  Assuming they will be sold to technicians, and used in laboratory environments.  You may want to add warning statements to this effect on the manual, or even on the part itself (if it's got a big enough label).
Is it that easy to simply declare it a component? Again, I am not trying to understand this from a logical standpoint - I have no trouble getting that - but from a law standpoint, which to me seems to often defy logic  :-//
 

Online blueskull

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #7 on: July 12, 2017, 08:04:19 am »
If you want to go the legal way, you need to prepare a ton of test reports and it's likely your cost will be higher than your revenue unless you can find a really high profit market or you can secure tens or hundreds of thousands of orders. Therefore, let's talk about the illegal ways.
If you are in EU, don't sell to EU. Lawsuits cross jurisdiction will be very hard, and as long as you lay low, selling to Asia Pacific or NA won't get you into big trouble.
Another way is to license your design to your off shore subsidiary and manufacture there, and hire someone to sell from there for you. This also helps you to dodge tax (which is why so many international companies are registered in a small island such as Bermuda).
 

Offline janekm

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #8 on: July 12, 2017, 08:08:39 am »
You might find this helpful, it's how TI's lawyers deal with their evaluation modules: http://www.ti.com/lit/ml/sszz027m/sszz027m.pdf

Many small companies selling kit / breakout boards etc fly "under the radar" for most of their products using a similar definition (think Sparkfun, Adafruit etc). Though in some cases (more productised devices that are intentional emitters of radiation, such as radio modules) they do go the route of using certified modules.

Another example is the Arduino. It was sold for some time without certification but when its use became more "product"-like they decided it was time to get it certified.

Raspberry Pi had certification from the beginning, because it was pointed out to them that their description of it had the characteristic of a device being sold to end-users (notably as a "computer").

It really is a more common-sense situation than it may appear from a dry reading of the regulations. You can't use the exemptions to try to "work around" the rules by classifying your device as something it isn't. An example is companies that were trying to sell radio equipment that didn't meet the regulations by selling the PCB and case separately.
 
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Offline jpanhalt

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #9 on: July 12, 2017, 08:28:03 am »

It is a given that the product is engineered in a responsible way as I am a top notch professional in the field, so I am not trying to work around legislation but simply deal with it smoothly.

Assuming you are employed and not an independent contractor in the field, and from an American perspective,* you may be taking quite a personal liability not only from tort cases brought by "injured" customers, but also from your employer for violation of its IP rights.  If you are an independent contractor, you still need to look at protection of your assets, if you have not taken care of that already.

That is why I said and still believe that you need to consult with someone skilled in Romanian law.  A one or two hour meeting should suffice, assuming you do not get any contracts of other original legal documents drawn up.   I have set up a simple limited liability corporation (LLC) with less than an hour of attorney's time, but that process relies mostly on boilerplate documents.

John

*America is somewhat unique with regard to tort -- each side pays its own attorneys win or lose with few exceptions.  The mere threat of a lawsuit can result in considerable, non-recoverable costs.  My view of such risks is probably exaggerated compared to others in which the winner can recover from the loser.
 

Offline dorin

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #10 on: July 12, 2017, 03:41:11 pm »
OK if I can simply follow common sense, that is great. In this case I should drop the idea of near complete assembly and use it only once the capital is large enough to afford an official certification.
Maybe it's just me being paranoid, because I'm used to the situation in Romania where authorities often come to pick holes in your coat until you bribe them. :palm:


 

Offline fcb

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #11 on: July 12, 2017, 05:29:03 pm »
If your kit is below 30V (i.e. under the Low-Voltage-Directive), then you will be pretty safe - does your kit contains over 30V, then I would be wary? Not so much from a legal side (suitable disclaimers etc...), more from a "you don't want to toast your clients" POV.

Might be worth getting a quote for Professional Indemnity / Product Liability insurance from a broker - they are likely to ask pertinent questions (e.g. "can we see a copy of your Form 123").  Failing that, look at what other kit makers have?

Is there any reason you want to offer a kit instead of a finished and tested item?
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Offline dorin

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #12 on: July 12, 2017, 06:04:01 pm »
Is there any reason you want to offer a kit instead of a finished and tested item?
Do you mean why I still want to do it given that there are already other reflow oven kits?

It's because I can offer increased performance at a competitive price. The project basically started with me needing a good convection reflow oven for under 200 bucks and couldn't find a satisfactory one, so I built one. It is also using an innovative algorithm of heater control much superior to PID, and I will actually opensource the software if the funding will be successful.

I would have also loved to additionally offer a (nearly) finished and tested item, but since I am not confident enough in the legal matters, I might have to resort to a plain kit.

« Last Edit: July 12, 2017, 06:07:56 pm by dorin »
 

Offline fcb

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #13 on: July 12, 2017, 06:39:58 pm »
PID/PI control is more than adequate for a reflow oven - here's one I designed and built 5 years ago (still in use) - it explains perfectly why you should consider selling it as a finished item! As soon as it worked I couldn't be bothered casing it...

I wrote a program that graphs the performance and has multiple zones/ramps etc.., but quite frankly I get the same results just switching it on and waiting for the solder to melt, add 20 seconds and then switch off and crack the door ajar.

Not trying to pour cold water on the kit idea - just think it might be safer as a finished/tested item.
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Offline dorin

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #14 on: July 12, 2017, 06:49:12 pm »
I designed it to have a professionally looking front panel that attaches directly on the original oven panel and have the power supply, relays and wires inside, in either case (pun intended) it would end up fairly done and safe , it's just that the users will do the assembly themselves, minus the SMD soldering of the controller (d'uh).

And yes you can just turn the oven on and it will solder but if you want to follow some curves, PID control no matter how well you tune it will either have some overshoot either a non-optimal rise/fall time, especially with a convection oven which has a huge thermal inertia compared to a quartz IR oven.
« Last Edit: July 12, 2017, 06:53:03 pm by dorin »
 

Offline janekm

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #15 on: July 13, 2017, 01:54:50 am »
OK if I can simply follow common sense, that is great. In this case I should drop the idea of near complete assembly and use it only once the capital is large enough to afford an official certification.
Maybe it's just me being paranoid, because I'm used to the situation in Romania where authorities often come to pick holes in your coat until you bribe them. :palm:

Well... me saying that you should use common sense is based on my experience from the UK, where generally speaking the authorities don't go looking for holes to pick in your coat to bribe you. If that's what's likely to happen in your country then you certainly have reason to be extra cautious.
 

Offline icept

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #16 on: July 16, 2017, 08:17:22 am »
At the very least you need to have some idea of the standards/regulations the finished product needs to follow. In this case I imagine you need to look at:
-EMC standards for both Europe and USA(FCC part 15). This should be reasonably straight forward if you're product contains no radios.
-Electrical safety - Since you're working with mains voltages this one can be fairly involved. You first need to figure out how to classify your equipment, for example, in Europe  it might be covered under any of these standards:
IEC 60204 (Safety of machinery – Electrical equipment of machines)
IEC 60335 (Household and similar electrical appliances)
IEC 60439 (Low-voltage switchgear and controlgear assemblies)
IEC 60950 (Information technology equipment including electrical business equipment)
IEC 61010 (Safety Requirements for Electrical Equipment for Measurement, Control, and Laboratory Use)
IEC 60730  (Safety Standard for Household Appliance)

You probably wont need to get certification for a kit, since it's really the end product that needs to comply. But you should make sure the end result meets the relevant standards.

One thing I would be extremely cautious about are any instructions telling people to work on mains voltage circuits. You generally need some sort of qualification to do this kind of work and there are serious safety risks. One potential way around this is to provide a pre-made product with an enclosure containing a plug and a socket, so that instead hacking up the oven's 240V circuits, you just plug it into your device.

You don't need a lawyer but you will need to do heaps of reading yourself.
 
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Online blueskull

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Re: MUST KNOW legal aspects about selling your first kit
« Reply #17 on: July 16, 2017, 08:29:03 am »
At the very least you need to have some idea of the standards/regulations the finished product needs to follow. In this case I imagine you need to look at:
-EMC standards for both Europe and USA(FCC part 15). This should be reasonably straight forward if you're product contains no radios.
-Electrical safety - Since you're working with mains voltages this one can be fairly involved. You first need to figure out how to classify your equipment, for example, in Europe  it might be covered under any of these standards:
IEC 60204 (Safety of machinery – Electrical equipment of machines)
IEC 60335 (Household and similar electrical appliances)
IEC 60439 (Low-voltage switchgear and controlgear assemblies)
IEC 60950 (Information technology equipment including electrical business equipment)
IEC 61010 (Safety Requirements for Electrical Equipment for Measurement, Control, and Laboratory Use)
IEC 60730  (Safety Standard for Household Appliance)

You probably wont need to get certification for a kit, since it's really the end product that needs to comply. But you should make sure the end result meets the relevant standards.

One thing I would be extremely cautious about are any instructions telling people to work on mains voltage circuits. You generally need some sort of qualification to do this kind of work and there are serious safety risks. One potential way around this is to provide a pre-made product with an enclosure containing a plug and a socket, so that instead hacking up the oven's 240V circuits, you just plug it into your device.

You don't need a lawyer but you will need to do heaps of reading yourself.

That's a lot. I would probably just sell the PCB with SMD parts populated and accompany with a BOM that can be purchased from DK or Mouser. This gives me perfect excuse to sell this as an R&D DIY kit which evades most legal requirements and pushes all possible liabilities to the user.

Or I can sell the preprogrammed and encrypted MCU with all other things, even including PCB, in open source document form.
 


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