Toll processing prefaces a number of concerns for the business providing the raw material. First off there are concerns about the capabilities of the contractor: whether it has the equipment and the expertise to fulfil the task; the consistency of the finished product; and whether the service is cost-effective.
Toll processing offers a convenient and cost-effective way to offload milling needs to an expert. However, there are a number of other considerations which must be kept in mind when looking into a toll processing agreement. Specifically, about the intellectual property in the material that is being given for milling.
A careful balance must be maintained between the restrictiveness of covenants protecting IP and the efficiency of the toll processing itself.
Grinding and milling are essential processes in a number of industries, including pharmaceutical and chemical. Since in both these industries the value lies in the unique formulation of the material, protection of the IP is quintessential.
We look at some ways in which businesses can keep their peace of mind about their intellectual property and derive all the benefits of toll processing:
- Due diligence – Know your toll processing services provider. This can include looking into past contracts, reputation in the market, inspecting the facilities and knowing exactly and who all you will be dealing with for your toll processing.
- Handling of raw material – Ensure knowledge of how your raw material will be handled during toll processing. This includes understanding the manufacturing process; and putting in place safeguards to limit access.
- Identify the trade secret – Often raw material to be ground will derive its protected IP status under trade secret laws. The company can seek to identify these and require specific protections, as the need may be.
- Third-party – The use of independent contractors must be specifically legislated for. Whether or not third party contractors can be permitted within the toll processing agreement, and if so what will be their legal obligations needs to be decided in the agreement.
- Information Technology – Physical control of the product may amount to a wasted exercise if the toll processing services provider does not have adequate IT security measures in place. It is also possible that the company can ask no/isolated IT records be maintained pertaining to the project and its raw material.
A toll processing agreement is as much a placing of faith in the service provider’s technical capabilities as it is about trusting its business standards. The points above reflect a small cross-section of the considerations a company must dwell upon before finalizing on a toll processing services provider. However, it must be borne in mind that overly restrictive covenants can hamper the efficiency of the agreement and the toll processing operation.
Classifier Milling Systems is one of the most reputed, trusted and dependable milling and grinding products and services provider in Toronto and the GTA. We undertake toll processing for numerous clients, with varying project sizes and scope.