The core answer
When you change OEM factory, almost nothing is decided by a single rule. Ownership of the formula, moulds, packaging and stock is mostly decided by your contract and by who paid for what. If the contract is thin or verbal, the factory is often in the stronger position because it holds the formula, the tools and the goods.
The rule (Thai statutes). A formula is protected as a trade secret under the Trade Secrets Act B.E. 2545 if it is not publicly known, has commercial value because it is secret, and its controller keeps it secret by appropriate measures (section 3). Using or disclosing it without the owner's consent, contrary to honest trade practices, including by breach of contract, is infringement (section 6). Artwork can be protected by copyright, and under section 10 of the Copyright Act B.E. 2537 work created on commission belongs to the hirer unless the parties agreed otherwise. Moulds and boxes as physical things follow ordinary property and contract rules.
Our practical view. Treat the exit as a negotiation backed by paper. Collect your documents, check what the contract says on each of the five items (formula, moulds, packaging and artwork, stock, confidentiality), and agree a written handover before you tell the factory you are leaving. Do not copy the factory's files or send a rival factory the old formula until a lawyer has read the contract.
This guide is about leaving the factory. It does not repeat who should hold the FDA notification, see who should hold the cosmetic notification and Thai FDA rules for supplements and devices. For patents versus trade secrets, see patent, petty patent or trade secret.
1. Who owns the formula?
There is no section of Thai law that says "the brand owns the formula". Three situations are common:
| Situation | Typical result |
|---|---|
| Factory's own ready-made formula, you chose it from a catalogue | Usually the factory's secret. You buy the product, not the formula. |
| Formula developed to your brief, contract says it is yours | You can demand it, within the terms. |
| Formula developed to your brief, contract silent | Unclear. Expect a dispute over who developed it, who paid and who held it. |
A trade secret can be transferred or licensed, and a transfer other than by inheritance must be in writing signed by both sides (Trade Secrets Act, section 5, as shown in the DIP's English translation). That is a useful anchor: if you are told the formula is "yours" but nothing is signed, you may not be able to prove it.
Facts that help you show you are the controller: your brief and specifications, emails showing who set the target, payment for development or R&D, the fact that you gave the factory your ingredient choices, and any written statement from the factory that the formula is exclusive to you. The Act requires that the secret is kept secret by appropriate measures, so the factory's practice (limited access, confidentiality clauses with staff) matters to any claim, whoever makes it.
Two points often missed. First, the Act says reverse engineering is not infringement unless the person agreed otherwise with the owner or the seller (section 7). A brand that has the product analysed in a lab is not automatically infringing, but a contract can change that. Second, independent discovery is also not infringement (section 7), so a second factory developing a similar formula on its own is not the same as copying yours.
2. Who owns the moulds and tooling?
Moulds, dies, filling heads and printing plates are physical goods. Look at:
- who ordered and paid for them, in full or by a "tooling charge" spread over unit prices;
- invoices, quotations and receipts that describe them as "your mould" or "customer-owned";
- whether they sit in the factory's asset register;
- whether the contract says the factory may use them for other customers.
The factory may also refuse to hand over goods while it is owed money. Thai civil law has a general right to retain another person's property until a related debt is paid, and a factory may rely on it. Whether it applies depends on the facts, so do not assume you can collect the moulds by turning up with a truck.
If the mould was designed for you, the drawings may also be protected as a work of applied art (Copyright Act, section 4) and the design might be registrable as an industrial design. Whether to use that route is a case-by-case question.
3. Who owns the printed packaging and the artwork?
Two separate things: the printed boxes (goods) and the artwork (a copyright work).
The artwork. Section 10 of the Copyright Act B.E. 2537: where the author created the work on commission, the hirer is the copyright owner unless the author and hirer agreed otherwise. Section 9 is different for employees: the work belongs to the employee-author unless it was agreed in writing otherwise, and the employer may publish it as the purpose of the employment allows.
What that means for you:
- A freelance designer you hired and paid is covered by section 10, unless the agreement says otherwise.
- Artwork made by the factory's own staff is more complicated. It may be an employee work (section 9) of the factory, not something the factory made for you under commission. Get a signed assignment from the factory, not an assumption.
- Any transfer of copyright (other than by inheritance) must be in writing signed by both parties (section 17). Use a written assignment even where section 10 helps you.
- Copyright is separate from your trademark. Register the brand name and logo yourself, see trademark registration in Thailand and who should own the brand.
The printed boxes. These belong to whoever paid for them, subject to the contract. Printed boxes carrying your brand are of little use to the factory except as a bargaining chip, but they are worth money to you. Count them and photograph them.
4. What happens to leftover stock and raw materials?
On termination, four piles usually exist: raw materials, packaging, work in progress and finished goods. The law does not set a single default, so the contract controls.
| Item | Usual commercial answers |
|---|---|
| Raw materials bought for your orders | You buy them at cost, the factory uses them elsewhere, or they are destroyed |
| Branded packaging | You collect it, or the factory destroys it with a certificate |
| Work in progress | Finish and ship, or write off |
| Finished goods | You buy and collect, sell-off period, or destruction |
Points to check:
- minimum order quantities and any "take or pay" clause;
- shelf life and the expiry dates of what will be returned;
- whether purchase orders you already signed are binding;
- who pays storage while you decide.
If the factory is the notifier or licence holder for the product, finished goods may not be lawfully sellable by you once you change factory. That is an FDA question, covered in the guides linked above.
5. Can I just terminate? What does the contract allow?
Check the termination clause first: notice period, causes (breach, insolvency, quality), and any lock-in or minimum term. Many OEM arrangements are a contract for hire of work (จ้างทำของ). For that type of contract, the Civil and Commercial Code lets the employer terminate before completion if it pays compensation for the damage the termination causes (the hire-of-work rules, which we check against the Code in each case). If you have no written contract, see verbal contracts in Thailand: you may have a binding deal, but you will have to prove its terms from purchase orders, quotations and messages.
Give written notice that follows the contract. Pay undisputed amounts. A dispute about quality should be recorded with dates, batch numbers and test results; see section 6.
6. What if the dispute is about product quality?
Quality problems are the most common reason brands leave, and the most common reason factories withhold things. Keep:
- batch records, certificates of analysis, retained samples;
- complaints and the factory's replies;
- independent lab results, taken from sealed samples;
- the specification that was agreed.
Do not stop paying invoices for good batches because you are unhappy with a bad one, unless the contract allows set-off. A demand letter that sets out the defect, the contract clause and the remedy you want is usually the first formal step; see demand letters.
7. Confidentiality when you move
Do not hand the old factory's formula, process documents or test data to the new factory unless you are sure you may. The risk runs in both directions: the old factory may complain you used its secret; you may complain it uses yours for others.
- Check the NDA in your contract and whether it survives termination, and for how long.
- Separate what you gave the factory (your brief, your ingredient list, your brand) from what the factory created (its process, its know-how).
- Ask the new factory to confirm in writing that it will not receive third-party secrets from you without authority.
The Trade Secrets Act allows the controller to ask the court for an injunction and damages where infringement is shown or imminent (section 8). We cite this to explain the risk, not to predict an outcome. Contractual penalty and non-compete clauses are another matter and we would review them individually.
8. Exit checklist
- Collect the contract, quotations, purchase orders, invoices and emails.
- List what you want back: formula, specifications, moulds, artwork files, packaging, stock, test data.
- For each, mark the proof of ownership: contract clause, invoice, assignment.
- Check the NDA, non-compete, lock-in and termination clause.
- Settle money: what you owe, what you are owed, any tooling balance.
- Count and photograph moulds, packaging and stock on site if possible.
- Agree a written handover schedule with dates and who pays logistics.
- Confirm FDA, licence and trademark status before the new factory produces.
- Send formal notice that follows the contract.
- Get the new factory under an NDA before sharing anything.
9. What to put in the next OEM contract
- Formula: who owns it, whether it is exclusive, and an obligation to release it (or put it in escrow) on termination.
- Tooling: customer-owned, marked, listed in a schedule, no use for others, release on demand.
- Artwork: written copyright assignment from every designer and the factory.
- Stock and materials: a buy-back or sell-off clause with a price formula and time limits.
- Confidentiality: survives termination, defined duration, return or destruction of documents.
- Termination: notice, cure period, handover assistance for a stated period at a stated price.
- Quality: specifications, testing, sampling, defect remedies, recall responsibilities.
- Governing law and forum.
See also contracts and documents.
Further reading
- Who should hold the cosmetic notification
- Thai FDA: supplements and medical devices
- Patent, petty patent or trade secret
- Who owns the brand
- Verbal agreements in Thailand
Your OEM contract, not goodwill, decides who keeps the formula, moulds, packaging and stock, so get each item in writing before you give notice.
We draft and review OEM and manufacturing contracts, handover agreements and demand letters. Initial consultation is free — call +66 92 254 2045 or send us the details. See also contracts and documents, FDA registration, trademark registration, demand letters and intellectual property.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
