Trade marks and Distributors

Posted by Luke Mitchell on 06 September 2017
Trade marks and Distributors

The use of trade marks by distributors is a matter that can cause significant legal issues to arise if the terms of any such use have not been properly documented in (or as an addendum to) a formal distribution agreement.

We have seen a number of situations where because either the parties have an informal distribution arrangement or the formal distribution agreement that exists does not deal with trade mark usage, a dispute has arisen as to which party "owns" the trade mark in a particular territory and which parties are entitled to use that trade mark in a particular territory.

As we touched upon in our previous blog, any business that sells the goods and/or services in more than one country (whether directly or through a distributor) should register all relevant trade marks in each of those countries. Failing to do so opens the door for someone else to misuse or even register the mark.

Where there is a distribution arrangement in a particular country (or countries), a formal distribution agreement needs to be entered into. That agreement should provide the distributor with a license to use the relevant marks in the relevant country (or countries) during the term of the agreement. The distribution agreement should state that that license expires upon expiry of the term of the agreement and/or upon termination of the agreement and that any and all usage of the marks is subject to the written approval of the owner of the marks.

While it may seem to be a minor matter while the distribution relationship is on good terms, if ownership and usage of the marks have not been formally dealt with in a distribution agreement, invariably once the relationship sours the first thing that a disenfranchised former distributor will do is seek to register the relevant marks in its own name. This can effectively shut a business out of a market until such time as the question of the ownership of the relevant marks is resolved.

Getting your IP strategy right, including identifying, securing and protecting your businesses IP rights is becoming increasingly important to ensure the success of your business. We have years of experience in helping businesses manage their IP strategy in an efficient and cost effective manner. We specialise in providing clarity and confidence to business operators in all of their legal relationships – contact us today to discuss your legal needs or that of your clients.