How Can I Reduce My Trademark Ownership Risks with Foreign Distributors and Affiliates?
Steps to Reduce Trademark Ownership Risks with Foreign Distributors and Affiliates
Doing business with companies in foreign countries can create issues regarding trademark ownership rights. Generally, this happens in countries that follow the “first to file” trademark law without a requirement of actual use in commerce. In these instances, the foreign distributor or business partner can file a trademark application and obtain a trademark registration without the knowledge — or permission — of the US company. If the relationship sours, the foreign distributor may exercise considerable leverage over the US company and even potentially sue the US company for trademark infringement of its own mark.
Step 1: Comprehensive Distributor Agreements – these agreements should be standard as to all distributors and include key terms such as:
Ownership of Trademarks and Other IP - Ownership of the trademarks and any other IP relevant to the deal is owned solely and completely by the Licensor.
Prohibitions on Filing Trademark Applications — A provision that prohibits the filing of trademark applications in foreign jurisdictions eliminates some of the risk of a vindictive ex-distributor.
Use of Trademarks Inures to Licensor — You want to ensure in most cases that any use by the licensee distributor is to the benefit of the Licensor.
Forum Selection/Choice of Law — Should be in the U.S. It’s best to avoid litigating in foreign jurisdictions under foreign law.
Termination Provision — If the above provisions are included in the distributor agreement, a clear termination provision is very effective in protecting trademark and other intellectual property rights.
Requirement of US Assets as Security — This last one is on the wish list. Having an asset in the US or another friendly jurisdiction that can be seized in the event of a breach of the license agreement is a powerful deterrent to bad distributor behavior.
Step 2: Proactive Foreign Filing – before entering into foreign distributorships, secure an application to register in that jurisdiction.
Step 3: Active Monitoring – employ a trademark monitoring service to ensure foreign distributors are honoring their agreement with you and that no third parties are infringing your rights.
For more information, see our blog post Trademark Ownership Dangers with Foreign Distributors and Affiliates: Steps to Reduce IP Risks.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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