Have you considered IP rights in a manufacturer/distributor relationship?

Shipping containers

We regularly receive questions from overseas clients about their local intellectual property (IP) rights.  In fact, we are currently assisting a European manufacturer claw back trade mark rights in New Zealand.  In this case, a manufacturer filed its trade mark in New Zealand and a citation was raised during examination.  The cited mark was owned by a distributor who had taken a sample of the manufacturer’s product with a view to entering into a distribution agreement, however that had not eventuated.

Complications can also arise around who has rights to a trade mark in agreements between overseas manufacturers and distributors who are importing and selling the manufacturer’s products in Australia or New Zealand.

Consider the following scenario:

USBAGZ manufacture luggage in the US.  They apply their trade mark PENCHANT to the goods in the US.

USBAGZ have only registered their luggage brand PENCHANT as a trade mark in the US.

USBAGZ have an exclusive distribution agreement with Strands (Pty Ltd) in Australia to distribute their luggage throughout Australia.

Strands register the trade mark in Australia, without the permission of USBAGZ.

Strands mistakenly believe that it is the owner of the trade mark in Australia.  When an infringer appears in the Australian market, Strands finds that its registration is not enforceable.  Further, Strands mistakenly believes that their trade mark registration is a valuable asset of their business.  When they go to sell their business and due diligence is done, the registration is deemed worthless.

USBAGZ has no enforceable registered rights in Australia. If they wish to register PENCHANT in Australia, the defective registration of Strands will bar registration and USBAGZ will need to apply to remove the defective mark from the register.

Points for consideration:

  • International manufacturers should always ensure that any distribution agreement specifically deals with trade mark rights and what is contemplated by the parties in terms of use and ownership;
  • International manufacturers should register their trade mark in Australia or New Zealand prior to having their products sold/distributed here, and ideally before entering into any discussions with local distributors.

If you or your clients have been looking at expanding your business by way of distribution, you can contact the Trade Marks Team at mail@mbip.com.au.

Geraldine Rimmer
Geraldine Rimmer, Senior Associate