Exporting Requires Formal Agreements
When considering exporting to foreign markets, you must protect yourself legally. It is crucial that your business relationship with the foreign entity representing you is documented in an agreement. Furthermore, you must also take the appropriate steps to protect your intellectual assets prior to entering any foreign markets.
Representation in foreign markets comes in a number of forms. Depending on the type of business you are in, you may be required to hire a local agent, representative, salaried/commission-based sales personnel, hire a distributor or enter into a joint venture. Regardless of which arrangement you decide on, you will need to ensure
your business relationship is fully documented via a formal agreement.
Standard Legal Agreement
When you are ready to start a business relationship with a foreign entity, you should consult with an attorney that specializes in international law. The following standard agreement clauses should be considered when drawing up the agreement with your attorney.
- Agreement date
- Parties in the agreement
- Purpose of the agreement
- Products/services sold under the agreement
- Buy/sell terms and conditions (payment method, shipping method and lead-time)
- Territory (region, country and city)
- Representation type (exclusive or non-exclusive)
- Responsibilities of seller
- Responsibilities of representing entity
- Pricing, discounts, incentives and compensations
- Orders, inventory and forecast requirements
- Marketing and promotion (marketing plans, marketing materials, product literature, rights to reproductions and sales assistance)
- Reporting obligations (foreign laws and regulations, recordkeeping, reports, annual statements, market intelligence, product recalls, exchange of adverse event information)
- Restrictions on representing entity
- Intellectual property rights (acknowledgment, notices, trademarks and name, third party claims and infringement of intellectual property rights)
- Term of agreement (date agreement is set to expire or renew, subject to certain conditions)
- Agreement renewal terms
- Termination and causes for termination of agreement
- Post agreement termination duties and responsibilities for each party
- Warranty, indemnification and limitations of liability for both parties
- Law governing the agreement
Keep in mind that most companies you are considering working with internationally will almost always request “exclusive” status in order to market your products or services. It may or may not be advantageous to initially grant “exclusive” status. If you decide on granting it, you may want to limit it to a trial period of six to 12 months, to be renewed for a period of one to three years if certain conditions are met, including sales quotas. Or you may postpone granting it altogether for a period of six to 12 months until certain conditions are met by initially granting “non-exclusive” status. You may even want to consider dividing the territory into two or more regions and assigning someone to each region.
Intellectual Property (Trademarks, Patents and Copyrights)
Before you export to international markets you must ensure that your intellectual assets are fully protected in those markets. There is no such thing as a worldwide trademark or patent. Just because you have successfully registered a trademark or patent with the United States Patent and Trademark Office does not mean you are protected outside the United States as well. This is a big misconception. In fact, you must register your intellectual property in each country you plan on conducting business in. It could be costly but certainly worth the investment should the possibility of intellectual property infringement arise. Even though many developed countries enforce their intellectual property laws, the fact remains that certain developing nations simply do not follow suit.
When registering your trademark internationally, you should start with the Madrid System for the International Registration of Marks, which functions under the Madrid Agreement of 1891 and the Madrid Protocol of 1989. It is administered by the International Bureau of the World Intellectual Property Organization (WIPO), located in Geneva, Switzerland. Approximately 80 countries are members of the Madrid Union. If the country of interest is not listed, then you will need to hire a local intellectual property attorney in that country to file on your behalf.
When conducting a trademark search outside the United States, I recommend using Thomson CompuMark. This company is a leader in international trademark research, and it claims to maintain the world’s largest collection of international trademark information.
When registering your patent internationally, you should start with WIPO for assistance. WIPO administers the Patent Cooperation Treaty (PCT) which provides for the filing of a single international patent application; this has the same effect as national applications filed in the designated countries. An applicant seeking protection may file one application and request protection in as many signatory states (countries) as needed. In some regions, a regional patent office, for example the European Patent Office (EPO) or the African Regional Intellectual Property Organization (ARIPO), accepts regional patent applications, or grants patents, which have the same effect as applications filed, or patents granted, in the member states of that region.
According to WIPO, copyright itself does not depend on official procedures. A created work is considered protected by copyright as soon as it exists. According to the Berne Convention for the Protection of Literary and Artistic Works, literary and artistic works are protected without any formalities in the countries party to that convention. Thus, WIPO does not offer any kind of copyright registration system.
However, many countries have a national copyright office, and some national laws allow for registration of works for the purposes of, for example, identifying and distinguishing titles of works. In certain countries, registration can also serve as prima facie evidence in a court of law with reference to disputes relating to copyright.
You must have a concrete plan to protect yourself prior to tackling international markets. Without the proper legal agreement in place with the entity representing you in a foreign market, or without the proper registration of your intellectual property in the country you plan on conducting business in, you may find yourself unnecessarily exposed.