Author- Preethika Vijaykumar
Distribution Agreements:
A distribution agreement, also known as a distributor, is a contract between a company that supplies goods for sale and a company that markets and sells those goods. The distributor consents to purchase goods from the supplier business and resell them to clients in their local geographic areas. To be legally binding, a basic distribution agreement needs to include specific details and explicit language.
When it comes to intellectual property, an owner gets into a distribution contract with distributing agencies to make their creations available and reachable in the market. Distribution agreements can range from straightforward royalty sales agreements to international licensing, manufacturing, and distribution arrangements. Each intellectual property would require different protection strategies in the contract, which would also vary in terms of the contract’s geographic scope. A distribution agreement must identify the duration of any license to use the IP that has been given under the agreement and may expressly state that ownership of the IP included in the distributed product will remain with the owner.
Distributors are only permitted to exploit intellectual property for marketing, sales promotion, and other similar activities. As a result, without the Manufacturer/Suppliers’ consent, a Distributor is not allowed to delete, deface, obscure, or engage in other actions to change any trademarks or trade names that appear on the goods. Distributors are only allowed to use trade names, logos, trademarks, and other intellectual property rights-related items to the extent that the Manufacturer or Supplier permits. They are not permitted to modify or remove any marks or other forms of identification, and they are not permitted to register marks or brands that are identical to or similar to those of the Manufacturer or Supplier.
Types of Distribution Agreements:
- Exclusive Agreements
- Wholesale Agreements
- Commission Agreements
- Developer Agreements
Exclusive Agreements:
Distribution rights are granted between a distributor and supplier company through exclusive distribution agreements. Both sides concur that, as opposed to non-exclusive rights, the distributor will provide the supplier exclusivity rights to sell specific goods or services. This tactic makes participation more difficult due to competition. When it comes to exclusive distribution contracts, the owner should have a reliable way to enforce minimum performance standards across the region, like by implementing a minimum royalty condition. If the distributor has committed not to advertise competitive products or services, the agreement should also include sufficient commitment and support from the owner to protect the distributor’s interests.
Wholesale Agreements:
A distributor and a manufacturer enter into wholesale distribution agreements. They specify the conditions and parameters governing distribution within a particular region. The wholesale distribution agreement’s specified products and services must be sold by the distributor. The agreement must expressly state the region in which the distributor will sell or distribute the product. When the owner has multiple territory-exclusive distributors, he must ensure that the agreements for neighboring regions do not overlap in terms of territory. The effects of selling goods or services outside the agreed-upon territorial limit must also be acknowledged.
Commission Agreements:
Distributor pay for surpassing manufacturer sales targets is outlined in distribution agreements for commissions. Commissions will change based on the specifics and price of the products sold. These types of agreements offer a great approach to promoting development and sales while compensating channel partners fairly for their contributions. In order to prevent the distributor from taking unfair advantage, a distribution agreement must contain restrictions on how much the goods and services can be priced. The agreed-upon price range should be specified in the agreement, and the distributor is responsible for ensuring it. Nonetheless, the distributor should occasionally be permitted to offer discounts.
Developer Agreements:
Developer distribution deals inform distributors of the preferred methods for distributing software and applications. They also outline the developer and distributor’s general working partnership. To reduce the likelihood of having to deal with a future dispute, it is imperative to draught the written agreement the first time. When a distributor is granted a manufacturing and distribution license for a product, it is crucial to specify in the distribution agreement whether and to what extent the distributor is permitted to make improvements as well as who would own the rights to those improvements. This is crucial because distributors frequently offer insightful feedback based on market demands, and enabling them to make improvements would result in the creation of new intellectual property, the handling of which must be spelled out in the contract.
It is advised that the owner of the IP not assign the rights with respect to the distribution agreement, but rather license the rights, if necessary. For instance, while the distributor has control over the brand or trademark used to identify the product in the licensed area, the proprietor still owns the product design. In distribution deals, a license would be preferable as anything less could result in serious issues when the distribution agreement expires.
Conclusion:
In conclusion, it is undeniable that distribution agreements hold an irreplaceable role in the marketing and selling of goods and services between supplier businesses and distributors. However, their geographic scope, protection strategies for intellectual property, and type of agreement may exhibit diversity. In India, a wide variety of distribution agreements exist, ranging from exclusive agreements to wholesale agreements, commission agreements to developer agreements. While each agreement type harbors its unique features and benefits, its legal validity depends on specific details and meticulous language precision. Hence, careful consideration is imperative for intellectual property owners to protect their interests by elaborating on the duration of any license to use the IP, ensuring that the minimum performance standards are met, and defining clear guidelines for any improvements made by the distributor.
