Exclusive licences: Better to be safe than sorry
Updated: Jul 29, 2019
A local business in Southeast Asia approached a leading clothing manufacturer from Europe to establish a local outlet in the former’s country. After extensive discussions and deliberations, the local business venture requested an exclusive dealership agreement for a period of 5 years with the European Company.
The European Company granted the exclusive license on the condition that the local company uses their trademark and the logo and that only their clothing brand would be sold in the local outlet. The exclusive licence also included the condition prohibiting the local outlet from selling clothing from any other brand in their store.
As time went by, the local outlet started selling other branded clothing in their store and the minimum order requirements agreed upon with the European company were not being met. Things got complicated when the local company went ahead to register the European company’s brand under its own name under Class 35 for retail services.
“ It is important to conduct a thorough background check in order to make sure that the local company you are entering into business with is trustworthy...”
Anguished, the European company sought to terminate the licence agreement along with the cancellation of the trademark application filed under Class 35. However, the parties pursued an amicable settlement instead. The European company ended up paying a significant amount of money to the local company and in return the local company agreed to terminate the agreement and more importantly, not use their trademark even for retail services.
Lessons learnt:
Before entering into an exclusive licence agreement, it is important to conduct a thorough background check in order to make sure that the local company you are entering into business with is trustworthy and not likely to default on the terms and conditions that were initially set.
File a trademark application that not only pertains to your products, but also to retail services, especially if you have an exclusive licence arrangement.