Negotiating the Distribution of Patented Products: Points to Consider

Every week, it seems, another news story appears about an innovative startup preparing to launch its new take on a product to a waiting market. While consumers and companies alike often eagerly anticipate these launches, they also pose potential risks to the company and its ownership of its intellectual property.

Today’s marketplace is more competitive than ever, and with more competition comes greater risk. How can companies protect themselves when creating a distribution agreement? What potential pitfalls arise, and how can they be avoided? What happens if the relationship between our company and the distributor changes? What if we wish to expand, or to end that relationship altogether?

Even when a company’s staff and leadership are well-versed in the market and the nuances of their product patents, they may need guidance and protection to launch products successfully – particularly when the product is their debut or flagship creation.

When intellectual property is at the core of a product’s value, a distribution agreement needs to contain specific contract provisions that seek to protect that intellectual property. It also needs to anticipate changes in the relationship between the manufacturer and the distributor, and to manage that relationship at every stage of a company’s growth and development. Finally, it needs to consider the client’s bottom line and big-picture business goals and “set the stage” for those goals to be realized.

Although most product creators and distributors enter negotiations in good faith, anticipating a contract that will create mutual benefit, fewer of these individuals know exactly how to get the clear, stable relationship terms they want. They may neglect to ask certain crucial questions, or may spend significant time and resources negotiating contract terms that will quickly become obsolete.

The benefits of a comprehensive negotiation, including the assistance of attorneys experienced in negotiating the distribution of patented products, abound. They include a reduction in risk exposure, the opportunity to avoid a wide range of disputes, and the chance to secure the continued viable existence of a company’s intellectual property rights in a product, even as that product is exposed to the vagaries of the free market.

Attorneys experienced in intellectual property and corporate transactions have specific language they expect to see in distribution agreements which address the questions raised above.