“There’s no need for a distribution agreement – with payment up front, what could go wrong?”
“Distribution agreements are straight forward. Cover off on transfer of title and the ordering process and you’re set – right?”
If you’ve ever thought this, think again. As Intellectual Property (IP) lawyers operating in the business world, we see many things go missing from these type of agreements. It can be costly.
There was a great example of this recently in the cheese industry. Spanish Foods (Aust) Pty Ltd is a distributor of international foods operating in the Australian market. It started importing cheese from a UK producer, Ashley Chase Estate, which used the brand name FORD FARM. Spanish Foods imported the Ford Farm cheese and sold it in Australia. Invoices were provided for the sale, but there was no formal distribution agreement between the parties.
Ashley Chase has a European trade mark to protect the FORD FARM name. It did not have a registration in Australia, leaving it vulnerable. Spanish Foods decided to apply for the FORD FARMS trade mark in its own name. Ashley Chase were instantly on the back-foot, having to oppose the trade mark application of Spanish Foods on the basis the application was made in bad faith – an onerous ground to establish. Ashley Chase was successful, but only after pursuing the matter before the Trade Mark Office. Had the application had gone unnoticed for another 2 months, Federal Court proceedings would have been required to challenge the trade mark.
There are several lessons for manufacturers.
- Trade marks are country specific and distributors do apply for trade marks they don’t own. Look at registering your trade marks in every jurisdiction of interest to prevent third parties getting in before you.
- Written documents are vital, particularly when looking at new ventures into new territories. To keep things informal, particularly in the initial stages, look at terms and conditions to accompany your products that cover the essentials.
- As the arrangement develops, implement a formal agreement. Otherwise, your distributor may obtain unintended rights, including to represent your brand in legal proceedings or to register a security under Australia’s Personal Property Securities Act.
If you have any queries about protecting your IP or distribution agreements, you can contact:
Case: Ashley Chase Estate Limited v Spanish Foods (Aust) Pty Ltd  ATMO 104