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HGA Takeaway: US Contracts and IP Protection
HGA Takeaway
US Contracts and IP Protection
What UK businesses need to think about before selling into the United States
The US is a huge opportunity for British brands, but it is also a market where getting the foundations right matters.
From protecting your brand name to deciding how a distributor can use your intellectual property, the agreements you put in place at the beginning can make a big difference later.
In this session, Thomas H. Thorelli of Thorelli & Associates shared some of the areas businesses should consider when protecting their intellectual property and negotiating contracts in the US.
The big takeaway
Don't wait until something goes wrong to think about contracts and intellectual property. A little preparation at the start can save a much bigger problem later.
Protect your IP early
If you're planning to build a presence in the US, your intellectual property should be part of the conversation from the beginning rather than something you revisit once sales start coming in.
Trademarks
Your brand name, product names and other trademarks should be searched and considered for registration early in your US activity. This can help you avoid accidentally infringing somebody else's rights while also giving your own brand stronger protection.
Copyright
Copyright can cover original creative work including written material, artwork, images, logos and software. For businesses built around design and creativity, understanding what you own and how that work can be used is particularly important.
Patents
Where your business has created something genuinely innovative, patent protection may also need to be considered. The US operates on a first to file basis, so timing can matter.
Don't forget confidential information
Not everything valuable to your business will be formally registered. Customer information, pricing, production costs, product development and other confidential knowledge can all have commercial value, which is why confidentiality agreements and clear contractual protections matter too.
Contracts give you the chance to set the rules
One of the clearest messages from the session was the importance of proper contracts. Rather than relying on somebody else's standard agreement, preparing the first draft can give you an opportunity to put your priorities on the table from the start.
Depending on how you're entering the US market, that could include sales terms and conditions, limited warranties, confidentiality agreements, agent agreements, distribution agreements or licensing arrangements.
Put simply
If something matters to you commercially, don't assume everybody has the same understanding. Put it in writing.
Think carefully about how you enter the market
There isn't one single route into the US. You might sell directly to customers, work with an agent or distributor, license your brand or intellectual property, acquire an existing business or establish your own operation.
Each option creates different commercial and legal relationships, so the right paperwork will depend on how you plan to operate.
Working with an agent, distributor, reseller or licensee?
This is where the detail really starts to matter. Your agreement should make it clear what the other party can and cannot do, how the commercial relationship works and what happens if things don't go to plan.
Questions worth asking
- Are they being given exclusive rights and, if so, what do they need to achieve to keep them?
- Which territory, customers or sales channels are included?
- How will pricing, credit and currency risks be handled?
- Who is responsible if there is a product liability claim?
- How can your trademarks, product names and other IP be used?
- What information will each side need to share?
- What must remain confidential?
- How long does the agreement last and how can either party end it?
- What happens if there is a dispute?
- Which country's or state's law will govern the agreement?
You may not need every one of these provisions in every agreement, but they are useful prompts for the conversation you should be having with your legal adviser.
Don't overlook your everyday sales terms
It isn't only major distributor agreements that deserve attention. Your normal terms of sale can determine what happens when an order is delayed, a product is returned, payment is late or a customer says something is defective.
Before selling into the US, review the basics
Think about how orders are accepted, delivery, payment dates and currencies, price quotations, shipment delays, defects, returns, warranties, indemnities, intellectual property, dispute resolution and governing law.
What would we do next?
If the US is part of your growth plan, we wouldn't try to solve everything at once. We'd start with the areas that could create the biggest problems if they're left until later.
1. Check your brand protection.
Make sure you understand what IP you own and whether US trademark or other protection should be explored before you start building the market.
2. Decide how you're actually going to sell.
Direct sales, an agent, a distributor and licensing arrangements all create different risks and responsibilities.
3. Review your existing contracts.
Don't assume UK agreements and sales terms will automatically give you the protection you need for US business.
4. Agree the difficult bits while everybody is still getting along.
Exclusivity, termination, liability, payment, IP use and disputes are much easier to discuss before there is a problem.
5. Get US specific legal advice where needed.
Particularly before signing a significant distribution, agency, licensing or other commercial agreement.
HGA Takeaway
The exciting bit is winning the US business. The sensible bit is making sure you're protected before it arrives.
About the speaker
Thomas H. Thorelli is part of Thorelli & Associates, a Chicago based law firm working with small and medium sized overseas companies doing business in the United States.
The firm focuses on helping businesses reduce their legal risk through preparation and preventative action.
Please note
This HGA Takeaway is intended as a general summary of the session and is provided for information only. It does not constitute legal, commercial or professional advice and should not be relied upon as such. Every business and contractual relationship is different. Members should carry out their own research and seek appropriate independent professional advice before taking action or entering into any agreement.
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