Successful exporting doesn’t necessarily mean that you have to do business across borders

I have a client who is really good at designing new and quirky products especially for children. However, they are too busy with their other business to concentrate on commercialising their ideas and building a market share for their products. So, they thought of licensing their intellectual property (they have spent a fair bit of cash on trademarking, design registration and patent applications).

Through licensing my client enters into a contractual arrangement allowing use of its intellectual property with a company who already has the manufacturing contacts and distribution network to get the products on the shelves in particular territories. My client was particularly keen to enter the US market where his quirky products would be a big hit.

After an introduction by Austrade last year, my client was very excited to get what seemed like a dream licensing deal with a large US company. The US company agreed to manufacture and distribute the products in the US, achieve minimum sales over three years of in excess of US$8 million and to pay my client 10% of royalties. My client did not ask for a licence fee up front relying on the contractual promise made by the US company. As it turned out, the US company couldn’t come up with the goods and started playing a game of hide and seek with my client when asked for sales reports to show they were actually doing what they promised to do.

The US deal went sour. What to do next?

It was too expensive to consider suing the US company for breach of contract so my client kept on keeping on, asking a colleague of his if they would like to assist with the distribution of the products in Australia. Funnily enough, the colleague expressed interest in taking on the whole shebang and low and behold, my client now has a licensing agreement with his colleague, with a licence fee paid in advance and royalties on sales. His colleague is based in Australia, he knows how the colleague works as he has worked with him before but the colleague has global aspirations.

So my client is going to be exporting his products globally without lifting a finger and he only had to look in his own back yard for someone willing to take on the licence.

Something to think about over Xmas…

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Lynda Slavinskis is an outgoing, intuitive and commercially savvy lawyer. She has worked in-house at Sussan Corporation and Tattersall’s and now assists small and medium businesses with import, export, leases, franchising, employment and general business advice as principal solicitor of Lynda Slavinskis Lawyers & Consultants. Lynda is on the Victorian State Government’s Small Business Advisory Council.