Managing product distribution channels is a critical part of business.  Goods need to go the right place.   

For electrical appliances, voltage requirements and power cord prong configurations, for example, must match the end use market.  A mismatch detracts from functionality.  For automobiles, air emissions equipment must match the legal requirements of the end use market.  A mismatch can result in fines.  For luxury goods, the product must be limited in distribution through selected merchants.  A mismatch can destroy exclusivity and potentially erode the brand.

That was the situation Zino Davidoff found itself in when its Davidoff Cool Water cologne was found for sale in CVS stores, a mass merchandising drug store chain.  Even though most of the product found there was genuine, as opposed to counterfeit, it was still in the wrong place.  It had been obtained through improper channels of distribution.  They were gray market goods.  Davidoff sued.

What is interesting about the case that the UPC codes were removed or defaced from the Davidoff bottles of cologne – either cutting them out of the box, or chemically removing them, or going so far as to grind them off the bottom of the bottles.  What is also interesting is that Davidoff sued on the basis of trademark infringement and won.

The UPC code was viewed by the court as an indicator of the goods’ source of origin.  It functioned as an indicator by allowing the company to determine whether the goods were genuine or not.  It also functioned as an indicator of quality – containing information about manufacture and providing information valuable in the event of a product recall.

Allowing UPC codes to act as trademarks gives businesses another weapon in their arsenal for policing and protecting the integrity of their distribution channels.

Doing business outside of your home country always presents a special challenge.  Besides language and cultural barriers, you may also encounter unexpected legal hurdles.  The rule of law may be less developed than you’re used to.  Contracts may be viewed as more fluid and less enforceable than you’re used to, and concepts you may take for granted might not exist.

Take for example the sales office a U.S. company was trying to establish in Malaysia.  The location was chosen, the job candidates were narrowed down, and then it came time to present an employment offer and contract. 

 The U.S. based executives driving the project framed the employment package in terms of salary and benefits.  Luckily, they had the benefit of local counsel who advised them that “salary” is viewed differently in Malaysia – even “salaried” employees are entitled to overtime.  That one piece of information helped management retool the job offer and avoid a nasty budget surprise.

Western companies and their manager often experience culture shock when doing business abroad, particularly in Greater China.  It’s a learning experience.  Mike O’Neill, general counsel of Lenovo recently wrote:

I realize that the big challenge in China is to have the humility to recognize what I don’t know.  We cannot assume that lessons learned elsewhere will apply in China; or at least, they certainly will not apply in the same way.

To help you bridge the knowledge gap and avoid the School of Hard Knocks, I invite you to join me on July 22^nd at 8 pm Eastern (5 pm Pacific) when I interview international lawyer Nicholas V. Chen, a partner in the Pamir Law Group,  on Ask the No Nonsense Lawyer teleseminar about the legal aspects of doing business in Greater China.   

Nic is a U.S. trained lawyer who has been traveling and working in China since 1973. He has helped hundreds of businesses successfully bridge the cultural gap, completing hundreds of foreign investments into China and many PRC cases into North America, Latin America, Europe and Africa.  He has also been named a Leading Lawyer by Asia Law and Practice Magazine and is an arbitrator for China International Economic Trade Arbitration Commission.

To learn more about the program and obtain a free registration to this special teleseminar, click here and submit a question you’d like me to ask Nicholas V. Chen about doing business in Greater China.  The website will then direct you to the call-in information page that includes your pass code (please note that there may be a small phone charge depending on where you are calling from). 

Please print that page and post it in a conspicuous spot as a reminder.  Space is limited, so please reserve your “seat” today by clicking here now.

We look forward to having you join us!

©Corporate M.O., LLC 2009

Today’s Wall Street Journal has an interesting article about how Toyota is leveraging it’s investment in product development with patents.  More specifically, Toyota has been diligently patenting the inventions resulting from the engineering developments associated with its best-selling hybrid Prius brand automobile. 

According to the Journal, Toyota has applied for more than 2,000 patents and is building a castle wall around its technology.  Raising the barriers to entry in this segment of the car market not only makes it more difficult for competitors to enter the field.  It also tees up Toyota’s patents (if and when they issue) for licensing and royalty potential.  It’s a great example of legal leverage.

For more information about the power of patents and how to use them for strategic business advantage, click here.

The past few years I’ve been to NYC I’ve been unable to get tickets to the Broadway show Jersey Boys, the story about the rise to success of Frankie Valli and the Four Seasons.  When the Broadway South series recently brought the show to Raleigh, NC my husband surprised me with tickets for my birthday.  What a show!  (And yes, he scored big points for the perfect gift.)

You’re probably wondering what all this has to do with Legal Literacy.  Well, part of the Four Season’s story is the remarkable relationship between the lead singer Frankie Valli and fellow founding member, songwriter, Bob Gaudio.   The two had a side agreement separate and apart from the group, a verbal agreement, sealed with a handshake – not a written contract.   According to the playbill, their collaborative efforts to this day are still governed by a handshake.

The audience applauded when the bit about the handshake deal was revealed on stage.  It made me realize that we’d all like to live in a world where your word is your bond and a deal is sealed with a handshake.  Written contracts and lawyers only appear to “complicate” matters. 

To make an arrangement like Valli’s and Gaudio’s work requires both parties to have a high degree of trust and integrity coupled to an uncompromised core set of values.  That’s easier to achieve when individuals are acting in their own capacity, than as agents for corporations that often represent a collection of competing interests. 

Not all entertainers are as fortunate.   The late Michael Jackson, for example, has left behind a legacy of litigation, including contract disputes. 

Contracts don’t create litigation, unresolved misunderstandings do.  Written contracts are merely roadmaps to reminding everyone about who is responsible for what.