4 July 2024

How can a Consignment Agreement Help Protect Intellectual Property Rights

Distribution_Consignment Agreement

A well-drafted consignment agreement can help protect intellectual property rights in several ways:

  1. Ownership and IP rights: The agreement should clearly state that the consignor (supplier) retains ownership and intellectual property rights over the consigned goods until they are sold to the end customer. This establishes the consignor’s exclusive rights over the IP.
  2. Permitted use: The agreement can specify the permitted uses of the IP by the consignee (retailer/distributor), such as limiting the use to marketing and promoting the consigned goods. Any unauthorised use or reproduction would constitute a breach.
  3. Confidentiality clauses: Consignment agreements often include confidentiality provisions that prohibit the consignee from disclosing or using the consignor’s confidential information, including trade secrets, designs, and other IP, for any purpose other than the consignment arrangement.
  4. Non-compete and non-solicitation: Clauses can be added to prevent the consignee from competing with the consignor or soliciting their customers during and after the consignment period, protecting the consignor’s IP and business interests.
  5. Indemnification: The agreement may require the consignee to indemnify the consignor against any claims or losses arising from the consignee’s unauthorised use or infringement of the consignor’s IP rights.
  6. Termination and return provisions: Clear guidelines for returning unsold goods and terminating the agreement can help ensure that the consignee does not retain or misuse the consignor’s IP after the consignment period ends
  7. Dispute resolution: The agreement should outline mechanisms for resolving disputes related to IP rights, such as mediation, arbitration, or specifying the governing jurisdiction for legal proceedings.

By explicitly addressing intellectual property rights, permitted uses, confidentiality, and other relevant clauses, a well-crafted consignment agreement serves as a legal safeguard for the consignor’s valuable IP assets while allowing for a mutually beneficial business arrangement with the consignee.

[1] http://sensakocms.mydpwebsite.co.za/documents/ConsignmentAgreement.pdf
[2] https://businesskitz.com.au/consignment-agreement/
[3] https://www.findlaw.com/smallbusiness/intellectual-property/laws-governing-art-consignment.html
[4] https://www.genieai.co/how-to/place-goods-on-consignment