Marketing Rights Agreement: Everything You Need to Know
An exclusive marketing rights agreement is a contract between a business and a distributor that will allow the promotion and selling of the business's product.3 min read
Updated November 11, 2020:
An exclusive marketing rights agreement is essentially a contract between a business and a distributor that will allow the promotion and selling of the business's product in exchange for a portion of the sales profit. In an exclusive marketing agreement, you are granting the right to sell your products to one firm which will help to strengthen your brand while keeping the competition at bay.
What Is a Marketing Rights Agreement?
A marketing rights agreement is a necessary step for small businesses that produce their own products and who might lack the capability, financial resources, or manpower to bring their products to the larger market.
There are many necessary components that should be included in your marketing rights agreement to make sure that both parties' interests are protected.
- Definitions - When drafting an agreement, the business that creates the product will be referred to as the manufacturer, and the distributor responsible for selling the product will be referred to as the wholesaler. Each party should be listed and their roles fully defined at the beginning of the agreement. The agreement should also define any key terms that are going to be used.
- Financial Implications - The contract should lay out the specific financial arrangement and obligations of each party involved. This can include a detailed cost per unit which will include labor, distribution, and shipping cost. You will agree on a sale price for the product and what portion of the profit that the distributor will retain. The percentage for the distributor can range anywhere from 10 to 80 percent and often will be determined by promotional and shipping costs.
- Intellectual Property - The business which has created the product will want to make sure that their rights to their intellectual property are protected and outlined in the agreement. This can include rights such as using the products logo and trademarks, which will often be used to promote the product. However, the originating business should retain copyright. You can also use the agreement to define what is considered the acceptable use of your intellectual property.
- Maintaining the Value of Your Product - While allowing your product to reach a wider market through a wholesale can push your company forward, an exclusive marketing rights agreement can be an excellent tool for maintaining your brand reputation by requiring the wholesaler to promote your products ethically.
- Marketing and Promotion - An agreement should allow the wholesaler to be able to use necessary protected intellectual property without the risk of infringement if it is necessary to sell the product. These rights and limitations should be clearly defined.
Creating a Marketing Contract Between a Freelancer and a Company
To ensure your marketing rights agreement protects both parties listed in the agreement, include certain sections to define the arrangement clearly. Sections that should be included are:
- Effective Date - The date that the contract will begin should be clearly stated.
- Services and Payments - The obligations of both parties, as well as determining payment and terms of payment, should be listed here.
- Ownership Rights - This section will establish ownership rights such as patents, copyrights, trademarks, and trade secrets.
- Publicity - A section should be created that defines the type of publicity and promotion that can be used to sell the product.
- Proprietary Information - This section is important for the protection of information that a business will not want to be made public and the restrictions that the dealer must follow.
- Warranty - The warranty section will define any guarantees and established warranties of products and work by either party.
- Termination - This section will define the process for termination of the agreement, including a voluntary termination as well as issues that may result in termination.
- Assignment - This area will define the procedures to assign, transfer, or subcontract obligations to other parties.
- Notice - This section will state how notice of the contract filing will be supplied.
- Enforcement - The enforcement section of the contract is vital to laying out the procedure in which the contract will be enforced such as arbitration and other legal remedies.
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