Inventors often engage sales representatives to promote, market and sell their products. In many cases, these are commission based arrangements. These arrangements may be more complex than first meets the eye. For sample, think about the following issues:
- Are non-competition provisions appropriate to prevent the sales representative from also selling competitive merchandise?
- Are confidentiality provisions appropriate to prevent the sales representative from revealing or using your proprietary information (sales lists, business plans, price structures, commission rates, customer lists, vendor list, financial information, and the like)?
- If the sales representative is terminated or quits, how long will he continue to receive commissions on accounts in his sales territory? When will the new sales representative begin earning the commission on existing/established accounts?
- If the company establishes an account in the territory of a sales representative, without the involvement or a lead from the sales representative, will a commission still be paid?
- If the sales representative is terminated or quits, how will you recover products given to him as examples?
- Should there be minimum sales quota to maintain an exclusive sales territory?
- Are exclusive or non-exclusive arrangements more appropriate in a given situation?
- What should the commission be based on? What precisely is included in net or gross sales figures? (shipping charges, taxes, product returns and the like)
- How will commissions be handled if commission has been paid on a large volume of products that are subsequently returned?
The ability to sell on the internet also raises complex issues for business owners:
- If he has a web site, will you have any say in how your products are marketed?
- How will you maintain control over your proprietary rights in your trademarks, copyrights and trade dress (packaging)?
- If internet sales result in foreign sales, who be responsible for import/export compliance, government fees and taxes?
- Before sales become international on the world wide web, has there been appropriate due diligence to be sure there are no infringements of foreign trademarks, patents, product safety, product origin or other foreign laws?
This is by no means an exhaustive list of issues that should be addressed in marketing and promotion agreements. Each situation is unique. We hope to have given you some ideas that you may not have previously taken into account when formulating an agreement. Our office can assist inventors and businesses with drafting custom agreements that meet their specific needs in a given scenerio. We can also assist sales representatives in reviewing agreements that have been presented for signature.