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As a NZ business owner, you may be concerned about the reselling of your existing products. It can be difficult to prevent such an act, especially if a customer has legitimately purchased your product from your business. Additionally, your business cannot lessen the competition in the market, making it harder to prevent such actions. Otherwise, you and your business may potentially be in violation of the Fair Trading Act. This article will outline whether you can prevent people from reselling your products and measures you can take.
Current Rules and Regulations Regarding Reselling
Currently, the market has many reselling businesses and online marketplaces for reselling with TradeMe and Facebook Marketplace. Resale rights are an essential component of commerce, as they determine whether a person can sell or distribute a product that they have legally acquired. In New Zealand, the concept of “exhaustion of rights” applies to the resale of products. According to this principle, once a product has been sold legally, the purchaser generally has the right to resell or distribute it without the consent of the original manufacturer or seller.
This means that, in most cases, you cannot prevent individuals or businesses from reselling your products in New Zealand once you have legally sold them. However, there are some exceptions and strategies to protect your brand and products.
Reselling & Copyright Considerations
Usually, the reselling of products that include copyright material does not infringe your copyright if the material is legitimately acquired. However, you can control the sale of your copyrighted material through distribution agreements. A distribution agreement outlines how specific parties can distribute or resell your products. This agreement can restrict your reseller from selling your products to unauthorised third parties, thereby controlling the resale of your products. Key terms can include:
- duration of the contract;
- products included in the agreement;
- duties of both parties;
- whether the contract is exclusive;
- intellectual property; and
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If a customer is reselling your products, the warranties your business offers are only applicable to the original purchase only. Hence, purchasers of resold products cannot rely on your business warranties.
Alternatively, if you have a reseller agreement with your customer, then you will need to honour your warranties. Having a reseller agreement can help limit your liability and ensure any reselling goes smoothly. Your reseller agreement can outline:
- pricing and payment;
- ordering process;
- intellectual property;
- consumer guarantees;
- delivery; and
Protecting Your Brand and Products
1. Trade Marks
One of the most effective ways to protect your brand from unauthorised resale is by registering your trade mark. Trade marks grant you exclusive rights to use your brand name and logo in connection with your products or services. This can help you take legal action against individuals or businesses that attempt to sell counterfeit or infringing products.
To register your trade mark, you can file an application with the IPONZ. Ensure to conduct a trade mark search beforehand to confirm that your trade mark is unique enough. Your registration will last for 10 years before renewal is needed.
2. Additional IP Protection
If your products or packaging have unique and distinctive features, consider applying for patents or design registrations. This can give you legal protection against others trying to replicate or sell products that closely resemble yours.
A patent will cover your novel inventions, including products and processes. This provides you with the right to prevent others from making, using or selling anything you have invented. Note that your patent rights will only apply in NZ.
Meanwhile, design rights apply to the visual appearance of a product. This can include shapes, configurations, patterns and ornaments.
3. Robust Contracts
Your lawyer can help establish additional clear contractual agreements with distributors, retailers, and wholesalers. These contracts can include clauses that restrict or regulate the resale of your products. While you may not be able to completely prevent resale, you can impose conditions that limit the ways in which your products can be distributed and marketed.
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Preventing the resale of your business’s products is difficult as you breach your obligations under NZ commercial laws. Ensure to avoid engaging in any activities that may lessen competition in the market; this includes prohibiting the resale of your products. You can also register your trade marks, patents and design rights to protect your interests. Additionally, you can put contracts in place, such as distribution or reseller agreements, to regulate the resale of your products.
If you would like help to regulate the resale of your products, contact our experienced regulatory and compliance lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
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