Distribution Agreements • 285
manufacturer will “sell” whatever it is that it manufactures to the distribu-
tor, who will then “sell” the product for a higher price. It is oen the case
that the manufacturer makes the least money, but it should, nonetheless,
be well compensated for the products being distributed.
ese types of agreements can range from the simple (i.e., a very concise
statement of the obligations of the manufacturer to provide the product,
obligations and restrictions on distribution, and a statement of the busi-
ness deal) to the very complex (i.e., license terms, marketing obligations,
collaboration obligations if the parties are to jointly develop any product).
In all cases, it is critical that the parties clearly articulate in the distribu-
tion agreement the manufacturer’s obligations with respect to providing
the product to be distributed, the distributor’s obligations with respect to
marketing and distributing the products, any intellectual property obliga-
tions, and a clear statement of the business deal (e.g., what will the manu-
facturer be paid for its products and when will payment be made?).
KEY ISSUES FOR DISTRIBUTION AGREEMENTS
In each distribution agreement it is essential to consider whether a license
grant is necessary and, if it is, what the scope of the license grant should
be. Generally speaking, a license grant in a distribution agreement should
be broad enough to cover all of the required distribution obligations of
the distributor. So, for example, it should include the right for the dis-
tributor to market, promote, distribute, sell, and use the products that
will be distributed.
• Consider whether the license should be exclusive so that the distribu-
tor is the only entity that can distribute the product, or non-exclusive
so that the manufacturer is permitted to enter into multiple distribu-
tion agreements for the same products.
• Manufacturers frequently will want to limit the distribution rights
to a particular territory (e.g., a particular state, region, or country).
• A hybrid approach is oen acceptable, in which the distributor has
the exclusive rights of distribution within a dened territory, coupled
with non-exclusive rights outside of that territory. Be careful—this