Battling The Gray Market

Advice on protecting yourself against unauthorized distribution.

By Inc. staff | 
 

DECEMBER 1988

If you subcontract with a foreign manufacturer, the gray market may be a threat to your business. But now, thanks to a recent U.S. Supreme Court ruling, you can help protect yourself by 1) carefully wording your agreement with the subcontractor, and 2) registering with the U.S. Customs Ser-vice.

Unlike counterfeit black-market goods, which are manufactured illegally, gray-market goods are legally produced but distributed in unauthorized ways. If, for instance, a foreign company has sold you its trademark for exclusive use in the United States, then tries to compete with you here by distributing the product itself, that product is a gray-market import.

Here's how you can help Customs guard your interests by blocking the product at the border. First, be sure that your relationship with the overseas manufacturer is contractually defined as licensee/licensor -- if you're affiliated with the gray marketer as either parent or subsidiary, Customs won't protect you. And remember to let the Customs Service in on your arrangement: record your trademark with it.

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