I was fortunate recently to attend a Nelson Tasman Business Trust seminar on the importance of protecting your intellectual property. Not only was it an opportunity to meet Nelson business owners and learn more about their businesses but it reinforced the importance of having the Intellectual Property clause in your Terms of Trade documentation where appropriate.
Remember Intellectual Property rights protect the rights of the owners of Intellectual Property to earn money from the created property, thus stimulating others to come up with intellectual property of their own.
A few examples of common kinds of intellectual property are trademarks, copyrights, industrial design rights, patents and trade secrets.
Earlier this month I had a Nelson business who work within the hospitality industry approach me concerned that their design drawings were continually being copied. They had spent considerable amounts of time, money and creative resources coming up with the design but felt they were vulnerable when it came to protecting their intellectual property.
When I looked through their terms of trade there were several initial areas of concern. The first observation was that the Intellectual Property Rights clause was missing. This clause would have protected their intellectual property rights where necessary. It would have stopped their client from on-selling or using any designs that they may have provided. It would have also indemnified them against any actions from any third party that owns any designs or plans their client provided them with to manufacture or work from in the event that it infringed on that third party’s intellectual property rights.
The second clause that was absent in their Terms of Trade was the Consequences of Default clause. This meant that if their client chose to not pay for the goods or services that they provided they would have been able to legally ensure that their client was liable for collection costs. It would have given EC Credit Control the ability to not only seek their debt but also all of their related collection costs from their client. In the event that they needed to take legal action against their client this clause allows them to also seek solicitor’s costs.
A good, robust fit for purpose Terms of Trade document not only shows a business to be professional, ethical and acting with integrity but it makes a statement that you and your business are confident with your documentation and business dealings. By ensuring your Terms of Trade are up to date with all the necessary amendments and relevant clauses demonstrates to the people you do business with that you are a responsible business owner.
My experience has been that quotes are the biggest area of disputes within small to medium sized businesses. Ensure there is no room for ambiguity by having your Terms of Trade documentation “fit for purpose”. A recent seminar by Nelson based Right way accountants stated that “25% of all small businesses started in 2015 will be dead in 3 years due to lack of financial nous and judicious business planning”.
Beat Tax, save wisely, look at your timing, structures and above all get good advice. If you can follow these guidelines and ensure that you have a robust Terms of Trade you will be in a position of strength that will not only protect your intellectual property but your business as a whole.
Ray Marshall EC Credit Control Nelson