Essay on Risk Management

996 Words 4 Pages
Risk Management The primary risk for lawsuits in my company revolve around trademark infringement, and unauthorized distribution of licensed product. The company is in litigation constantly. Typical scenarios that have resulted in lawsuits are as follows:

· The company buys $500,000 worth of Tommy Hilfiger inventory from a manufacturer, no longer licensed to make the product. It is surplus inventory. Because the manufacturer no longer has a license from Hilfiger (probably because he sells to people like us) the product is considered unofficial and illegal. My company sells the product to XYZ large chain discounter. The legal trademark-infringement staff from Hilfiger constantly shops at these type stores. In order to protect the
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The customer sues us, asserting that we knew that the goods were second quality all along, and intentionally cheated them.

Far and away the first scenario is the most common. Although it is not really a quality issue, it is the area in which the company is the most vulnerable. Several procedures have been put in place to mitigate the potential liability issues. The people selling us high-end licensed apparel are required to provide us with documentation that the manufacturer has the legal rights to manufacturer and distribute the merchandise. This may come in the form of a copy of a portion of their license agreement or a letter from the licensor or a "sanitized" invoice. To sanitize an invoice, the proprietary details are whited out, such as price, date, contact person, terms, etc. What is important is that the trademark logo shows on the invoice, and the size and color breakdowns of the merchandise. Sanitized invoice is applicable when buying from broker. The other way that the risk is controlled is by using specific channels of distribution. There are some brands that are extremely aggressive in protecting their trademarks. The example I used above, Tommy Hilfiger is one of them. The Hilfiger licensees are strictly forbidden from distributing trademarked apparel through discount stores anywhere in the United States. Further, because there are licensees all over the world, they are restricted from

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