EXPORTING FIRMS MUST "THINK LOCAL' TO AVOID WORLDWIDE TRADEMARK PROBLEMS

EXPORTING FIRMS MUST "THINK LOCAL' TO AVOID WORLDWIDE TRADEMARK PROBLEMS

Our local university and world trade association recently put on a seminar on industrial espionage. Local attorneys covered the mechanics of U.S. and overseas intellectual property protection, with particular emphasis on patents, trademarks, copyrights and trade secrets.

We who export must be aware that local rights to use our own trademarks can be legally appropriated by opportunists. In some countries, all a local need do is register an unprotected trademark, even if he or she has neither equity in, nor involvement with, the product.

Once secured, the trademark rights are then sold back to the hapless manufacturer or authorized distributor, usually at outrageous prices.

Products unprotected by local patents or copyrights likewise can be blatantly copied in some countries.

However, for exporters, it is trademarks that are the most sensitive since they accompany the physical products.

Trademarks get their value from the goodwill and brand recognition they convey. Since all this comes from advertising, loss of trademark use in a local market is really loss of the benefit that advertising dollars bring.

The World Trade Organization is addressing intellectual property protection - a first for the WTO. This is good news.

The bad news is that it has a long way to go before we see anything approaching worldwide uniform registration procedures and protection.

So, if you have a valuable trademark, get your lawyer involved before extensively exporting. Legal counsel is also important if you are in the process of applying for patent or copyright protection in this country.

In other countries, if you wait too long to apply your product may be considered ''generic'' and unpatentable.

THE TRUTH IS OUT THERE,

BUT WHO'S LISTENING?

Another concern is security. The luncheon speaker at the seminar was an FBI special agent very much involved with the Economic Espionage Act of 1996.

She had some hair-raising tales, almost akin to those experienced by Agents Mulder and Scully, FBI characters in the popular TV show, ''The X Files.''

You would be amazed at who is spying on whom. It's almost family!

A synopsis of this act prepared by the FBI's National Counterintelligence Center is available through the FBI home page at http://www.fbi.gov.

I now understand what the Bureau of Export Administration had in mind in limiting access to critical technology only to U.S. citizens and green card holders (permanent residents).

Although neither lawyer nor G-man, I have a simple common sense solution to much of the above risks: Know with whom you are dealing.

The fact that many U.S. firms have little or no information about their overseas trading partners will come as a surprise to anyone who hasn't instructed or consulted on export-related matters.

It clearly shows that top management is not as concerned about their overseas trading partners as they are about domestic customers.

Can you imagine a domestic sales manager knowing little more than the name and address of a major domestic account? Sadly, this is all too frequently the case when it comes to exporting.

Credit agents often require background information on new foreign buyers; but even they can become complacent with prepaid or letter-of-credit orders.

ARE YOU GIVING SALES

REPS ENOUGH CREDIT?

Furthermore, prospective overseas sales representatives often escape credit department scrutiny. Credit approval is often waived, as suppliers are seldom in a creditor position with their representatives.

Here are some reasons you should obtain information on your overseas trading partners.

* Good reliable firms are unlikely to pirate intellectual property or spy.

* Your representatives or distributors may be handling products that could compromise your business. Your sales management should stay informed about the product lines your representatives and distributors are handling, especially when the relationship involves exclusive territories.

* Letters of credit can and do fail, as savvy credit managers know. The most optimistic data suggest a 50 percent failure rate, exactly the same odds as a coin toss.

If I haven't sold you yet, here's the cruncher: It's the law. Compliance with U.S. export control procedures implies at least some familiarity with one's overseas trading partners.

Obviously, the level of scrutiny varies with the kind of product exported and the destination country.

However, at an absolute minimum, foreign buyers must be checked against three negative lists (Entity, Denied Persons, and Specially Designated Nationals and Blocked Persons). All are found in the Export Administration Regulations.

The Enhanced Proliferation Control Initiative makes exporters also responsible for knowing that their trading partners aren't involved in certain restricted activities. These include certain nuclear activities, chemical and biological weapons, and missiles.

EXPORTERS NEED TO KNOW

THEIR PRODUCT'S END USER

Exporters of products of greater sensitivity must have more detailed knowledge of their buyers' operations. For instance, they must know that their products' legitimate end uses are within their buyers' capabilities.

The purchase of a supercomputer by a bakery is a frequently cited example of a ''red flag,'' that is, a suspicious transaction. In order to spot the red flag, the exporter would have to know that the foreign buyer is a bakery.

The good news is that there's sufficient background information on trading partners - for compliance exports of most products - in a well documented credit file. Credit reports, sales call reports and shareholder reports issued by publicly traded buyers all tell the story.

Exporters are not expected to be detectives, but they are expected to be reasonably prudent. This serves both our own interests and export control compliance.

Since distances preclude frequent direct customer contact, third-party information plays a greater role in exports than in domestic business.