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Mind your agreements

In a recently published appeal case before the Amsterdam Court of Appeal (1), the court considered the implications of an exclusive distribution agreement on know-how protection.

The case involved a dispute about an agreement between a Dutch manufacturer of sewage water treatment installations and a German company producing and selling environmental equipment for nautical use. Being interested in expanding its range of products the German company contacted the Dutch manufacturer to enter into an agreement about selling the Dutch manufacturer”s sewage water treatment installations in Germany and Poland. The Dutch manufacturer, who were indeed interested to increase their sales, believed to have entered into an exclusive distributor agreement with the German company being their exclusive distributor. In the course of one year several installations were delivered by the Dutch manufacturer and distributed by the German company. As with many relationships there was a sudden end to this one when sales interrupted after the German company had developed its own version of a sewage water treatment installation.

It was thus that the question arose whether an exclusive distributor would have been free to develop a similar product using know-how made available to her under the agreement for information to customers and for obtaining the necessary certifications.

In the opinion of the court the existence of an exclusive distributor agreement would be a strong pointer for the implication that the exclusive distributor was not at liberty to develop its own version of the product using such know-how. Also in the court”s opinion accepting an opposite point of view would have the unfair consequence that the manufacturer of the original product would be unable to sell his product in competition in the distributor”s market because having ceded the exclusive right to that market to his distributor.

Accordingly, with the necessary proof of an exclusive distributor agreement, the German company could have been held liable of tort. Unfortunately for the Dutch manufacturer, they were not able to convincingly proof the existence of an exclusive distributor agreement and lost the case that they might otherwise have won.

In this regard it is also useful to note that tort under Dutch law, under circumstances, can also extend to a third party, when that third party is knowingly profiting from a breach of contract between a first and a second party (2). Such circumstances could be in place if there had been previous relations, entrusting of confidential or sensitive information, and when damages occur in the Netherlands.

(1) Netherlands Patent Office Journal 2009, No. 20, pp75-78

(2) Supreme Court of the Netherlands 17-05-1985, NJ 1986, 760