A distribution agreement may come to an end, but a distributor may not immediately stop using the principal’s brand. A former distributor may continue displaying the principal’s logo, using its trademark on websites or social media, distributing promotional materials, or representing itself as an authorized distributor. Such conduct may create confusion among customers and expose the principal to commercial and legal risks.

The first question is whether the former distributor still has any legal right to use the brand. Under Law No. 20 of 2016 on Trademarks and Geographical Indications, a registered trademark owner may grant another party a license to use the trademark. Accordingly, the distributor’s right to use the brand should be assessed based on the scope of the authorization granted under the distribution agreement, any separate trademark license, and the applicable termination provisions.

This makes post-termination obligations particularly important. A well-drafted distribution agreement should clearly require the distributor, upon termination, to stop using the principal’s trademarks and logos, remove the principal’s name and branding from its websites and social media, discontinue promotional materials, and cease representing itself as an authorized distributor. Where appropriate, the agreement should also address the treatment of remaining inventory, signage, packaging, and other materials bearing the principal’s brand.

The risk becomes greater where the former distributor continues dealing with customers under the principal’s name. For example, a former distributor may continue advertising itself as an “official distributor” and accepting orders even though its appointment has ended. Customers may then reasonably believe that the distributor remains authorized, potentially leading to disputes concerning payment, delivery, product quality, warranties, or after-sales services.

Continued unauthorized use may also give rise to trademark-related claims. Article 83 of Law No. 20 of 2016 provides a basis for a registered trademark owner and/or its licensee to bring a civil claim against unauthorized use of a trademark that is identical or substantially similar for similar goods or services. Available remedies may include damages and an order to stop the use, with the claim brought before the Commercial Court.

However, continued use by a former distributor does not automatically constitute trademark infringement. The legal position will depend on the circumstances, including whether the trademark is registered, the manner and purpose of its use, the relevant goods or services, the scope of any prior authorization, and whether that authorization has validly ended.

Before taking further action, the principal should review the distribution agreement, any trademark license or other authorization, the termination provisions, and the circumstances surrounding termination. Evidence of continued use should also be preserved, including screenshots of websites and social media, promotional materials, quotations, customer communications, and other documents showing continued use of the brand or representations of authority.

Depending on the circumstances, the principal may issue a formal notice requiring the former distributor to cease using the brand and remove any representation that it remains authorized. If the conduct continues, the principal may consider contractual remedies, trademark claims, or other legal measures available under Indonesian law.

For businesses that rely on distributors, brand protection should therefore be addressed both when the relationship is established and when it ends. Clear provisions governing trademark use, termination, and post-termination obligations can help reduce the risk of former distributors continuing to use the principal’s brand or holding themselves out as authorized representatives.

Schinder Law Firm advises Indonesian and international businesses on distribution arrangements, trademark protection, commercial contracts, and disputes arising from the use of intellectual property after termination. For further information, please contact info@schinderlawfirm.com.

Author:
Dewi Susanti