Managing Distribution

Setting up distribution is a task in its own right and involves the following:

♦ Monitoring, auditing sales

♦ Investing in the relationship

♦ Geographical restrictions, law

♦ Supporting the channel

♦ The reorder process

♦ Size of reseller base

♦ Not giving away more than you have to

♦ Quality control

Recourse-Getting Legal

This is not an easy call to make. Let me take you through the two most common distribution disputes.

♦ You supply goods. They remain unpaid.

♦ Someone is copying your product.

These problems are even more complex when they happen overseas. Even in your own country it can take years to get justice. Litigation is also a major and demoralizing distraction. The only people who benefit are your competitors. The golden rule is that prevention is the best cure.

Write your contracts carefully. Deny transgressors any gray areas. Make sure the costs of putting things right fall on them. Have strict termination and punitive penalty clauses in place too.

Keep accurate, detailed records of accounts, phone calls, letters, and events. Watch delivery to payment intervals like a hawk. Keep the credit you allow low so if there is a problem you won't have to write off too much money.

Curtail the relationship with any distributor or dealer who defaults or colludes. If necessary, make your action public knowledge.

Outraged pride, no matter how justified, is never a good enough business reason to resort to law. Sometimes it is necessary just to warn people. Only take legal action when it is necessitated by survival policy and there is a clear, provable technical infringement. Behaving in a business-like manner reduces legal costs, but consider taking out legal insurance just in case. Build this investment into your manufacturing overhead.

Always have secondary distributors and dealers in the wings to replace your weakest dealers. These can then be brought in at short notice to replace any distributor or dealer who abrogates his contract.

Counterfeiting, Piracy, and Theft

In the United Kingdom, which is always regarded as being exceptionally law-abiding, the externally audited figures imply that one in four pieces of software in use are illegal. The internal audits by IT managers double that figure to one in two. The most common cause of this is people buying software once and copying it many times. In large firms uncontrolled software distribution can allow software to spread as fast as a brush fire. This is known in the trade as under licensing. It is likely to represent your biggest source of loss.

Pursuing individuals is as effective as trying to wipe out a colony of ants with the tip of a pool cue. Organized businesses are your real concern, such as a distributor who continues to sell your product long after your agreement has been terminated, or a large corporation who uses your software company-wide by copying an unlocked evaluation copy you gave them in good faith. However, the following also occurs:

♦ Counterfeiters—Normally interested in branded products and even then they normally concentrate on their top-selling products.

♦ Software Incorporation—One firm uses/embeds someone else's software into their product without paying for it. This is hard to spot but often a disgruntled employee will whistle blow or the software will exhibit some telltale sign that alerts you.

Whatever the offense and wherever the problem, you have to have a realistic strategy and a cool head. First, don't do what most people do: nothing. If you don't protect your intellectual property, your program, you can make it harder to protect your rights in the future. It is important to send out a clear signal that you are not to be messed with and you will protect your interests and recover monies whenever valid.

The trick is to know how to do this without taking up too much management time. You are meant to be running a software operation after all, not subsidizing the legal profession. This involves getting forceful rather than heavy and litigious at the outset.

Unless you are familiar with the procedures, your best bet is to contact your local software enforcement organization, such as SIIA in the United States or FAST for the rest of the world. They pursue thousands of such cases each year and they know the most effective way to deal with cheats. If you think you have a case you must gather as much evidence as possible to support your complaint. If nothing else, they will give you some practical advice. If they take the case, they will initially put the offending firm or individual on notice. If they persist from that point onwards, a judge would deem the defendant is contravening that organization.

Most firms settle at this point. In most countries the offenders and their board are criminally liable if found guilty. If they are selling the software illegally known customers can be served with similar notices.

If you don't get satisfaction, you will have to consider taking legal action. An official summons clears up many cases before they go to court. Although the police and Government Trading Standards departments are interested in these cases, they rarely have the resources to pursue them unless it is extremely high profile.

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