Could Intellectual Property offer solutions for businesses affected by tariffs?

Tariffs are the talk of the town at the moment (quite literally every town, even those inhabited solely by penguins). Given the announced 90-day hiatus, and toing and froing in negotiations that are apparently underway, there is uncertainty as to whether tariffs will apply in their current iterations, or at all. Whilst this is not ideal for businesses that will feel unable to make critical decisions, they will currently be considering all their options in a possible post-globalisation world, or one that excludes the USA as their key market (as improbable as the latter may seem currently).

This article explores the interplay between tariffs and business’ IP portfolios, with some ideas of matters to consider in reaction to these policy changes. Whilst the article does offer solutions leveraging IP, its scope does not include considering all other economic challenges or practicalities involved a particular strategy. That being said, where possible, the article takes account of all foreseeable pros and cons applicable to each.

Licensing your trade mark to US manufacturers

The US is the biggest consumer market in the world, so it is no wonder that there are already reports of certain auto manufacturers moving their production to the US to avoid the costly effects of the tariffs.

Brands could also consider an option that requires a lot less start-up capital than moving production there. This would be by partnering with a local US manufacturer that already has some of the expertise, infrastructure and network to begin manufacturing your products for you, specifically for the US market.

As part of the partnership, businesses may consider licensing various IP such as trade marks, designs or even patents to the local manufacturer. They would in return pay you a fee for this licence, valued accurately according to past revenue and profit figures in the US and elsewhere.

This strategy would allow an exporting business to avoid the costs of the tariffs imposed on those importing into the US, and also avoid the high costs and risks of having to set up production in the country. It is a relatively risk-free method of continuing to access the US market, whilst a trading policy that could change in the future, is operative.

From an IP perspective, any business considering this option should ensure that all registrable IP that will be utilised in the US, is fully and properly registered there, with ownership in the hands of the parent company based in your home country. Businesses should also be careful to negotiate and draft any manufacturing agreements with local partners accurately, and in a way that secures their market share, and IP rights (whether current or future). There may be questions as to the term of any such agreement, and whether a business would want to continue with such an agreement should there be a regime change in the US, or should the tariffs no longer apply. This in turn could affect the attractiveness of such a transaction to the local manufacturer too.

Businesses will also need to consider extraneous factors that may affect viability here. US manufacturers will still be subject to the rising costs of importing materials and components from the rest of the world, and this will in turn affect profitability, and whether the business is able to compete in the market. Manufacturing countries in continents such as Asia have obviously more favourable conditions where components and materials are produced, along with infrastructure that has attracted investment for several decades.

The brand owner would also be taking a risk in relation to their brand reputation. Whilst well-drafted termination provisions could come in handy here, the brand owner has only limited contractual control (rather than direct oversight) over the way the local manufacturer and licensee carries out their business. Lower manufacturing quality standards for example (in a bid to achieve profitability) could affect a brand’s long-term reputation.

Opening your exports up to new markets

The US may be the biggest consumer market currently, but trading partners such as China, India, Japan and the EU are not far behind and are projected to catch up very quickly over the next decade. With the tariffs making trade with the US difficult, businesses may consider accessing these markets and building a presence from an early stage, or if they already have a presence in them, growing their trade in these regions.

If a business is considering entering a new market, they should ensure that all registrable IP is filed for registration in that particular territory. A trade mark registered in your home country does not protect you in the event of infringement in the new territory. Particularly if manufacturing is also taking place in the target market, it is a common issue that newly appointed manufacturers/distributors can threaten to take over trade in that market entirely, when the parent has not registered its IP there.

Exporting businesses should also consider their commercial negotiations and contracts carefully. They should ensure that they, and their local partners, are compliant with any local laws applicable, and that expectations in the contract are clear on both sides. From an IP perspective, brand owners will want to ensure that limited and clear licences are in place where required, and that any rights arising as a result of the partnership are assigned back to them on an ongoing basis.

Protecting your market share in key markets

In times of economic uncertainty generally, and particularly in times where the biggest market for some businesses is threatened by tariffs, it is vital that businesses protect their already hard-earned market share in other countries.

Intellectual property exists to allow businesses that have earned their place in the market by investing in research and development and creation of IP, to protect themselves from that hard work being unjustly coopted by a third party. If businesses find that a third party is using their brand, their design, or any other protected IP, action should be taken to resolve this at an early stage. Disputes can grow in severity when an infringing party becomes more entrenched in their position as they invest more in the infringing brand/product.

Deploying your IP in this way allows you to maintain revenues in key markets that are unaffected (or less affected, given the general effect on global supply lines) by the US tariffs. In times where a particularly important market will be closed off to traders in varying degrees, it is very important to ensure that other key markets are protected and maintained. This is particularly true if those traders will want to expand operations in key markets outside the US, given the future outlook.

Selling off your rights in the US

As a very last resort, and particularly in situations where businesses have country specific sub-brands in the US, they may consider selling their IP assets in the country. Such a decision would be drastic, as it would effectively mean closing off that market for trade under those brands or products forever. As such, this option should only be exercised where a business is not already significantly invested in the US market and does not see prospects of pivoting in any way to soften the blow of tariffs. Given the business’ IP is a key asset, which has taken investment to bring about, and offers growth potential for the future (even if licensed to others, rather than sold), this option is less recommended.

If exporting businesses are contemplating selling off their IP assets in this way, they should at least ensure that the assets are valued accurately for the territory and that there are clear payment terms reflected in any agreement for sale and assignment. Businesses should keep a hold of their IP assets and not make any changes to the register until they have received full payment, and all other obligations of the buyer have been satisfied.

Maintaining your rights in the US

Many businesses may feel unable to continue to trade in the US, given the added costs of the tariffs. Indeed, at least momentarily, many exporters may have paused their exports to the US until such time as the long-term policy landscape becomes clear.

It is important to keep in mind that some IP rights depend on their use in the specific territory to be validly maintained there. In the case of trade marks, a lack of genuine use in the territory the mark is registered in, will make that trade mark vulnerable to cancellation for non-use. For a cancellation action on the basis of non-use, the proprietor of the trade mark must have failed to make use of the mark for a continuous period of five years.

Whilst most businesses will have made decisions on what to do in response to the tariffs by then, it is useful to keep in mind the deadline at the end of the five years to prevent those IP assets from being lost.

Concluding thoughts

As can be seen from the above, IP can certainly offer some solutions to the dreaded tariff crisis. There will of course be extraneous factors such as cost of materials, practicalities of entering new markets, and the loss of trade in the US to consider. After all, the US consumer market is currently around double the size of the next biggest market. In any case, there are at least important IP considerations to be made, given the importance and value of such assets in any economic crisis.

When deploying these solutions, businesses must ensure that they are protecting themselves to the best of their ability, using their already existing, or new, IP assets. Whether by filing to register your IP, ensuring that contracts are drafted to a high standard, or ensuring that any IP infringers are dealt with, businesses should engage high quality, specialist solicitors with a global reach in this respect.

Edwin Coe’s Intellectual Property team is ranked in The Legal 500 UK 2025, the WIPR UK Trade Mark 2025 and WTR 1000 2025 firm rankings. The team regularly assists exporting and transnational businesses protect, commercialise and enforce their intellectual property assets globally. If you have any comments about this article, or require advice yourself, please contact Lakmal Walawage or any other member of the Intellectual Property team at Edwin Coe LLP.

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