Challenges of switching to new product lines – contractual, legal and technical considerations

15 Apr 2020 , 3:57pm

With many companies adapting their plans to new products in the aftermath of the Covid-19 pandemic, a number of challenges can arise, warns Elizabeth Dennis of Marks-Clerk.

The recent outbreak of Covid-19 has probably had the biggest global impact of any event since 1945. It has led many luxury businesses to adapt their strategic plans and extend their product lines, not only in an effort to preserve their economic viability but also to provide the much needed support and supplies that are in high demand across the globe.

It is inevitable that each country around the world will feel the impact of Covid-19, particularly with the medical and healthcare systems being pushed to the limits and supply chains in other sectors disrupted.

These circumstances have shown a huge surge in demand for products such as ventilators and personal protective equipment such as surgical gowns as well as hand sanitising products, with businesses such as Dyson, McLaren, Burberry and Kylie Skin all looking to make a positive difference through the development and launch of new products to help ease the ever-increasing demands.

Whilst the good intention of businesses to develop and launch new product lines is undoubted, challenges are likely to arise in doing so and contractual, legal and technical considerations should not be overlooked. By taking preliminary precautions, businesses can ensure that both safe and compliant products are made available and that they are protected in their new trading activity.

Contractual considerations

Firstly, whether new contracts are being entered into or the status of current contracts is being reviewed, it is important to ensure that the manufacture, supply and distribution of any new product adopted is borne in mind and that the urgency to meet the new demands does not result in costly mistakes. Substantial changes may be required to fit the contract to the new product. With the development of products outside a business’ usual sphere of interest, new contractual relationships may need to be put in place with suppliers, manufacturers and distributors.

An additional contractual consideration is that of insurance and whether by entering into a new consumer market, such as healthcare or medical supplies, protection against end user liability and product liability are appropriately provisioned for. Premiums may also go up significantly.

Legal challenges

The development and launch of new product lines also has the potential to lead to legal challenges. These include, but are not limited to, intellectual property (“IP”) and regulatory considerations.

1. Branding

In respect of legal challenges relating to IP, the development and launch of a new product line may merit the development of a new brand name. It would therefore be prudent for a business to take measures to ensure that trade mark clearance searches have been carried out to avoid future infringement proceedings being brought by third parties. This is a key step to take before the launch of any brand as whether the intention is for the new trade mark to be used on a registered or unregistered basis. To proceed with the launch of a new brand without carrying out clearance searches is a risky approach to take. If a business intends to obtain a registration for a new trade mark, design or patent, specialist legal advice should be sought to ensure that the requisite procedure is followed and correct application is made in order to ensure the most appropriate and thorough protection is obtained.

2. Regulatory compliance

A key factor to consider when entering into a new market, particularly concerning healthcare or medical products, is that of regulatory compliance and whether a new product line will need to meet certain regulatory frameworks that are in place. It is highly likely that products targeted for human use or consumption will require thorough and precise testing, not only at the development stage but also throughout manufacturing and trading. Regulatory frameworks are in place to ensure consumer safety and compliance of those providing given products in the market. Caution should therefore be taken to determine whether a new product line is subject to any regulatory frameworks and criteria that will need to be met.

3.Technical challenges

Lastly, the launch of a new product line is likely to face technical challenges, particularly in such circumstances where a business is seeking to develop and produce a product outside of its primary sphere of interest. The design and development of medical equipment for example combines a number of different technical skills and equipment, and steps ought to be made to ensure appropriate employees and manufacturing equipment are in place to support the same. Technical challenges may also be realised in the testing of the final product as, despite a keen urgency to bring new products to market to meet increased demand, adequate testing ought to be carried out (and by law may have to be) to ensure the efficacy and effectiveness of the new product lines.

So “doing one’s bit” in the current crisis may be admirable and advantageous but, despite the obvious urgency, beware of cutting corners.