There are more than 15 million trademark applications filed annually and nearly 100 million registered trademarks in the world. With this in mind, it is inevitable that two companies in similar fields will end up having trademarks that resemble each other or are even identical.
When this happens, there are two ways to resolve this. The one who registered their mark earlier can force the other one to stop using the later mark. Alternatively, the companies can agree on the terms on which both trademarks can be used, that is to say, the trademarks can co-exist simultaneously.
While it would be easy to say that the earlier trademark owner should always prevent the use of a later similar mark, in practice co-existence agreements are a more common way of solving the conflict. There are numerous reasons for this.
Firstly, going through litigation is very costly and time-consuming. It should always be the last resort. Of course, there are instances where co-existence is just not an acceptable option.
Secondly, often it is not a clear-cut case whether there is an infringement or not. The differences in the marks or goods/services may be just enough to make the case uncertain and an amicable settlement a more attractive option.
Thirdly, it could be that the older mark is more than five years old and can at least partially be cancelled for non-use. In such a case, the owner might prefer a settlement rather than risk his own trademark rights being lost for non-use. It is common in infringement cases that the defendant challenges the validity of the older trademark.
Fourthly, it could be the case that the later trademark is registered in some important countries where the earlier trademark is not. If that’s the case, the owner of the earlier mark would risk expansion to those countries where the later trademark is registered but the earlier mark is not. This is in fact a common reason for concluding co-existence agreements. Company A might have older registrations in one country and Company B in another country.
There are also many other scenarios where concluding an agreement is preferable to both parties.
What’s typically included in a co-existence agreement?
In the simplest form, a co-existence agreement is an agreement between the parties that defines the terms on which two trademarks can co-exist. Here are some typical provisions that are often involved in a co-existence agreement.
Territory. Trademarks are territorial rights. A trademark co-existence agreement typically states whether it applies only with respect to some countries or regions, or whether it applies globally.
If the agreement is limited only to certain countries or regions, the parties are free to act without restrictions in other territories.
Trademarks and their variations. Co-existence agreements always relate to particular trademarks. Essentially, it says that Company A is entitled to use and register trademark X and Company B is entitled to use and register trademark Y. It is also common to include some variations, for example that Company A is entitled to use and register trademark X in a logo form and together with additional elements, as long as those additional elements do not include trademarks of Company B. For example, Company A could not use and register trademark X Y, because Y is a trademark of Company B.
It is also possible that the right to use and register the mark are not equally distributed. If one party, for example Company A, has a clear upper hand in the negotiations, it can demand that Company B does not use its trademark in a particular country. It could be that the territory of the agreement is the European Union, but Company B has to agree not to use his trademark in Germany because that is a particularly important market for Company A. If this is the case, the co-existence agreement would not prevent Company B from using another mark for the same product in Germany. This is in fact quite common. For example, Burger King is called Hungry Jack’s in Australia due to a trademark conflict.
Goods and services. A co-existence agreement typically specifies the goods and services for which the parties are allowed to register and use their mark, or conversely, are not allowed to register and use their mark for. The latter option is less restrictive, because it merely means that a company can register and use their trademark for all goods and services, except for those which are mentioned in the agreement.
As an example, if a juice company and wine company enter into a co-existence agreement, they can agree that the wine company can register and use their trademark for wine, and the juice company can register and use their trademark for juice. If the goods and services are defined like this, the wine company can take action if the juice company registers or uses the trademark for products other than juice. The same applies vice versa. They could also agree that the wine company does not register and use their trademark for juice, and the juice company does not register and use their trademark for wine. This leaves more possibilities to expand the brand.
If one of the parties has a clearly superior position, it could force a solution where it agrees not to register and use their mark for certain goods, and the other party has to agree to register and use their mark only for certain goods. To use the juice and wine companies again, if the wine company had the upper hand, it could demand that the juice company register and use its mark only for juice, and the wine company agrees not to register and use its mark for juice. In this case the wine company would have much more freedom of action in the future.
As a practical matter, we do not usually advise our clients to accept a formulation where they agree to limit their registration and use for only certain goods or services. When the business expands, new product and service categories inevitably become relevant. We have often seen instances where co-existence agreements made decades ago severely restrict the expansion of a company’s business.
If possible, it is better to avoid agreeing to limit the registration and use of your mark to only certain goods and services. It’s better to agree not to register and use your trademark for particular goods and services. This leaves much more freedom of action.
Registration consent. When a party applies for a trademark, it is possible that the registration authorities object to the application because the other party has registered a similar trademark. For this reason, it is common to include a provision in the agreement that the parties agree to future registrations of the other party, provided that the application is in line with the terms of the co-existence agreement.
It is important to separately agree that the party giving its consent also provides necessary “letters of consent” for registration authorities. In most countries it is not enough that the parties have agreed on the co-existence of the marks in a co-existence agreement; registration authorities typically require “letters of consent” issued by the holder of the earlier mark. It is also common that the party who needs to get the “letter of consent” is responsible for drafting a suitable document.
It should also be taken into account that not all countries accept letters of consent. So while one party might give its consent to the registration of a later mark, there are countries where this consent is not recognised.
Non-challenge. It is also common to include a provision that a party to the agreement cannot challenge the validity of the other party’s trademark rights.
Other typical clauses
Apart from these specific clauses, a co-existence agreement typically contains contractual provisions that are present in most other agreements as well, such as:
- Applicable law and jurisdiction
- Procedure for amending the terms of the agreement
- Validity and duration
- Consequences for infringements
Regarding the duration, a trademark co-existence agreement does not sit well with the idea that agreements can be terminated simply by giving a notice of termination, absent any breach of contract. This is because if one party spends time and money to build a brand, it is not easily reconcilable with the view that the other party could simply pull the plug and say that the other party can no longer use the trademark. However, and this is very important to note, the EU court has ruled that a trademark owner can withdraw its consent given to another company to use a trademark. However, it is possible or maybe even likely that the party withdrawing the consent (pulling out of the co-existence agreement) would have to pay compensation to the other party. That would be decided by the laws that governs the agreement.
Concluding a trademark co-existence agreement is something that should not be taken lightly. A co-existence agreement made without proper consideration and legal advice can severely restrict your rights and freedom of action in the future.