In this guide, our trade mark solicitors explain the basics of trade mark co-existence agreements. What is a co-existence agreement, and when and why might you consider using one? What are the potential pitfalls? What should you include in your co-existence agreement, and how can you deal with any breach?
Contents:
What is a co-existence agreement?
A co-existence agreement is a contract through which two parties that use the same or similar branding agree that each may continue to do so without interference from the other, subject to restrictions.
Co-existence agreements range from simple, straightforward documents to lengthy, complex ones. All co-existence agreements serve the same purpose – to recognise each party’s rights to use the mark, determine the extent of those rights and, ultimately, avoid consumer confusion and legal disputes. However, since every situation is unique, a co-existence agreement must be tailored to the parties’ bespoke circumstances. For example, some agreements might impose geographical limitations whilst others limit the goods each party can produce using the mark.
When should you consider using a co-existence agreement?
Co-existence agreements are commonly used as part of a business’s wider brand protection strategy. Examples of situations in which they can be particularly useful include:
To resolve trade mark disputes
When you apply for a trade mark in the UK, the UK Intellectual Property Office (IPO) will notify the owner of any earlier mark they deem the same or similar to yours. The owner of the earlier mark may then oppose your application. If they do so, a co-existence agreement can provide a convenient, cost-effective means of addressing the original owner’s concerns and avoiding the time, expense and uncertainty of a hearing before the Trade Marks Tribunal.
When the parties’ respective use is unlikely to cause confusion in the marketplace
In the UK, trade marks can be registered in up to 45 ‘classes’ covering different goods and services. Class 16, for example, covers paper, cardboard and goods made from those materials, and class 25 covers clothing, footwear and headgear. You must specify the classes in which you require protection when applying for a trade mark.
Two separate enterprises’ goods or services might fall within the same trade mark class and appear to overlap when, in reality, they are quite different. For example, all clothing retailers will require protection in class 25, regardless of the nature of the clothing. So, a situation may arise in which two clothing businesses operating in different fields wish to use a similar mark within class 25. One may specialise in industrial workwear and the other in childrenswear. Whilst their activities might seem the same on paper, there may be no risk of consumer confusion.
As long as neither party intends to diversify into activities that overlap with the other’s, a co-existence agreement presents an efficient, cost-effective way for them to achieve trade mark protection for their respective brands. The agreement gives the parties peace of mind that they can use their branding freely, without the threat of objection from the other.
When the businesses operate in different geographical areas
Small businesses often enjoy success within their local geographical area and have no intention of expanding. This is particularly so with ‘bricks and mortar’ operations, which provide their services face to face, in an office or shop environment. It is not unusual for such businesses to trade under names that are identical to others offering the same service in a different location – ‘Our Daily Bread’ for a bakery, for example.
In this scenario, the businesses offer the same service under an identical name. So, in accordance with trade mark principles, if one registered the name as a trade mark, they would enjoy a monopoly over it. Since the IPO does not distinguish between geographical locations within the UK, that monopoly would cover the entire country. Sometimes, businesses simultaneously use the mark on an unregistered basis and build up considerable goodwill in their locality.
A co-existence agreement would allow each organisation to protect their goodwill and prevent the other from encroaching upon their territory.
When the parties’ target consumers are different
The trademark classification system divides goods and services by type, such as vehicles, clothing and games. Despite the primary function of a trade mark being to enable consumers to identify the source of goods, the system does not differentiate between the nature of the targeted customer.
Two businesses might use similar branding on the same goods without risk of marketplace confusion if they operate in separate, distinct marketplaces. One of the businesses might deal solely with other commercial enterprises, and the other, the end consumer. The first might sell chemical substances to the agricultural industry, the second to those involved in manufacturing. If the consumers do not overlap and there is no risk of confusion, the parties can enter into a co-existence agreement allowing them to operate freely within their designated marketplace.
Why you should use a co-existence agreement
There are several reasons why a business might consider entering into a co-existence agreement. They include:
Co-existence agreements are more cost-effective than litigation
Whilst sometimes unavoidable, litigation should always be a last resort. It is expensive, time- consuming and inherently uncertain. Intellectual property matters are particularly unpredictable, with the IPO or Judge often having to base their decision on how they believe the ‘average’ consumer would behave.
Co-existence agreements enable businesses to avoid litigation by agreeing to delimit their respective use of the mark. The parties achieve clarity, certainty and peace of mind to use the mark as agreed, without risk of dispute.
No rebranding is required
By the time you become aware of a potentially problematic pre-existing mark, you may have already spent considerable time and money on developing your branding. You may even be using it.
If you are forced to rebrand, the consequences can be disastrous. The time and money spent on developing the brand will be wasted, and any associated goodwill will be lost. If you can negotiate a co-existence agreement with the other party, you can continue using your branding, albeit on a limited basis, thereby avoiding the pitfalls of rebranding.
Prevents future conflict
Prevention is always better than cure. So, if the results of your trade mark searches reveal a pre-existing mark that potentially overlaps with your proposed one, it may be advisable to approach the owner of the existing mark regarding a potential co-existence situation rather than waiting for them to oppose your application.
Despite often being in a position of strength, the owner of an earlier mark might be persuaded to co-exist for several reasons. Legal disputes are inherently unpredictable, and there is no guarantee that any opposition raised will succeed. Further, trade marks are vulnerable to cancellation in certain circumstances so the owner risks losing their protection altogether if any such circumstances apply to their mark.
To effectively avoid future conflict, the terms of the co-existence agreement must be clear and unambiguous. It is vital to seek advice from experienced trade mark solicitors to ensure the agreement is properly drafted. Furthermore, it is always take legal advice before approaching the owner of a previous mark to avoid doing anything that might jeopardise your position.
Allows the parties to reach a commercially workable compromise
Whilst the trade mark system aims to facilitate flexibility and avoid stifling competition, it has limitations. It cannot foresee every commercial eventuality, and there are invariably situations that do not fit neatly into it. Usually, the parties themselves are far better placed than the IPO or the Court to find a commercially workable, fair compromise having regard to the nature of their businesses, spheres within which they operate and target consumers. Co-existence agreements allow them to agree terms that reflect their commercial reality.
Disadvantages of using a co-existence agreement
Co-existence agreements can be invaluable in brand protection, but they have disadvantages. They include:
Loss of commercial flexibility
When you enter into a co-existence agreement, you commit to not pursuing a particular course of action for a long period, potentially indefinitely. This might appear unproblematic in the early stages of business development and may be necessary in the context of a dispute, but it can cause issues later on. The agreement may limit your ability to expand into new territories or products, and stifle your ability to effectively commercialise your brand. Further, you may need to amend all of your existing trade mark registrations to comply with the agreement, which can be costly.
Negotiations can be hard-fought and may necessitate the disclosure of commercially sensitive information
The effects of a co-existence agreement can be far-reaching, so the terms are often fiercely negotiated. Sometimes, you may have to divulge your future business plans to the other party to reassure them and encourage agreement, particularly if they are in a stronger negotiating position.
What to include in your co-existence agreement
The required terms will depend entirely on the commercial reality but, generally speaking, the matters that should be considered include:
- The extent of the parties’ rights and limitations, and how consumer confusion will be avoided.
- The extent to which the parties’ trade marks can be modified in the future.
- How the agreement will be future proofed. You must consider if and how you envisage expanding your product range, and if you wish to trade globally.
- As part of future-proofing, consider periodic reviews. Technologies not yet contemplated might be commonplace in twenty years’ time, and the sectors in which you operate may have changed beyond recognition. The ability to amend the agreement to reflect any such developments is vital.
- Any competition implications. Co-existence agreements may fall foul of competition laws if they are deemed to prevent, restrict or distort competition.
- Should one party have the option of acquiring the other’s trade mark on the occurrence of future developments?
- How will any disputes be resolved?
The key to successful co-existence is a clear, unequivocal agreement so expert legal advice is essential. Our trade mark solicitors have negotiated and prepared co-existence agreements for many businesses. They are alive to any potential issues and will ensure your agreement accurately reflects the parties’ intentions, carefully outlines their rights and responsibilities and safeguards your commercial interests.
Breach of a co-existence agreement – What should you do?
A co-existence agreement is only effective if the parties adhere to it. If the other party breaches the agreement and uses the mark outside of its scope, you may have a claim for breach of contract, trade mark infringement and passing off, depending on the circumstances. If your claim succeeds, the Court may grant an injunction to prevent any further breach and infringement, and award you damages.
Speak to us as soon as you become aware of a potential breach. Our trade mark solicitors will review the facts of your case and advise on the best course of action. If the co-existence agreement contains a dispute resolution clause, its provisions must be followed and a failure to do so may place you in breach. Our solicitors aim to avoid litigation insofar as possible and will strive to negotiate a favourable settlement without recourse to the Court.
Is co-existence the best option for your business?
Co-existence agreements can provide a cost-effective, efficient way of avoiding future conflict or settling a dispute in certain circumstances. However, they are not appropriate in every situation.
Sometimes, the commercial reality is such that the risk of consumer confusion cannot be mitigated. Co-existence can also significantly impact any plans to expand, diversify or commercialise your brand. A trade mark opposition may, therefore, be a better option. If you succeed, your use of the mark for the relevant goods or service within the UK will be unfettered.
The owner of an earlier mark can oppose a trade mark application on the basis that it is identical or too similar to theirs and covers identical or too similar goods or services. The opposition must state the nature of the existing rights and how the registration of the proposed mark would affect them. The IPO will send a copy of the opposition to the applicant who can then file a counterstatement in defence. The opposition process allows for a ‘cooling off period’ during which the parties can explore settlement. During this time, a co-existence agreement might be entered into. If the parties cannot resolve their dispute, the case will be decided by the Trade Marks Tribunal
The opposition procedure is complex, and success or failure hinges to a great extent on the evidence. Our trade mark solicitors have represented a significant number of clients on both sides of opposition proceedings, with excellent results. They will guide you through the process, prepare all relevant documentation, gather all pertinent evidence and present your case in the best possible way.
Summary
Co-existence agreements offer brand owners many clear benefits. However, to be effective, the agreement must be clear, unambiguous and future proof. If it is not, you may be simply delaying rather than avoiding conflict. Further, co-existence agreements are not appropriate in every situation. Their effects can be profound and potentially last indefinitely, so you must be certain that co-existence is the correct course of action before approaching the other party. Our trade mark solicitors will advise on the suitability of co-existence to your business and future plans, and explore whether any alternatives may be more appropriate. If co-existence offers the best solution, they will approach the other party on your behalf and negotiate a comprehensive co-existence agreement that safeguards your brand, now and in the future.
