While registering for a trademark, one of the most essential rules is not to choose a trademark that is confusingly similar to a prior existing trademark. However, in present the world of business and commerce, it is possible for two parties to use similar or identical trademarks to market their goods and services with the help of coexistence agreements. The aim of this article is to provide an overview of the typical benefits and potential pitfalls of coexistence agreements.
What are the coexistence agreements?
A coexistence agreement is an agreement regulating the use and registration of similar or identical trademarks for related goods and services in the same or similar markets by two or more trademark holders. It allows the parties to set their own rules for the peaceful coexistence of the marks without any likelihood of confusion.
Coexistence agreements usually work by way of limiting the expansion and use of similar marks to certain geographical territories or to certain types of goods or services. A coexistence agreement is also likely to contain provisions for marks that may not yet be in use.
A coexistence agreement can be used when one of the parties is aware that another business is trading, or about to do so, with a mark that might confuse its customers or damage its business or when one of the parties is worried that a competitor is seeking to register a trademark that might make it difficult for the party’s business to expand.
Potential benefits of a coexistence agreement include:
- Resolving the existing conflict while avoiding costs and risks associated with it and minimizing future ones by setting out agreed/certain rules for using and registering their marks;
- Facilitating trademark clearance in case of opposition or potential opposition;
- Securing the continued existence of the trademark in the corresponding markets;
- Providing legal certainty for brand use or expansion. Setting out certain limits for future brand expansion in a coexistence agreement helps parties to shape their own commercial future by ensuring their expansion will not infringe on the other party’s rights.
Potential risks include:
- Loss of commercial flexibility as they typically restrict the use and registration of a mark. This may limit a mark owner’s ability to expand its business into new products or markets or divest or license its brand.
- Potential for future conflicts. If a coexistence agreement does not adequately address the parties’ future brand use plans or future technology, conflicts are likely to arise.
- Risk of consumer confusion as such agreements cannot guarantee against consumer confusion. The parties must consider the possibility that confusion may arise and how they will address it.
- Risk of the mark being affected negatively because of dilution. The coexistence of similar marks on the market may weaken the rights of the trademarks making it difficult to enforce the marks against infringers.
- Risk of provoking an infringement claim. Not all prior trademark owners would consent to enter into an agreement but instead may bring an opposition proceeding or infringement claim against the junior party.
When not to use a coexistence agreement
Coexistence agreements can prove to be useful for resolving present or possible future uncertainties and difficulties between parties about the use of similar marks. However, such agreements are not recommended to be used if the trademark holder has not yet sorted out its business plan cannot understand its terms and they have not been clearly explained; it has no absolute right to control the relevant trademark rights not to be enforced.
Coexistence agreements may provide legal opportunities and economic advantages that might prove useful for respective trademark owners and consumers under appropriate circumstances. However, it is critical that it is skillfully drafted to avoid any future conflicts. Co-existence agreements can be effective tools to resolve trademark disputes, but parties interested in using such a tool should consider the implications in terms of their business of using such agreements in consultation with trademark lawyers before committing to engage in such an agreement.