Coexistence agreements: Yes or no?

Coexistence agreements are one of the options that two owners of similar or identical trademarks have in a situation where they want to agree on how to (co-)exist together not only on the market but also in trademark registers. But can you really be sure that a coexistence agreement gives you a guarantee that your trademark rights will not be contested by the other party? The answer can be found in this article. 

Have you ever thought about registering a trademark? If so, before filing a trademark application, you probably did research whether any similar or even identical trademarks for similar or identical goods and services have already been registered. As there has been a growing trend in the number of trademarks for many years, it is becoming increasingly difficult to choose a trademark that is unique to such an extent that it does not cause conflict with the owners of other already registered trademarks.

One solution to the conflict is to enter into a coexistence agreement with the owner of the earlier trademark. 

The importance of coexistence agreements 

As their name suggests, coexistence agreements are agreements that govern the coexistence or parallel existence of trademarks side by side, even when they are similar or even identical.

These types of agreements often contain the definition of the territory for the use of the conflicting trademarks, the specification for which goods and services a given trademark can be used and applied for in the future, or the specification of other mutual rights and obligations of the owners of the conflicting trademarks. One of the advantages can be the obligation of one or both parties to refrain from contesting the trademark rights of the other party, whether in relation to use or a new registration. 

Coexistence agreements could look like a dream concept, but…

...the Office has thrown a spanner in the works

In its recent decision, the European Union Intellectual Property Office (“EUIPO”) analysed coexistence agreements in relative detail. It involved a case where a company had opposed the registration of a trademark it considered similar to its earlier mark.

In the case, the applicant argued that, under a coexistence agreement entered into between the applicant and the opponent, in which both agreed not to contest their rights, the opponent was obliged to refrain from encroaching upon the applicant’s right to file an application and use the mark applied for (even though the mark applied for was similar). The applicant further asserted that, due to the coexistence agreement, the opponent was not entitled to oppose the trade mark and that the oppositions filed by the opponent infringed its contractual obligations.

However, the EUIPO commented on the applicant’s argument that it could not deal with the assessment of a potential breach of the coexistence agreement, as this was beyond its competence. Therefore, the EUIPO has no jurisdiction to decide whether or not a particular act constitutes a breach of an agreement, as the interpretation of a private law deed (which, moreover, was governed by Czech law in this case) is not a fact to be assessed by the EUIPO. 

The Court of Justice of the European Union reached the same conclusion in its decision earlier[1]. The EUIPO therefore upheld the opposition and dismissed the application because the marks were confusing. 

Therefore, if you are planning to enter into a coexistence agreement, you should take into account that in the event of a dispute, the authorities (including the Czech Industrial Property Office) will not take the agreement into account and will decide according to the general rules, namely according to the likelihood of confusion of the trademarks. As a result, the coexistence agreement will be disregarded in the litigation and the owner of the earlier trademark will be in a more favourable position.

Recommendations 

Coexistence agreements should be treated with “a pinch of salt”, given that they do not hold up as an argument before patent offices.  

For this reason, we recommend that certain sanctions in the event of a breach of the coexistence agreement be stipulated during the very preparation of the agreement (i.e., for example, the filing of opposition, an application for revocation or invalidity of the trademark that was the object of the coexistence agreement), in particular in the form of a contractual penalty. 

We propose defining the amount of the contractual penalty so that it is an incentive for the other party not to breach the agreement.

While coexistence agreements are a concept by which trademark owners can protect their trademark rights, it is also important to bear in mind that in the event of a dispute before the patent office, arguments based on a breach of the coexistence agreement will not hold before the authorities. Therefore, it is important to properly provide for any breach of contractual obligations so that the parties are deterred from any breach as much as possible.

If you are considering entering into a coexistence agreement, we will be happy to assist you with drafting and the correct definition of contractual penalties.