Is a Co-Existence Agreement the Right Choice for Your Brand?
A co-existence agreement arises in a scenario where two trademark owners have developed rights to the identical or to similar marks. This type of an agreement will aim to resolve a potential trademark dispute. Often, the goods or services are offered in different geographic areas, are unrelated, or utilize different trade channels. The agreement will need to set forth in detail the rights of the respective parties and how confusion in the marketplace will be avoided. Any party about to enter into a co-existence agreement must weigh the pros and cons of the agreement.
A consent agreement is a type of a co-existence agreement. Trademark applicants may introduce a consent agreement into the record of a trademark prosecution for the purpose of obtaining registration. Often, a consent agreement is the trademark applicant’s best option for convincing the Examiner that their proposed mark will not cause a likelihood of confusion with the mark cited against their application. It usually does not thoroughly address long-term co-existence, but will limit the rights of the party seeking consent. Without contrary evidence, a consent agreement will be considered evidence that there is no likelihood of confusion. The reasoning is that the parties most affected by potential consumer confusion are declaring that confusion will not result.
Although, there are multiple situations where a co-existence agreement is a fair compromise for two parties using similar or identical trademarks. There are also circumstances where one party has much to gain and the other party has much to lose. For example, where one party is the senior user and the registrant of a mark and is approached by a junior user of a similar or identical mark in a related industry, the senior user would have very little incentive to enter into a co-existence agreement. Co-existence agreements could have detrimental affects on the parties’ brands and their legal rights. Trademark rights can be diluted which may make it more difficult to enforce your trademark against third parties. The value of your mark may be negatively impacted as a result of dilution and weakened trademark rights. Moreover, you could limit the expansion of your business by allowing use of a similar or identical trademark. Since you cannot control the quality of the other party’s goods or services, they could develop a poor reputation and then your brand and good will could suffer.
If one decides to enter into a co-existence agreement, it is critical that it is skillfully drafted. A court may reject a co-existence agreement, if it fails to provide sufficient detail regarding avoidance of confusion and if the court believes that consumer confusion is inevitable. Moreover, there are many areas that should be addressed in a co-existence agreement so that future conflicts can be avoided. Some of these areas include: (1) who has the right to product or territorial expansion; (2) who has the right to the domain name(s) or user names on social media or to variations of the mark; (3) who has the right to license or assign the mark; (5) who has the right to do business internationally and file international trademarks; (6) what if one party abandons its rights; (7) what is the term of the agreement; and (8) what if one party breaches, what relief will the other party be entitled to and if there is a dispute what venue will the parties utilize.
Co-existence agreements can be effective tools to resolve trademark disputes under the appropriate circumstances. However, parties should take time to reflect on the pros and the cons of such agreements in consultation with trademark counsel before committing to engage in such an agreement. In other words, a trademark owner who can negotiate from a position of strength should carefully consider whether a consent agreement makes logical sense or if such agreement will expose the brand to unnecessary risks. Please feel free to contact our office for assistance with determining if a co-existence agreement is the right choice for your company. Weighing the advantages and disadvantages of a co-existence agreement can certainly be a difficult task and we would be happy to provide you with a courtesy consultation.