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Benefits and Risks of Trademark Coexistence Agreements
Practical Law Legal Update 4-540-5507 (Approx. 4 pages)
Benefits and Risks of Trademark Coexistence Agreements
by Practical Law Intellectual Property & Technology
| Published on 16 Sep 2013 • USA (National/Federal) |
A discussion of the key benefits and risks to consider when entering trademark coexistence agreements. This Legal Update includes links to relevant resources for more detail and for related considerations.
Trademark owners may enter into a trademark coexistence agreement:
- As part of the resolution of a trademark dispute, for example, an opposition proceeding or litigation.
- To avoid a conflict with a potentially conflicting mark identified during the trademark clearance process.
- As part of a sale of assets where a mark owner is selling its interest in a mark for certain goods but retaining ownership of the mark for other goods.
Trademark coexistence agreements can be a cost-effective and efficient way to resolve an actual or potential conflict but can also present certain risks to trademark owners, including potentially limiting how an owner may use, register, expand and enforce its brand. Parties entering into trademark coexistence agreements must carefully weigh the advantages and potential risks. Based on that analysis and the strength of the parties' positions, either party may prefer a different course of action.
Benefits and Risks of Trademark Coexistence Agreements
Potential benefits of a coexistence agreement include:
- Resolving the existing conflict and minimizing future ones. A well-structured coexistence agreement may help avoid costs and risks associated with an existing dispute and avoid future conflict by setting out agreed on parameters for using and registering their marks.
- Facilitating trademark clearance. A coexistence agreement is one way to address the risk posed by a potentially conflicting mark disclosed by a trademark search. For more information on trademark searching and clearance, see Practice Note, Trademark Searching and Clearance.
- Providing legal certainty for brand use or expansion. Setting out certain parameters for future brand expansion in a coexistence agreement gives each party a level of certainty that its expansion will not infringe the other party's rights.
Potential risks include:
- Loss of commercial flexibility. Coexistence agreements typically restrict 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. Prospective buyers or licensees may not be interested in a brand that is subject to contractual restrictions on use and expansion.
- 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. Coexistence agreements are not a guarantee against consumer confusion. The parties must consider the possibility that confusion will arise and how they will address it.
- Risk of brand dilution. Marketplace coexistence of similar marks may dilute the marks, reducing their strength and value, and making it difficult to enforce the marks against infringers.
- Risk of provoking an infringement claim. A senior rights owner approached about a possible coexistence agreement may refuse to enter into an agreement and instead bring an opposition proceeding or infringement claim against the junior party.
- Loss or limitation of existing trademark registrations. If the agreement requires a party to stop using a mark for certain goods or services, the party's trademark registrations for those goods and services may be cancelled because actual use of a mark is required for registration renewal in the US.
For a sample trademark coexistence agreement with additional guidance and drafting tips, see Standard Document, Trademark Coexistence Agreement.
Alternatives to Coexistence Agreements
A coexistence agreement is just one way to resolve a trademark dispute or remove a potential obstacle identified by trademark clearance. Other negotiated options include:
- A consent agreement. A consent agreement is like a coexistence agreement but typically is a simple document that involves one party consenting to the use and registration of another party's mark. They are often submitted to the USPTO to overcome a likelihood of confusion refusal that cites one party's mark against another party's trademark application. For a sample consent agreement, see Standard Document, Trademark Consent Agreement.
- A license agreement. For a model trademark license, see Standard Document, Trademark License Agreement (Pro-licensor).
- A purchase of the conflicting mark. The owner of one mark, usually the junior rights owner, may be willing to sell its rights. A purchase may be preferable to a coexistence agreement because the purchaser owns all rights in the mark and the mark is not subject to dilution from the other party's use of a similar mark.
- A settlement agreement. Under a settlement agreement, one party may agree to cease using the mark at issue. For a model settlement agreement, see Standard Document, Trademark Settlement Agreement and Release (Pro-trademark owner).