IP, IT & Life Sciences

The “Grey Zone” in a Trademark Coexistence Agreement

Entering into a trademark coexistence agreement should be carefully assessed to avoid that, instead of solving an issue, it causes further trouble.

The key points of a trademark coexistence agreement

A trade­mark coex­is­tence agree­ment (TCA) is a con­tract where­by two par­ties set­tle the use of their trade­marks for avoid­ing a mutu­al infringe­ment of trade­mark rights.

Enter­ing into a TCA could be a solu­tion if:

  • some­body files a trade­mark appli­ca­tion that may affect the devel­op­ment of another’s busi­ness;
  • the busi­ness activ­i­ty of a com­peti­tor who is active on a mar­ket may lead to con­fu­sion among con­sumers about oth­er trade­marks that are tar­get­ing the same mar­ket;
  • a company’s sub­sidiary is sub­ject to a sale-pur­chase trans­ac­tion or a com­pa­ny is split up into oth­er enti­ties, each want­i­ng to use part of trade­mark port­fo­lio of the com­pa­ny; and
  • there is a risk of a com­peti­tor look­ing to sue for using a sign sim­i­lar to or iden­ti­cal with its trade­mark, for goods and ser­vices that are sim­i­lar to or iden­ti­cal with those des­ig­nat­ed by the competitor’s trade­mark.

How­ev­er, the con­clu­sion of a TCA is not rec­om­mend­ed if:

  • a par­ty does not con­trol the trade­mark rights or oth­er rights agreed not to be exer­cised against the oth­er par­ty;
  • the TCA pro­vi­sions con­flict with nation­al or EU laws (in some sit­u­a­tions, the nul­li­ty of a TCA pro­vi­sion that infringes the law could even trig­ger the nul­li­ty of the whole TCA);
  • the busi­ness plan of a par­ty is not finalised; or
  • the terms and con­di­tions of the TCA are not clear, lead­ing to impos­si­bil­i­ty to exer­cise spe­cif­ic intel­lec­tu­al prop­er­ty rights.

Any TCA should con­tain sev­er­al com­pul­so­ry ele­ments, such as:

  • a clear iden­ti­fi­ca­tion of the par­ties;
  • a clear iden­ti­fi­ca­tion of the use of the respec­tive trade­marks (eg, as stand alone or in com­bi­na­tion with oth­er ele­ments, in black and white or in colours, etc.);
  • where applic­a­ble, an express pro­vi­sion on the use of domain names and alphanu­mer­ic char­ac­ters;1
  • a clear iden­ti­fi­ca­tion of the ter­ri­to­ry where the TCA is applic­a­ble;
  • the con­se­quence for the trade­marks’ non-use;
  • the pro­ce­dure to add new ele­ments to the trade­marks (eg, new fig­u­ra­tive ele­ments, colours, logos, etc.)
  • the dura­tion of the TCA;
  • the right to review the whole TCA or its ter­mi­na­tion con­di­tions;
    a clear dead­lock mech­a­nism, espe­cial­ly for strate­gic busi­ness deci­sions; and
  • the applic­a­ble law and com­pe­tent author­i­ty to judge dis­putes in case of breach;

The legal effect of a TCA

Over­all, under Roman­ian law TCAs are bind­ing and are tak­en into con­sid­er­a­tion by Roman­ian Courts and by Roman­ian State Office for Inven­tions and Trade­marks.

As regards com­mu­ni­ty trade­marks (CTMs), the Office for Har­mon­i­sa­tion in the Inter­nal Mar­ket (OHIM)2 con­sid­ers that a TCA is not bind­ing for OHIM, but it may be tak­en into account, espe­cial­ly when the appli­ca­tion of EU reg­u­la­tions3 and EU case law is deemed in com­pli­ance with the con­tent of the TCA4 (“the find­ings of OHIM Board of Appeal are sup­port­ed by the pro­vi­sions con­tained in the coex­is­tence agree­ment clear­ly intend­ed by the par­ties to be legal­ly bind­ing and indi­cat­ing that the par­ties them­selves found no like­li­hood of con­fu­sion between the con­flict­ing marks; see OHIM BoA deci­sion no. R0024/2003 – 1).

Atten­tion should be paid to the TCA’s enforce­abil­i­ty of the cho­sen gov­ern­ing law and juris­dic­tion vis-a-vis the nation­al laws of the par­ties because, in some cas­es, the TCA may be unen­force­able.5

A sen­si­tive aspect of the TCA is trade­marks dilu­tion. Mar­ket coex­is­tence of sim­i­lar trade­marks could dilute them, dimin­ish­ing their dis­tinc­tive pow­er and mak­ing the trade­mark rights dif­fi­cult to enforce.

TCAs and competition rules

A TCA should com­ply with com­pe­ti­tion rules set forth in art. 101 (1) of TFUE and in the nation­al leg­is­la­tion. A TCA may nei­ther affect trade between EU mem­ber states nor restrict com­pe­ti­tion with­in the inter­nal mar­ket.

Under sec­tion I(4) of Com­mis­sion Com­mu­ni­ca­tion 2014/C 291016, a TCA could infringe EU com­pe­ti­tion rules if its effects impair trade between EU mem­ber states in a con­sid­er­able man­ner, esti­mat­ed either by the mar­ket share or by the turnover of the par­ties in rela­tion to the goods and ser­vices pro­vid­ed under the trade­marks sub­ject to TCA.
The CJEU con­firmed that a TCA could be “law­ful and use­ful” if there is a “seri­ous risk of con­fu­sion” between con­flict­ing trade­marks and if, by the TCA, the par­ties intend to set­tle a dis­pute in rela­tion with such risk of con­fu­sion. How­ev­er, a TCA infringes EU com­pe­ti­tion rules if its main goal is to divide the mar­ket or restrict com­pe­ti­tion (CJEU case C-35/83 BAT vs Com­mis­sion).

Any restric­tion in the TCA would be assessed tak­ing into account also the com­pe­ti­tion rules. Such restric­tion should be linked to the agree­ment, pro­por­tion­ate and indis­pens­able for obtain­ing pro-com­pet­i­tive effects. For exam­ple, restric­tions such as non-com­pete oblig­a­tions for prod­ucts oth­er than the one cov­ered by the TCA and indi­rect restric­tion of pas­sive sales (masked as trade­mark exclu­sive use) breach EU and nation­al com­pe­ti­tion rules.

Attention should be paid to the TCA’s enforceability of the chosen governing law and jurisdiction vis-a-vis the national laws of the parties because, in some cases, the TCA may be unenforceable.

1
Some com­pa­nies choose to adver­tise their phone num­bers in alphanu­mer­ic and such dis­clo­sure could infringe oth­ers trade­mark rights: eg, 0721 VODAFONE used by a com­peti­tor of VODAFONE.
2
The offi­cial EU author­i­ty car­ry­ing out the pro­ce­dures for the com­mu­ni­ty trade­marks.
3
Reg­u­la­tion 2072009 on com­mu­ni­ty trade­marks and imple­ment­ing reg­u­la­tion.
4
OHIM exam­i­na­tion guide­lines Part C oppo­si­tion, Sec­tion 2 Iden­ti­ty and Like­li­hood of con­fu­sion, chap­ter 7.
5
Under Roman­ian law, a con­tract exe­cut­ed under pri­vate sig­na­ture needs a court deci­sion to attest its enforce­able title. In order to have effect in Roma­nia, such deci­sion issued by a court of a state not a mem­ber of the EU should com­ply with sev­er­al com­pul­so­ry con­di­tions out of which (i) the judg­ment should be final under the law of the for­eign state where it was ren­dered and (ii) there should be reci­procity between Roma­nia and the for­eign state in respect of the effects of the for­eign judg­ment.
6
Notice on agree­ments of minor impor­tance which do not appre­cia­bly restrict com­pe­ti­tion under Arti­cle 101(1) of the TFEU (De Min­imis Notice)