Tips for Negotiating a Trademark Coexistence Agreement
Brands register their trademarks in order to stop other companies for using them and creating confusion or competition in the market. Sometimes, however, two companies may be using a very similar mark without even being aware of it. This can happen when the two businesses are trading in different geographic areas, or are providing two completely different and unrelated services.
For instance, “Bands-R-Us” could be both a company selling wedding rings in California and a service that books jazz quartets in New York. Each company could have established rights to their brand, but be potentially at odds if they start moving into each other’s market. Coexistence agreements are contracts that attempt to resolve these types of potential trademark disputes. They are usually drafted to either settle a conflict or stop one from arising.
Sometimes, coexistence agreements take the form of a proactive consent agreement. That’s where one party agrees to let the other register their similar mark with strict limitations. A company called “XBoard,” for example, might be selling surfboards in Florida and not particularly concerned about a small business in Vermont that manufactures a children’s board game called “XBoard.” They may be quite happy to allow the Vermont company to register the “XBoard” trademark as long as they stick to toys and stay out of the sporting goods market. A consent agreement between the two brands will both avoid any potential litigation and help with the registration process.
What You Need to Consider
A trademark coexistence agreement is a legal contract that binds the signatories to certain terms and conditions. It will place limits on how (and often where) a trademark can be used and will affect how the goods or services can be marketed. Here’s what you need to think about when you’re negotiating with another company that’s using a similar mark.
- Avoid the likelihood of confusion. Your registration application could be rejected, even with a valid coexistence agreement, if you haven’t taken steps to avoid confusion between your two brands.
- Establish clear boundaries that go beyond geography or the nature of your business. Think about things like marketing platforms (online vs brick and mortar), restricting how the mark is displayed, limiting any use of the mark that could damage its appeal or reputation, and narrowing the types of products to which the mark can be applied.
- Outline the expansion rights of both parties. For instance, can “Bands R Us” in New York start booking bands for weddings in California? Can the wedding band manufacturer in California start selling their rings in New York?
- Consider whether either party can register the trademark in another country. This is particularly important for new companies with big plans.
- How can the mark be used on social media? Who will hold the rights to the domain name?
- Always include a method for dispute resolution that considers alternatives to litigation (mediation or binding arbitration)
Entering into a trademark coexistence agreement always holds an element of risk. You may want to expand into new territories and markets in the future and find yourself limited by an agreement you signed many years before. A coexistence agreement may also limit your right to transfer your mark or impact your ability to enforce it. Finally, if the other company is producing poor quality goods or providing an inadequate service, your own reputation could suffer as a result.
Talk to an attorney and make sure you understand all the implications of entering into a coexistence agreement before your sign. Particularly if you’ve been approached by another company who wants your consent to register a similar mark, get a professional to help you decide whether doing so is really in your best interest.