What Is A Trade Mark Co-Existence Agreement And When Might You Need One?

Lisa Patten February 21, 2024

Whilst trade marks are powerful intellectual property rights with unparalleled longevity, they protect your mark only in respect of the goods or services that you have registered them for. The UK trade mark system divides all types of goods and services into classes (simply for administrative purposes) and, when registering a mark, you must select the classes in which you require protection. For example, high street clothing retailers will require protection in class 25 covering clothing but may also require protection for jewellery in class 14, handbags in class 18 and cosmetics in class 3. The trade marks system seeks to balance giving individual businesses sufficient brand protection with the wider need to avoid stifling competition.

A consequence of the system is that your mark may be registered by other businesses in different classes to the ones you have selected. Often, this is unproblematic, since each trade mark owner operates in a different market, so there is no risk of consumer confusion or dilution of the mark. A well-known example is the mark ‘PENGUIN’, which is registered by separate companies in respect of books, biscuits and clothing. Sometimes, however, the system can cause issues for brand owners. A business may wish to expand its offerings, but find that another business has already registered a similar trade mark in the relevant classes. Worse, they may have been unaware of an earlier mark which, whilst not directly relevant to their commercial operations, nevertheless precludes them from registering their trade mark in the classes covering their core services, and renders them potentially liable for trade mark infringement if they continue to use the trade mark. It may appear that an expensive rebrand is required, or that a lengthy dispute is unavoidable. However, many brand owners are relieved to learn that, in the right circumstances, a co-existence agreement may offer a convenient, cost-effective solution.

Here, we explain what a co-existence agreement is and when you might consider using one. We set out the advantages and disadvantages of co-existence agreements and consider the alternative courses of action.

What is a co-existence agreement?

A co-existence agreement is an agreement whereby businesses wishing to use the same or similar trade mark agree to co-exist. Whilst the exact terms will vary depending on the circumstances, the crux of the agreement is that each party will be entitled to trade under the trade mark within clearly defined boundaries, without complaint from the other. The boundaries may be geographical or may relate to the types of goods and services either party can use the mark in connection with.

If a party breaches a co-existence agreement and uses the mark other than as agreed then, in addition to any potential claims for trade mark infringement and passing off, the innocent party may have a claim for breach of contract.

When might you use a co-existence agreement?

Co-existence agreements are not a suitable solution to every branding dispute but can be an invaluable tool in a company’s brand protection armoury in a variety of situations. They include:

When you operate in a different geographical area to the other business

It is common for small businesses in different locations to operate under the same trading name or trade mark. For example, scores of local hairdressers call themselves ‘A Cut Above’ and are well-known in their locality. Under the UK trade marks system, just one of these businesses would be entitled to register the name as a trade mark, since the system does not allow trade mark owners to specify the area in which they intend to trade. As a result, the first business to register ‘A Cut Above’ as a trade mark for hairdressing services would achieve a monopoly over the whole of the UK, despite having no intention to expand into other parts of the country.

If you find yourself facing a situation of the type mentioned above, a co-existence agreement may provide a workable solution to the issue. A well-drafted agreement will provide the trade mark owner with reassurance that their rights will not be diluted whilst allowing other businesses to trade under the same name within their locality.

When your target audience is distinct from that of the other business

The UK trade marks system divides all goods and services into different classes but has no regard to the type of consumer the goods or services are targeted at. For example, class 25 covers ‘clothing, footwear and headgear’, an enormous spectrum of goods. So, it is not inconceivable that two completely different businesses, operating in entirely distinct marketplaces or targeting consumers at different points in the supply chain, might do so under the same or similar branding. In these cases, their customer bases would be so different that there would be no risk of confusion as to the origin of the goods, and so little commercial rationale behind forcing one to cease their use of the branding, under which they may have developed a significant reputation.

A co-existence agreement offers an ideal way for brand owners in this situation to reach a workable compromise and protect their respective commercial interests.

When your use of the mark differs from that of the other business

As we have seen, each trade mark class covers a plethora of goods. Sometimes, the goods included within a class can appear entirely disparate. For example, class 3 includes nail art stickers, room fragrances and sandpaper. If one business offers nail art stickers under the same or similar trade mark to another offering sandpaper, the risk of consumer confusion as to the goods’ origin may be negligible. In these cases, the parties could enter into a co-existence or consent agreement recognising each other’s rights to use the mark in connection with carefully defined goods, and agreeing not to diversify into any that may overlap with them.

Advantages of using a co-existence agreement

Co-existence agreements provide a multitude of advantages in the right circumstances. The commercial benefits for the brand owner using a mark without a registration are obvious and, whilst it might seem counter-intuitive for a trade mark owner to willingly relinquish some of its legal rights, doing so can sometimes make sound commercial sense.

Examples of specific advantages include the following:

To prevent a dispute

If you become aware that another business has registered a trade mark that is the same or similar to your trade mark in classes that cover your goods or services, your use of the trade mark might constitute trade mark infringement. However, if you are confident that your use is sufficiently different from theirs such that there is no risk of consumer confusion or trade mark dilution, you may be able to avoid a conflict by approaching the trade mark owner and suggesting they enter into a co-existence agreement with you.

There are several reasons why a trade mark owner may be persuaded to enter into a co-existence agreement, despite owning a registered trade mark. For example, they might not have used their mark in the last five years in connection with the goods for which they have registered it, in which case it is potentially liable to cancellation for non-use, which means they risk losing their protection entirely. If they enter into a co-existence agreement, they can negotiate the protection they desire and allow you to use your mark in clearly defined circumstances.

To avoid litigation

Litigation is inherently uncertain, particularly when it comes to intellectual property issues. Even the apparently strongest of cases can fail if the Judge disagrees with your assertions regarding the likely effects of your use of the branding. Accordingly, most intellectual property solicitors view litigation very much as a last resort, to be commenced when the nature of the dispute is such that all alternative dispute resolution methods have failed or are unlikely to yield results.

If it appears that the parties will be able to co-exist, a co-existence agreement provides an excellent alternative to litigation. The parties are free to negotiate terms that reflect their commercial reality, and to continue trading as they have been to date albeit subject to specific, agreed restrictions.

To avoid having to rebrand

Maintaining your existing brand and the goodwill you have accumulated in connection with it is crucial to your success, and a co-existence agreement provides a convenient route through which to do so. Of course, your use of your brand will be restricted, but provided the restrictions are not critical to your commercial operations, this can be a small price to pay to avoid the time, expense and reputational damage caused by having to rebrand.

Disadvantages of using a co-existence agreement

Not all issues can be resolved by a co-existence agreement. The trade mark owner may be unwilling to relinquish any of the protection afforded by their registration, or the parties’ positions might be such that a compromise is unlikely. Even in cases where a co-existence agreement is possible in theory, in practice, the disadvantages might dissuade you from pursuing it as a course of action. They include the following:

You will need to compromise

Co-existence agreements only work if the parties are willing to compromise, which means that some of the rights you would otherwise enjoy over your branding, must be foregone. Whilst other forms of resolution, such as litigation, are less certain, the successful party will enjoy a monopoly over the mark in the relevant classes, with no need to agree to any concessions.

You will lose a degree of flexibility

Whilst co-existence agreements can be an invaluable means of settling potentially difficult issues, you must understand that, by entering into one, you agree to restrict your business activities. You may be precluded from expanding into other geographical locations or diversifying into other goods or services. It is, therefore, vital that you give careful consideration to your long-term commercial goals before committing your business to any restrictions.

You may need to amend your existing trade mark registrations

If you have an existing trade mark portfolio that is affected by the co-existence agreement, you may need to incur the time and cost of amending your registrations to reflect the terms of the agreement.

Your trade mark rights may be diluted

Whilst a trade mark owner will have presumably satisfied themselves that their trade mark rights will not be affected by the effects of the co-existence agreement, it is impossible to predict with certainty what will happen in the future. By allowing a third party to use your trade mark, there is a risk that your rights will become diluted and your position in the marketplace compromised. However, this risk can be mitigated by giving careful consideration to the terms of the agreement and ensuring it is as future-proof as possible.

Alternatives to a co-existence agreement

When deciding whether a co-existence agreement is the correct course of action for your business, it is helpful to consider the alternatives, the most common of which are as follows:

Rebrand

Brand owners facing issues with others using the same or similar branding to theirs can simply make a clean break and rebrand. This can be a sensible option if you are at the early stages of brand development and have not developed a consumer base or reputation on the back of your brand. You might also prefer to use a more distinctive trade mark that is unique to your business alone.

Oppose the trade mark application

Many brand owners use trade mark watching services to alert them to any applications for marks that are the same or similar to theirs. If you are alerted to a potentially problematic filing, you may choose to oppose it by filing an Opposition with the UK Intellectual Property Office (IPO). If your Opposition succeeds, the later application will be rejected, and you will retain your monopoly.

Pursue Court proceedings

Sometimes, litigation is unavoidable. If you are a trade mark owner and believe your mark has been infringed, you can bring infringement proceedings asking the Court for an injunction to prevent the other party’s further use of their mark, together with the delivery up or destruction of all offending material and the payment of damages.

If you wish to use branding registered as a trade mark by someone else, but not being used by them, you can apply to the IPO for the trade mark to be revoked and removed from the trade marks register.

Key takeaways

In the appropriate circumstances, co-existence agreements offer brand owners facing a problem involving a different business using the same or similar branding an invaluable alternative to opposition and infringement proceedings. Sometimes, they are used by parties to an opposition or litigation to settle their issue, thereby reducing costs and removing the uncertainty of a trial or IPO hearing.

However, this course of action should not be taken lightly. Whilst a co-existence agreement may seem like a convenient, fast solution to a current problem, if the terms of the agreement are ambiguous, or restrict your ability to expand or diversify too stringently, you may face more severe problems later, or simply be delaying a dispute. You must, therefore, be satisfied that a co-existence agreement is the correct course of action for your business. If you are happy that it is, you must then ensure that its terms align with your long-term commercial objectives. If, having considered the ramifications of a co-existence agreement, you do not consider it viable in your situation, you may need to consider an alternative solution to achieve your goals and protect your brand.

How we can help

At the Jonathan Lea Network, we can:

Conduct trade mark clearance searches
File trade mark applications to register a brand name, trading name, logo or other trade mark and manage the process through to registration (in the UK and overseas)
Assist in opposing registration of someone else’s conflicting mark or defending you against such threatened opposition
Assist in post-registration matters, for instance, non-use cancellation, consents, limitation of the specification of goods and services
Take action to prevent the use of your trade mark or similar mark by third parties
Defend you if you are accused of using someone else’s trade mark
Advise you in choosing an appropriate trade mark – some trade marks are legally stronger than others
Assist in the exploitation of your trade mark, for instance, licensing, sale, mortgaging, franchising, etc
Assist with the renewal of your trade marks

For all new clients, we offer a no-cost and no-obligation call of up to 20 minutes to first discuss your matter and requirements before confirming a scope of work and quote. This can be arranged by sending your details together with an overview of your matter through our contact form.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2024.