Trade marks in a crowded world

Entering a new market can mean an otherwise well-established trade mark coming up against opposition from local competitors that may already use the same or a similar brand. Care needs to be taken at the outset to understand the available options and local variances in law and practice.

One of the very earliest domain name disputes concerned two long-established companies, both using the word PRINCE as part of their company’s name. Prince Sportswear, a US behemoth, could not understand why its chosen domain name, prince.com, was not available to it. The simple answer was that Prince, a large English software developer, had thought of and registered it first. The US company objected, on the grounds that the registration must have been in bad faith – and lost, for the English company had indeed used the name Prince over years and had an equally genuine, good faith claim to the domain name.

Clashes like this marked the early days of the World Wide Web, when for the first time businesses from around the world began trading in the same, virtual, space. Their prevalence has diminished as the exact form of domain used by a business has become less important, with users relying more on search engines to find the site of interest rather than attempting to remember the name itself.

But as trade has become more global in the offline world, similar clashes over registration of trade marks have become commonplace. As Mark Foreman, Director of Trademarks in Osborne Clarke’s London office explains “businesses that formerly did not compete for customers find their applications to register opposed as they expand their presence to national or international level, and encounter for the first time others using the same or similar brand. The local competitor, by virtue of having established rights to use the brand, can often stop the newcomer registering or using. But if the newcomer has already invested substantially in promoting their reputation under that brand they are unlikely simply to change name or go away.”

Even within the European Union, where the law of trade marks has been substantially harmonised for over 20 years, differences of business and legal culture mean these clashes are handled quite differently from country to country. Osborne Clarke’s international IP team highlight some of the key considerations that European businesses should be aware of.

Honest concurrent use

In some jurisdictions, such as Belgium, the concept of “honest concurrent use” may apply. If so, the holder of the earlier right cannot stop the newcomer from using the mark honestly – that is, with no intention to trade off the earlier mark owner’s goodwill. But assessing what constitutes honest concurrent use is a complex matter. A number of factors have to be taken into account, depending on the local law: the nature and length of use; geographical area of trade; the likelihood of consumer confusion; and whether the adoption and subsequent use of the mark was ‘honest’, itself a culturally variable concept.

As Ann-Sophie de Graeve, Counsel in Osborne Clarke’s Brussels office illustrates:

“The Benelux Convention on Intellectual Property (BCIP) provides for co-existence for in the situation where someone wants to register a trademark that is identical to an earlier trade name, which is only of local significance.

The Benelux rules do not, however, go as far as the EU Trade Marks Directive, which gives the holder of the earlier trade name the right to object to the later registration.

Furthermore, under BCIP, a third party trying to register a similar sign in a period when a registered trade mark could have been revoked for lack of genuine use may be permitted to do so. If genuine use of the earlier registered mark is subsequently resumed, a situation of coexistence follows from this for two identical marks for (possibly) similar goods/services.”

Likewise, in Spain, a newcomer may be able to use a pre-existing mark. Rafael Garcia del Poyo, Partner in Osborne Clarke’s Madrid office notes “Spanish law can come to uphold rights to use a trade mark which, when first used, may have infringed another registered mark. If the rightholder acquiesces over a period of at least 5 years of the infringing use, then the right to challenge that use can be lost, under the doctrine of “prescription from tolerance”.

The fact that the Spanish trade mark registry does not examine trademark applications can also lead to the co-existence of identical or similar registered brands in practice. This will only be dealt with upon a claim being filed by any of the rightholders.”

Taking the initiative: co-existence agreements

One solution to the uncertainties inherent in opposition proceedings is to do a deal, agreeing on terms on which both parties can use the brands of their choice without disrupting each other’s business. Such co-existence agreements avert the need for costly opposition or infringement proceedings, and can be very effective. In principle, all that is needed is to decide what use each business needs to make of the mark, in what form and in what territory. Then abide by what has been agreed.

In Germany, explains ­­Anja Bohm, Associate in Osborne Clarke’s Cologne office, “co-existence agreements are used regularly (and increasingly), and are considered an important instrument to settle trade mark disputes.

Three types of co-existence agreements can be identified: pure delimitation agreements, priority agreements and non-aggression agreements. Generally, a combination of these types of agreements is used and they are seen as viable means to prevent confusion of consumers.”

Competition scrutiny

Trade mark holders are not entirely free to agree whatever terms they want. Agreements that are seen as having either the purpose or effect of unduly restricting competition are liable to be struck out as anti-competitive. The Federal Supreme Court in Germany, for example, has issued a number of rulings in recent years on this principle, including a recent case which reiterated that the restriction of competition can only be determined from the consumer perspective, not just based on the product and trade mark identity.

In some situations, co-existence agreements can actually benefit consumers. Marialaura Boni, Senior Associate in Osborne Clarke’s Milan office, notes that “if a co-existence agreement provides for a set of rules on how potentially conflicting /confusingly similar trademarks should be used to avoid confusion in the marketplace, such an agreement can be seen as benefiting consumers. From this angle, it can be seen how two public interests (on the one hand, consumer protection and, on the other hand, the protection of competition in the marketplace) represent two sides of the same coin.”

Nobody’s perfect

Agreements to co-exist can also prove traps for the unwary for a number of other reasons. In the rush to make the problem go away, the fine details which make the difference between workable and problematic may not be fully worked through. What exactly is each party undertaking not to do? Could a better result have been achieved by pursuing the opposition, rather than giving away rights that the relevant trade mark registry could not have taken? Will the holder of the existing registration amend their specification so that the newcomer can register a mark within its agreed scope? Even if such compromises do not affect today’s business, are they going to restrict future plans?

As Julia Darcel, Associate in Osborne Clarke’s Paris office illustrates: “In France, the courts will interpret these agreements strictly, taking the view that whatever is not explicitly prohibited in the agreement is allowed.

For instance, the Paris Court of Appeal, in a 2014 ruling, considered that the prohibition on an operator from using the concerned sign “alone” could not be construed as a prohibition on using this sign “separately” (i.e. sign distinguishable from another sign).

In another case, two companies entered into a co-existence agreement providing that the defendant must change its trade name and domain names to avoid likelihood of confusion with the distinctive signs of the other party (including its prior trade mark). Later on, the defendant registered the disputed sign as a trade mark and the claimant filed a lawsuit grounded on fraud. The Court of Cassation dismissed the claim, since the co-existence agreement did not specifically prohibit such a registration.”

“Worse still is the question of what happens after a few years of co-existence“, notes Mark Foreman. “If either party’s brand extension takes them into the other’s agreed exclusive areas of use, then the issue is one of breach of contract as much as infringement – and the former may be cheaper and easier to enforce. Co-existence, as much as trade mark registrations, needs perpetual maintenance by both parties.”

Changing world, changing business models

Another scenario is changing business models, such as when music ceased to be consumed solely live or in hard copy recordings and became an online service. The decades-old co-existence of the Beatles’ APPLE label with the computer company APPLE fell apart when, through neither’s, fault their areas of operation converged.

Finally, the world itself can change. Many existing IP licences, including co-existence agreements, have been drafted to cover the territory of the European Union.  But in March 2019, the shape of that territory will change, as the United Kingdom departs.  An agreement framed on the assumption that the UK would always be within may suddenly leave the parties exposed to disputes as they scramble to supplement their EU rights with UK registrations, and agreements based on the latter with new national-only arrangements.

What does this mean for pan-European protection strategies?

If your business is expanding into new territories, rather than waiting for a challenge to be brought, it is a good idea to monitor any existing trade marks and applications in those territories that may be considered similar to yours. Reaching a co-existence agreement can provide certainty not just in the immediate term, but if well-drafted, will help both parties to understand what they can and cannot do as markets, technologies and other factors change. However, an agreement may introduce constraints on a business which, in the longer term, may cause issues.  It is equally important to think how an agreement designed to solve today’s problems might itself give rise to problems tomorrow.

But assuming that agreement is the way forward, even within the EU there are some subtle, and some not-so-subtle, differences in how national laws treat co-existence agreements, or indeed honest concurrent use without an agreement. Co-existence is an alluringly simple concept; putting it into practice needs a thorough understanding of both the commercial and the legal environments in which the agreement needs to operate. And once the ink is dry, perpetual vigilance.