Independent Existence or Coexistence of Identical or Similar Trademarks

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Tamara Nanayakkara, Senior Program Officer, SMEs Division, WIPO

Introduction

To become and remain profitable, an enterprise should prevent its competitors from entering its exclusive niche in the marketplace. Developing a brand image based on a strong trademark is a key way to achieve this objective. However, there are practical difficulties in selecting or creating such a trademark to differentiate its goods and/or services from those of its competitors. This may be due to inadequate understanding of the trademark system or due to factors or events that could not have been foreseen for good reasons. It is not uncommon for an enterprise to encounter an identical or confusingly similar trademark with which it has to come to terms. One way of doing so is to enter into a trademark coexistence agreement. Crafting a satisfactory trademark coexistence agreement is never easy. Given the challenges of doing so, this article focuses on prevention, to the extent it is possible to do so.

Apple vs. Apple

A recent decision of the High Court of England between two famous enterprises, Apple Computers and Apple Corps, illustrates how two enterprises with the same or similar trademark tried to - "resolve"- their differences through a trademark coexistence agreement. Both companies had registered a mark containing the word apple, each with a slightly different depiction of an apple for the marketing of two different products: Apple computers for the manufacture of computers and development of software and Apple Corps that owns the rights mainly to Beatles' music and its main business being the exploitation of those rights. The two companies entered into a trademark coexistence agreement, the relevant provisions of which provided that Apple Computer would have the exclusive right to use its own marks on or in connection with electronic goods, computer software, data processing and data transmission services. Apple Corps would have the exclusive right to use its own trademarks on or in connection with any current or future creative work whose principle content was music and/or musical performances regardless of the means by which those works were recorded, or communicated, whether tangible or intangible.

When, however, Apple Computers launched its iTunes software and its iTunes music store - an electronic shop where music can be downloaded using the iTunes software, and the iPod a portable device that could store and play music - the question arose whether Apple Computers has trespassed into the area exclusively reserved for Apple Corp and thus acted in contravention of the trademark coexistence agreement. Thus, despite their best efforts to peacefully coexist the parties ended up in litigation.

The court looked at the issue from the point of view of the consumer and held that there had been no breach of the agreement as the Apple Computers logo had been used in connection with the software and not with the music provided by the service. There was therefore, in essence, no deception or customer confusion or likelihood of confusion or deception as to the origin of the product, an essential objective of the trademark system. No one downloading music using the iTunes software thought they were interacting with Apple Corps.

Apple Computer may have won the case (Apple Corp intends to appeal) but, considering that it was founded in 1976 almost 10 years after Apple Corp registered its trademark, it could have saved itself a lot of time, money and hassle if it had simply chosen another trademark which had no such problem. Prevention is ultimately better than the cure.

The Way Forward

The first lesson to be learnt from the above case is that in choosing a trademark an SME must, apart from ensuring that it should not simply use the same word as the product it is trying to sell (“detergent” for detergent), or describe what it does (“clean” for detergent), or use any offensive, immoral, or deceptive word, be sure that the mark it has chosen has not already been registered or used by another enterprise for marketing the same or similar products. In other words, one must “clear” the trademark for registration or use as a trademark. To do so, it is important to undertake what is called a “Trademark Clearance Search”. It would be prudent in doing so to undertake a clearance search for more than one mark for as that would increase the likelihood of the survival of at least one. This should be done much before the actual launch of the corresponding product on the market.

While an SME could itself undertake such a search, it is better to hire the services of a search firm whose business is to do such searches and who have the necessary experience to undertake a comprehensive search not only of the trademark register but also of business/company names register, other databases including phone directories, marks that are used in the market but are not registered, as well as of domain names and geographical indications¹. Such a search may also be done on an international level, at least of registered marks, to get a more complete picture of whether the proposed mark is available for use in export markets, as well as in the context of e- commerce. This is particularly important when an SME begins operations as an international player or at least has the aspiration of expanding internationally in the near term.

Such a clearance search will provide vital information of other potentially conflicting marks that are either registered or used in the market for the same or similar goods and help the SME in deciding whether to proceed with the application to register the trademark or not. If in the face of existing identical or similar marks the enterprise decides to go ahead and seek registration it risks facing opposition proceedings.

When Problems Cannot be Prevented

If, however, the clearance search gives the proposed trademark a clean bill of health the SME could apply for registration and, all else being equal, be granted a trademark registration.

However, it may happen that despite all the effort to clear the proposed mark once on the market the mark may come face-to-face with other identical or similar marks. Such marks may be for similar goods and services that had got through the search net that was perhaps not cast widely enough or for dissimilar goods and services that may yet be of concern to the viability of the proposed mark or be a famous mark².

Also, it is not uncommon that two enterprises were both innocently using the same or similar trademark in the market with respect to the same or similar goods as their actual geographical operations did not overlap and, therefore, were genuinely unaware of each other’s existence. If one or both of them seek registration of that mark the trademark office may, if it finds that there had actually been “honest concurrent use”³, grant both parties registration while delimiting the geographical areas for use of the respective mark.

In all such potentially contentious situations there may be an alternative to going into a costly and time consuming litigation (or an opposition proceeding as the case may be). The parties may agree to co-habit by entering into what is called a trademark coexistence agreement. The main objective of such an agreement is to achieve peaceful coexistence by spelling out how they could exist together in the market place. Such co-existence may be on the basis of dividing up territories that each holder may operate in or by delimiting their respective fields of use.

This is easier said than done, as is evident in the Apple vs. Apple case cited above. It is often difficult to foresee how the business of each trademark owner would evolve and future expansions may blurr the boundaries inevitably resulting in conflict. A well crafted agreement mindful of such potential problmes could still be struck down by the courts if found to be contrary to public policy. ⁴

Key Preventive Steps

While Apple Computers and Apple Corps may have deep pockets that could absorb the costs of such litigation, most SMEs are not so fortunate. For SMEs, litigation of this nature could spell the end of a promising future. It is, therefore, of paramount importance that all possible steps are taken to avoid such an eventuality. Such steps, therefore, may include the following:

The process of choosing a trademark is an important one that must be done with caution and foresight. Undertaking as comprehensive a search as possible, preferably with the assistance of a trademark specialist, could go a long way for clearing the way for a trouble free existence of the chosen trademark.
If despite all such efforts, a conflict arises with the same or a similar trademark in the market then an agreement to coexist may be more appealing to an SME than entering into a legal confrontation. This is not to say, however, that faced with litigation it is always better to capitulate and agree to coexist. Litigation may be the only appropriate response in some situations. There are also other options such as buying (or selling) or licensing the trademark. It is for the owners of the trademarks to judge in each case what would be the appropriate response in the light of their particular situation.
If, indeed, entering into a coexistence agreement is the best option for an SME, the challenge is not the present where the two enterprises competing in the market could fairly easily delineate their respect areas of business and agree to stick to those parameters. The real challenge lies in anticipating the future. Where would each company like to see itself in the future? Would their respective expansion plans converge on each other’s territories? Trying to foresee the future use of a trademark and building that vision into an agreement is no easy task but one that, nevertheless, needs to be kept in mind while drafting such a coexistence agreement.

Independent Existence or Coexistence of Identical or Similar Trademarks

Introduction

Apple vs. Apple

The Way Forward

When Problems Cannot be Prevented

Key Preventive Steps

Further Reading

Small and Medium-sized Enterprises

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