Trademark Coexistence Agreement Article

By Eric Goldman

Marianna Moss (a friend/wife of my former colleague) has written an article entitled Trademark “Coexistence” Agreements: Legitimate Contracts or Tools of Consumer Deception?, 18 Loyola Consumer Law Review 197 (2005). To my knowledge, this is the first academic law review article on the subject of trademark coexistence agreements. In the article, Marianna points out the public policy interests of these arrangements, including possible antitrust consequences and consumer confusion arising from the coexistence relationship. Therefore, drafters of these agreements need to consider the interests of third parties not at the negotiation table. If you’re doing a trademark coexistence agreement, this article is worth reading–it may help you draft an agreement that will survive third party scrutiny.

The abstract:

Coexistence agreements allow potentially confusing trademarks to coexist in the market without trademark infringement lawsuits. Although competitors frequently use coexistence agreements to avoid or settle lawsuits, there is no significant scholarship discussing the legal validity of such agreements in terms of antitrust and trademark law. This paper discusses the validity of coexistence agreements between manufacturers of similar products.

The discussion begins with historical reasons for trademark protection and goes on to explore whether trademarks are the property of their owners. The validity of coexistence agreements hinges on this concept. If trademarks are property of their owners, then coexistence agreements are valid despite the possible harm to the public interest. If, on the other hand, trademarks are not their owners’ true property, then, in evaluating the validity of coexistence agreements, courts should consider the agreements’ usefulness or possible harm to the public.

Another relevant aspect of trademark law is the law and economics of trademark protection. The main effect of trademark protection in terms of economics is the reduction of consumer search costs. If manufacturers keep the quality of their product constant, then consumers will use a trademark as a proxy for the product’s quality. This gives manufacturers an incentive to invest in and maintain their products’ quality.

Next, the paper explores views of various international tribunals on the validity of coexistence agreements. Courts’ interpretations vary from validating an agreement based solely on its terms without considering public interest to invalidating an otherwise legitimate agreement because it violates public policy. The proposed explanation for this difference is that courts consider the type of products subject to a coexistence agreement. If fashion items are involved, the courts will not consider public interest even if the trademarks are confusingly similar. If, on the other hand, the product in question is medication, courts will invalidate a coexistence agreement between manufacturers who own confusingly similar marks to protect public health.

The next section of the paper discusses antitrust implications of coexistence agreements. Generally, coexistence agreements do not violate antitrust laws, but they nevertheless may affect competition between manufacturers of similar products. Two possible aspects of competition affected by coexistence agreements are the price and quality of products. However, the effect of a coexistence agreement on quality and price is unpredictable. Depending on the behavior of a manufacturer, a coexistence agreement may increase or lower the price of a product; the same goes for the product’s quality.

Finally, the paper concludes that, in evaluating the validity of coexistence agreements, courts should consider public interest based on a sliding scale. The more vital the public interest implicated by the agreement (such as public health), the more strictly should the court scrutinize it. The standard for invalidating an agreement in case of a vital public interest is the likelihood of confusion. If the trademarks involved in the agreement are likely to be confusing to the public, the agreement should be invalidated. Conversely, if the trademarks involved are not likely to cause public confusion, then the court should allow the agreement to stand.