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    Articles

    Legal Nature and Role of Trademark Coexistence Agreement


    2018/2/6|Articles
    Lily FU  

    The trademark applicant may submit the coexistence agreement entered into with the cited trademark holder or the Letter of Consent produced by the latter so as to obtain the trademark authority’s approve of registration. However, it is possible that the coexistence agreement or the Letter of Consent is accepted by the trademark authority and the registration is approved; or it is denied by the trademark authority but is accepted by the court and the registration is approved; or it is denied by the trademark authority and such denial is maintained by the court. In the viewpoints of the parties concerned, the cited trademark holder is certainly entitled to dispose of his trademark right as it is private right, why should the trademark authority intervene with such disposal? In the viewpoint of the trademark authority, the examination of an applied-for trademark involves not only private rights of the parties concerned but also interests of the consumers. The court is in favor of the viewpoint that the coexistence agreement is to manifest autonomy of will of the parties concerned while trademark coexistence shall be subject to statutory examination. This article will discuss the legal nature and role of coexistence agreement. 
     

    I. Legal nature and role of coexistence agreement
    As the coexistence agreement is named as “agreement”, it is a kind of contract and is subject to the Contract Law. A contract is the written manifestation of the consensus on their relationship of rights and obligations between the parties concerned involved in the corresponding transaction. With its feature of relativity, a contract only has legal force on the parties concerned but not on any third party. Even if it is agreed in a contract that a third party shall pay debts to the creditor, the debtor shall still shoulder the breach liability if the third party fails to pay such debts. Therefore, the coexistence agreement has no binding force on the trademark authority, and it is a misunderstanding that the trademark authority should accept the trademark coexistence.
     
    As the Letter of Consent is only signed by the cited trademark holder, it is not a contract in the meaning of the contract law. However, if it is also signed by the trademark applicant and its wording expresses the intention of “offer” and “acceptance”, it establishes the contractual relationship between both parties. For the purpose of this article, it is not important whether the Letter of Consent constitutes a contract, as the Letter of Consent can also act as evidence for affirmation of facts.


    The trademark coexistence agreement involves the decision of the cited trademark holder on whether it, within the scope of its own interests, “tolerates” the use of the same or similar trademark on the same or similar commodities by the trademark applicant. As a trademark can bring along huge commercial interests for its holder in the market competition, such decision of the cited trademark holder must be based on his own interests. There is no merchant in the market who is willing to sacrifice his own commercial interests to help others get the corresponding economic interests (even if some merchants occasionally make sacrifices for moral reasons). When adjudicating disputes related to the coexistence agreement, the trademark authority and the people’s court shall keep such economic laws in mind. The private right is not paramount but private interests are paramount in business competitions. When considering its “private interests”, a merchant must take the confusion of consumers as a decision cited factor, which is often manifested in the provisions on distinction of two trademarks in the coexistence agreement. If any party concerned violates such provisions, it shall shoulder the breach liability (including huge compensations) even if such violation may not necessarily lead to the revocation or invalidation of the applied-for trademark; or, the cited trademark holder may resort to the protection by the anti-unfair competition law according to the specific case facts.
     
    Beijing Higher People’s Court has made the following finding on the coexistence agreement or the Letter of Consent: “the explicit consent on the applied-for trademark’s registration in the coexistence agreement can act as evidence to prove that it is not easy to cause confusion in the relevant public”①; “if there is no other obvious evidence on the possibility of confusion, the Letter of Consent can usually act as strong evidence for exclusion of such possibility”②. There are two highlights in such finding: first, the coexistence agreement or the Letter of Consent is accepted as evidence; second, it is used to prove that it is not easy to cause confusion in the relevant public. Such finding is none other than the focus of disputes related to the coexistence agreement.
     
    In our opinion, the finding confirms that the parties to the coexistence agreement have the say on whether trademark coexistence causes the “possibility of confusion among consumers”. As merchants aim at “interests” when entering into the coexistence agreement, the judge shall give full respect to the judgment standards of the parties concerned when accepting such agreement as evidence no matter he agree with such interests or not; which shall not be neglected in the examination of application for trademark coexistence.
     
    In addition, the finding confirms who should shoulder the burden of proof. In the practice, the adjudicator of disputes often affirm the fact that “(trademark coexistence) is easy to cause confusion among consumers” by simply saying that coexisting trademarks are the same or similar and their use on the same or similar commodities is easy to cause confusion among consumers as the parties concerned failed to submit evidence for “excluding the possibility of confusion”.
     
    As mentioned above, the parties of the coexistence trademark shall have the say on whether trademark coexistence is easy to cause confusion; and their judgment standards and scope are definitely stricter and wider than those of the examiner or judge. No that the parties to the coexistence agreement claim that it is not possible for trademark coexistence to cause confusion among consumers, the examiner or judge shall put forward stronger evidence or basis for denying such claim so as not to be deemed “arbitrary”.
     
    As what needs to be affirmed is “possibility” but not facts already happened, it seems “beyond their power” for the parties concerned to prove a fact that may or may not happen in the future. Maybe this is the reason why the above finding emphasizes the judgment of the parties to the coexistence agreement. However, the parties to the coexistence agreement may also submit evidences including the market survey report of a third party to prove a fact already happened (such as low confusion rate) or not yet happened (such as non-existence of high confusion rate), so as to further enhance the credibility of their claim.
     
    Now that the cited trademark holder takes his “private interests” as the basis for entering into the coexistence agreement, how can he “tolerate” the applied-for trademark’s coexistence in a fierce market competition environment? There are different reasons. Sometimes, the economic basis for the parties concerned to enter into the coexistence agreement is the relevance between them, such as parent-subsidiary corporation or joint venture③. Sometimes, the parties concerned reach a compromise because of historical reasons such as the conflict between a prior unregistered trademark and a later registered trademark④. Sometimes, the parties concerned have other commercial considerations, e.g. the cited trademark holder maybe think the applied-for trademark will not threat his market share and is unwilling to get involved in the corresponding administrative or judicial proceedings; the cited trademark holder may get other commercial interests from the coexistence agreement; or the cited trademark holder wants to harm others for personal gains or just wants to harm others (the cited trademark holder is involved in bankruptcy proceedings and maliciously enters into the coexistence agreement with others).
     
    Whatever the economic basis of the coexistence agreement is, the party submitting such agreement must understand that he only submits evidence to prove the representation on no objection of the cited trademark holder, while the trademark authority or the people’s court shall decide whether to accept such evidence. Even if such agreement is accepted as evidence, it only means the adjudicator has affirmed the fact that the cited trademark holder does not think the applied-for trademark will cause confusion among consumers on commodities or services related to the two trademarks.
     
    However, as consumers but not the cited trademark holder may have confusion, the trademark authority still needs to examine the possibility of confusion caused by trademark coexistence from the aspect of consumers. This is not only a right of the trademark authority, but also a statutory obligation of it under the trademark law.
     
    In the authors’ opinion, the trademark law can be divided into two parts: examination & approval and protection of rights. The first part involves not only private interests of the parties concerned but also the public interest of consumers, while the second party mainly involves private interests of the parties concerned. It is not exact to say that the coexistence agreement reflects the disposal of “private right” by the right holder, as the cited trademark holder does not dispose of his trademark right but only expresses his consent on the applied-for trademark’s existence within the scope of his economic interests.
     
    In addition, there may be “omission of trademark cited” in the practice of trademark registration. In the case involving the trademark “Wei Dun”⑤, the trademark authority approved the applied-for trademark’ registration due to “omission of trademark cited”. In the following case on trademark infringement, the court held that “omission of trademark cited” shall not be the defendant’s excuse for non-infringement, and a complete examination should be carried out to decide whether the plaintiff’s infringement accusation is tenable. Therefore, even if the coexistence agreement is submitted, it is necessary for the trademark authority to independently examine the applied-for trademark for the sake of public interest or private interests of the prior trademark holder. It is possible at least logically that the cited trademark holder does not think the applied-for trademark’s registration will confuse consumers but cannot exclude different understandings of other potential trademark right holders.
     
    To sum up, the coexistence agreement is a contract with the primary function of proving the relationship of rights and obligations between the parties concerned. When the coexistence agreement is accepted as evidence in the corresponding administrative or legal proceedings, it can prove the fact that the cited trademark holder undertakes not to raise an objection against the applied-for trademark (it will be much better if such agreement can act as evidence for not causing confusion). No objection of the cited trademark holder against the applied-for trademark is just an indecisive factor to be considered by the trademark authority or the people’s court when considering whether the applied-for trademark can be registered.
     
    II. Different fact findings from acceptance of coexistence agreement
    Generally speaking, an objection against the applied-for trademark is more often raised by the cited trademark holder, while the coexistence agreement can become a key measure of the trademark applicant for exclusion of hindrance. Though both the trademark authority and the people’s court think they shall independently examine the relevant issues even if the parties concerned have submitted the coexistence agreement, they have different standards in the actual disposal of such issues. In our opinion, considerations shall be given to the specific circumstances of different cases.
     
    If the coexistence agreement is authentic, it shall be accepted as evidence; however, fact findings based on it may differ due to the adjudicators’ different value orientations. Our suggestion is that the adjudicators shall affirm the facts of disputes from a broader perspective and vision according to different economic bases of the coexistence agreement.
     
    1. If the parties to the coexistence agreement are affiliated enterprises, the applied-for trademark shall generally be approved for registration, which not only shows respect to the autonomy of will of the parties concerned but also does not harm the consumers’ interests. In many cases, the cited trademark holder is the parent company or joint venture partner of the trademark applicant, and the applied-for trademark is based on the cited trademark. As the user of the cited trademark within the relevant territory is not the cited trademark holder but its subsidiary or joint venture, the coexistence agreement enables both parties to achieve common economic interests within the registered territory of the cited trademark.
     
    The underlining simple truth is: now that the cited trademark is known by consumers within the registered territory and the provider of products or services within such territory is the trademark applicant, consumers can understand not only the source of products or services but also the relationship between the trademark applicant and the cited trademark holder through the use of trademark, greatly lowering the possibility of confusion on the relevant products or services (it is easier for consumers to distinguish imported products and domestic ones as in most cases there is obvious difference in price). If the trademark authority does not permit trademark coexistence, consumers will misunderstand that products of the trademark applicant directly come from the cited trademark holder, increasing the possibility of confusion among consumers.
     
    Of course, if the applied-for trademark is the same as the cited trademark and both trademarks are used on the same commodity (which is a rare case), the adjudicator will seem more “humane” by indicating the applicant that he may achieve the intended commercial purpose through trademark licensing at the same time of rejecting the applied-for trademark. However, if there are certain differences between the applied-for trademark and the cited trademark, the approval of the applied-for trademark’s registration can not only facilitate consumers to distinguish between imported products and domestic ones but also help domestic merchants to obtain greater economic interests than trademark licensing, no matter the applied-for trademark is used on the same commodities or similar ones. For example, a joint venture usually has a statutory duration, the trademark licensing will no longer exist upon the termination of joint venture; however, if the cited trademark holder is an overseas partner of the joint venture and agrees that the domestic party may apply for the registration of a similar trademark, the domestic party may continue to use such trademark after the termination of joint venture and maintain the acquaintance of consumers on the relevant product.
     
    2. If the parties concerned have entered into the coexistence agreement for historical reasons even though they are not affiliated enterprises, the trademark authority and the people’s court shall generally respect the parties’ autonomy of will. The prior user can continue to use the relevant trademark within the original scope in accordance with the trademark law, and trademark coexistence enables the trademark applicant to use the relevant trademark within a broader scope.
     
    In terms of practical significance, now that the cited trademark holder permits the trademark applicant to expand its trademark’s scope of use by means of trademark coexistence, both parties will undoubtedly set restrictions on such use by means of contract (including the agreement on territory of use, packaging decoration and advertising), so that they can clearly distinguish different consumer groups. If any party violates the coexistence agreement, it must pay the corresponding economic cost.
     
    For any coexistence agreement of this type, the competent authority or court shall mainly judge the confusion rate of consumers from the contents of such agreement, and shall not focus on the applied-for trademark.
     
    3. If the parties concerned have entered into the coexistence agreement not because they are affiliated enterprises or for historical reasons, the trademark authority and the people’s court shall generally approve trademark coexistence unless there is obvious possibility of confusion. When judging the possibility of consumers’ confusion, the cited trademark holder takes more factors into consideration than the trademark authority or the people’s court, because he focuses on his own interests but not public interest. He is most unwilling to see any confusion of consumers on his products or services which leading to the loss of consumers.
     
    4. In the practice, there are cases in which the coexistence agreement is subject to malicious utilization. Such coexistence agreement shall not be accepted as evidence, and the parties concerned may also shoulder other civil or criminal liability. In such a case, even if the applied-for trademark is approved for registration, the other party shall be entitled to appeal to trademark invalidation.
     
    III. Settlement of disputes arising from trademark coexistence agreement
    Whether the cited trademark holder can, with the excuse that the trademark applicant violates the coexistence agreement, request the trademark authority not to approve the applied-for trademark’s registration or to invalidate such trademark or accuse the trademark applicant for infringement at the people’s court? There may be different circumstances in the practice.
     
    1. One circumstance involves the trademark objection or review. The cited trademark holder may, with the excuse that the trademark applicant violates the coexistence agreement, claim the invalidity of such agreement and request the trademark authority not to approve the applied-for trademark’s registration. The people’s court or the arbitration institution shall decide whether the coexistence agreement shall be invalidated, revoked or dissolved. The trademark authority or the people’s court adjudicating civil disputes cannot affirm the legal force of the coexistence agreement. In fact, the coexistence agreement is just evidence and its validity or legal force is of no substantial significance to the adjudicator of civil disputes.
     
    The purpose of accepting evidence is to affirm the relevant facts under dispute. Even if the trademark authority accepts the coexistence agreement as evidence and affirms the corresponding facts based thereon, such agreement can prove nothing more than the cited trademark holder’s representation on no objection against the applied-for trademark or the fact of low confusion rate. The trademark authority can take the cited trademark holder’s “claim of invalidity” as his posterior declaration of will concerning trademark coexistence, while the posterior declaration of will is usually superior to the prior one. The trademark authority can affirm the fact that even though the cited trademark holder represented that he will not raise objection against the applied-for trademark earlier, he made a contrary declaration of will later; while the validity of the coexistence agreement is not related to the case. Therefore, the trademark authority shall make an independent ex-officio examination of the applied-for trademark.
     
    2. Another circumstance is that the trademark authority does not accept the coexistence agreement as evidence and does not approve the applied-for trademark’s registration, the trademark applicant resorts to administrative proceedings, and the cited trademark holder requests the people’s court to uphold the trademark authority’s decision with the excuse that the coexistence agreement is invalid because of violation by the trademark applicant. Thus, the people’s court shall examine whether the trademark authority has necessary factual and legal basis for or goes against the relevant procedures in disapproving the applied-for trademark’s registration, but not whether the trademark authority is correct in not accepting the coexistence agreement as evidence.
     
    3. If the cited trademark holder requests the people’s court to make a judgment on the trademark applicant’s infringement with the coexistence agreement’s invalidity as the excuse, the first problem to be solved is whether the court adjudicating the dispute on trademark infringement can decide the validity of the coexistence agreement submitted by the parties concerned as evidence at the same time? We are in favor of the negative answer. Firstly, different “causes of action” are involved in such proceedings. Secondly, even if the coexistence agreement is confirmed to be invalid, the court can only simply affirm the trademark applicant’s infringement based on such invalidity. So long as the trademark applicant’s registered trademark is not invalidated, the court can only judge whether prohibiting its continued use of such registered trademark is good for protecting consumers’ interests based on specific facts, while the cited trademark holder’s “private interests” becomes a minor factor for consideration.
     
    4. Now that the coexistence agreement is just a contract and only has binding force on both parties, a party may bring a lawsuit against the other party based on their contractual relationship if the latter violates the coexistence agreement.
    If the coexistence agreement includes arbitration clauses, the stipulated arbitration institution shall have jurisdiction over the disputes under such agreement. If the dispute adjudicating organ confirms that one part is in breach, it shall make a judgment or ruling on the other party’s request, ordering the breaching party to shoulder the corresponding breach liability. If one party of the coexistence agreement enjoys the unilateral right of rescission in accordance with such agreement or the contract law and the factual conditions for claiming such right are satisfied (the breach reaches the agreed or statutory extent), the party may request for a judgment or ruling on rescinding the coexistence agreement. However, even if the coexistence agreement is rescinded, such rescission shall have no legal force on the trademark authority or the people’s court. That is to say, the party can only request the trademark authority to revoke or invalidate the corresponding trademark in accordance with statutory procedures or request the people’s court for confirm infringement, and the trademark authority or the people’s court shall make a decision in accordance with the corresponding laws and facts.
     
    To sum up, we must distinguish different legal relationships involved in the coexistence agreement, including the legal relationship between the parties concerned based on contract; the legal relationship between the parties concerned and the trademark authority in administrative proceedings related to trademark registration and validity (with such agreement as evidence); and the legal relationship related to infringement between the parties concerned based on such agreement (which has no substantial significance). The disputes related to the coexistence agreement can only be properly dealt with only after clarifying the different legal relationships involved and the role of such agreement in the formation and infringement of trademark right.
     
    Notes:
    ① Beijing Higher People’s Court (2013) Gao Xing Zhong Zi No. 268 Administrative Judgment.
    ② Beijing Higher People’s Court (2012) Gao Xing Zhong Zi No. 1043 Administrative Judgment.
    ③ Beijing No. 1 Intermediate People’s Court (2014) Yi Zhong Zhi Xing Chu Zi No. 4284 Administrative Judgment; Beijing Higher People’s Court (2014) Gao Xing (Zhi) Zhong Zi No. 3371 Administrative Judgment.
    ④ Beijing Higher People’s Court (2009) Gao Xing Zhong Zi No. 141 Administrative Judgment.
    ⑤ Beijing Chaoyang District People’s Court (2014) Chao Min (Zhi) Chu Zi No. 35047 Civil Judgment; Beijing Intellectual Property Court (2015) Jing Zhi Min Zhong Zi No. 602 Civil Judgment.