Trademark Coexistence Agreements: When Settlement Is Better Than Opposition

Introduction : In India, most trademark disputes are primarily determined through adjudication. The Application is advertised through the journal; the notice of opposition may be filed by the proprietor of an earlier mark, and the Registrar decides whether registration of the new mark is likely to confuse the public or not. The process is very slow, expensive and, because confusion is assessed on impression, it is uncertain. A coexistence agreement offers an alternative, a private contract in which the proprietors of identical or similar marks agree to limit their respective use and registration, by reference to goods and services, trade channels, territory and manner of presentation.

In India, the marks are regulated under the Trade Marks Act, 1999, which doesn’t contain any provision particularly dedicated to such agreements. Their effects are indirect and depend upon the reasonableness of the Registrar and the courts’ treatment of consent, concurrent use and public confusion. This blog will help you to identify the statutory hooks for coexistence, examine when such settlement is preferable to the opposite party, and consider the limits that Indian courts have placed on private arrangements between trademark proprietors with reference to decisions of the Supreme Court and the High Courts of India.

Legal Provisions

A. The Trade Marks Act, 1999

Section 11(1) bars registration of a mark that, through its identity or similarity with an earlier mark in particular goods or services, is likely to create confusion among the public, but it opens with the words “Save as provided in section 12”. Section 11(4) provides that nothing in the section prevents the registration where the proprietor of the earlier mark consents, and that the Registrar “may” then register the mark under Section 12 under special circumstances. Section 11(5) further provides that the registration shall not be refused only on the grounds in Sections 11(2) and 11(3), i.e., well-known marks and passing off or copyright, unless the proprietor of an earlier mark raises that objection in opposition proceedings. The consent is only a relevant circumstance, not an entitlement to registration.

In case of honest concurrent use or any other special circumstances, Section 12 empowers the Registrar to register identical or similar marks by more than one proprietor, subject to such conditions and limitations as may be found to be necessary. Section 33 provides a correlative provision that an earlier proprietor, with full knowledge and continuous period of five years’ use of the latter proprietor’s registered mark, shall not have the right to get it annulled or oppose its use except in cases where the later mark was not applied in good faith. Section 34 is a provision protecting prior use from the registered proprietor, and Section 30(2)(d) allows mentioning another’s mark when needed in order to indicate the adaptation of goods to it.

B. Contractual, Procedural and Competition Framework

The compromise decree in respect of the settlement of a pending suit is provided under Order XXIII Rule 3 of the Code of Civil Procedure, 1908, and is enforceable. Pre-institution mediation of commercial suits under Section 12A of the Commercial Courts Act, 2015, being a mandate, provides a natural ground for negotiations. The territorial or product category limits among competitors might also be dealt with under Section 3(3)(c) of the Competition Act, 2002, which provides for an appreciable adverse effect on competition for agreements between the enterprises engaged in similar or identical trade which share markets by virtue of their geographical area or type of goods. Section 3(5)(i) of the Competition Act, 2002 grants the right to impose conditions that are necessary to protect the rights. However, these restrictions need to be read with Section 27 of the Indian Contract Act, 1872.

Legal Analysis

A. Opposition Is Binary, but the Settlement Is Intended 

The outcome of the opposition can be either acceptance or rejection by the Registrar, usually based on a partly subjective determination of similarity. A settlement allows the parties to tailor it to fit their markets, by product category, channel, geography or presentation, which a tribunal will not generally do.  Courts see the value in this. The parties who negotiate those conditions themselves retain control over the commercial content.

Risk favors the settlement, as it is hard to predict the winning side. The proprietor of the registered mark may even lose against the prior user. A registered proprietor may also lose to a prior user. This uncertainty forms the basis of commercial coexistence.

B. Separation Must Be Distinguishable to the Consumer

Confusion is assessed from the viewpoint of the average buyer with faulty memory. In Britannia Industries Ltd. v. ITC Ltd., the Supreme Court of India ruled that there was little likelihood of confusion because BRITANNIA and SUNFEAST FARMLITE were prominently placed, and the defendants’ packs called attention to features such as “five seeds.” An agreement specifying such conditions, such as a requirement of a house mark, different trade dress and clear product description, would follow judicial scrutiny and stand a better chance of survival.

Contract can address problems that statute deals narrowly with. In Hawkins Cookers Ltd. v. Murugan Enterprises, printing “Suitable for Hawkins Pressure Cookers” with “Hawkins” in distinctly different red type was held to be an infringement, because the gaskets were compatible with other pressure cookers and naming one of them was not “reasonably necessary” under Section 30(2)(d). If compatibility statements are really important, the parties can agree in advance on the appropriate wording and typography.

C. Registry and Courts Are Not Bound

The principal restriction is that a private arrangement is not binding upon the Registrar or a court. Sections 11(4) and 12 are merely permissive, and consequently, commentators have always treated coexistence agreements as merely supportive of registration. The case of Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd. explains the reason. While both companies had acquired the right to use CADILA as their corporate name by virtue of a court-approved reorganization of the erstwhile group, the Supreme Court has found that medicinal products require a stricter approach, as confusion would be dangerous and public interest requires a lesser degree of proof of confusing similarity. Where the issue concerns public health, the agreement is least likely to displace the statutory requirement.

There will still be business risks involved. Coexistence will prevent expansion, deter licensees or purchasers and dilute the trademarks, making enforcement difficult against third parties. In any case, a senior owner offered to coexist will refuse or sue. Coexistence may also function as a license, in which case quality control must be ensured.

D. When Opposition Is the Better Approach

It would be inappropriate to try and reach a settlement if the opposite party is the one making counterfeit goods or was an imitator, if the negotiations were simply a delay tactic, and the terms of the settlement would involve relinquishing something that is crucial, and if the case required a record of rigorous enforcement to prevent future infringement. A separate negotiation track may be tried, alongside pursuing the suit.

Relevant Case Laws

Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73: The Supreme Court reaffirmed the principle of deceptive similarity and stated that a higher standard would apply to drugs because of the danger to life and the interests of the public. The decision indicates that an arrangement between relatives or erstwhile relatives does not lessen the standard.

Neon Laboratories Ltd. v. Medical Technologies Ltd., [2015] 10 S.C.R. 684: Using the “first in the market” test, the Supreme Court affirmed an interim injunction in favor of the earlier user of the mark “PROFOL” over the latter user “ROFOL” who had filed an application for registration at an earlier point. This case has significance when evaluating leverage before negotiations.

Power Control Appliances v. Sumeet Machines Pvt. Ltd., (1994) 2 SCC 448: The Supreme Court has defined the concept of “acquiescence” as one where the conduct is not compatible with the exclusivity claim, does not imply implied consent through family relations and granted an interim injunction. It is emphasized in the case that it is imperative to record consent through language.

Marico Ltd. v. Agro Tech Foods Ltd., 2010 SCC OnLine Del 3806: Dismissing the appeal with regard to descriptive use, it was held by the Division Bench that it is open to the Court to restrict use of either or both the marks for preventing confusion arising out of use of two similar marks.

Hawkins Cookers Ltd. v. Murugan Enterprises, 2012 SCC OnLine Del 2118: “Rival brand name on accessory goods” as provided in Section 30(2)(d) is permissible if it is reasonably necessary, but giving prominence to the rival brand name was found to be an infringement.

Britannia Industries Ltd. v. ITC Ltd., 2021 SCC OnLine Del 1489: The Delhi High Court has refused an interim injunction since prominently displaying the house brands and distinguishing features made confusion unlikely in the public, and it shows which separating means the court considers effective.

Practical Implications

Coexistence will be the most appropriate resolution in cases where there is a conflicting mark, but there is no significant commercial overlap. The agreement should provide for definitions of the marks and the goods or services concerned, for mandatory visual distinction such as a house mark, for dealing with the problem of online sales, since territorial limitations can be easily overcome, for consultation before expanding into the domain of the other party, for binding assignees and successors, and for the procedures to be adopted for resolving disputes through talks among executives, mediation, and then arbitration or even litigation. The usual problems are always the absence of definition of boundaries and lack of quality control provisions in the licenses. The opposition may be withdrawn if it agrees after the Applicant limits their specification. Similarly, the suit may be settled by consent decree.

Conclusion

A coexistence agreement is a commercial tool which operates indirectly under legislation and through various Judicial precedents. Sections 11(4) and 12 enable the Registrar to effect the agreement, but it is the discretion of the Registrar to prioritize the interest of the public over personal deals, specifically in pharmacy.

Settlement is preferred to opposition when there are separable aspects between the two marks which consumers are able to appreciate, the risks in litigation are balanced for both sides, and there is no issue of health for the public at stake. Settlement is not preferred when the other party acts with dishonest intent or the terms result in relinquishing core interests. To make coexistence reliable, the agreements should focus on the conflict and not on the market, the consent should be documented in writing, and the Registry should issue guidelines for giving weight to the agreements.

Author: Udit Kumar Verma in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney