Coexistence agreements bring peace in trademark disputes

Intellectual Property /
John Simpson
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By Tony Poland, LegalMatters Staff • A carefully crafted coexistence agreement can help prevent costly trademark infringement litigation while protecting the brand, says Toronto intellectual property lawyer John Simpson.

Simpson, principal of IP and new media law boutique Shift Law Professional Corporation, says coexisting agreements are quite common, citing U.S. retailing giant Target Corporation and Target Australia as an example.

He says consumers in North America are familiar with the big box chain. There are almost 2,000 Target locations scattered throughout the United States. The retailer moved into Canada in 2013, opening up 133 stores. However, two years later Target ended the Canadian experiment.

Simpson says the average consumer might be inclined to believe the Target chain in Australia is part of the U.S. corporation’s expansion. After all, both Target U.S. and Target Australia sell the same type of goods. Their websites are similar. And a variation of the U.S. retailer’s familiar trademark red and white target logo is used by the Australian company.

‘The similarities are evident’

“Someone might be searching on the internet for Target and come across the Australian chain,” he says. “They might not even realize they are not on the U.S. website. It is not just about the first impression. Even after a bit of digging, the similarities are evident. It looks like the same store.”

However, Simpson says a closer look at the Target Australia website reveals the following disclaimer: “Target Australia Pty Ltd is part of the Wesfarmers Ltd group and has no affiliation with Target Corporation U.S.”

“When I first saw Target Australia’s website my first thought was it was part of the American chain,” he tells LegalMattersCanada.ca. “When I learned it wasn’t the same company, my second thought was that it is very likely the two parties have a coexistence agreement. 

“This is a very common form of settlement in trademark law,” Simpson adds. “Companies that would otherwise be parties to a trademark infringement lawsuit agree to settle their differences on the basis that they can coexist on certain terms.”

In cases similar to the two Target chains, some people may assume that it would be an obvious case of trademark infringement.

“Iconic brands such as Target U.S. are very vigilant about protecting their trademark rights, so you would not expect to see something like this. Or at least if you did, you would assume that the companies are related,” he says. “The question then becomes, “How could Australia do this without being sued?’

Trademark rights are national in scope

“The reason is because trademark rights are national in scope,” Simpson explains. “If Target U.S. doesn’t have a registered trademark in Australia and they don’t have any operations or use of their trademark in that country, then this is fair game for someone to do this.”

He says trademark infringement litigation can be expensive.

“Where the merits of an infringement action are doubtful, the parties will often resolve their potential dispute in the form of a coexistence agreement,” says Simpson. “In this case, they are selling the same goods and services and doing the same thing, but in completely different jurisdictions. 

“So, the parties would agree to terms that would be directed toward minimizing any customer confusion. For example, Target U.S. would not want a customer who was really dissatisfied with an experience with Target Australian to think that they are one in the same organization.”

There could be terms in the agreement dictating how the two entities present themselves on the internet or a provision preventing either side from expanding into the other’s jurisdiction, he says.

‘Both have an interest in preventing any sort of lawsuit’

“They would both have an interest in preventing any sort of trademark infringement lawsuit and avoiding any dispute coming to a head,” says Simpson.

He says coexistence agreements will not be suitable for all disputes.

“If I started using a Nike swoosh to sell shoes, that would not be a good candidate. Obviously I cannot coexist with Nike by directly infringing on their trademark,” Simpson says. “I would need to get a licence or stop selling the shoes.

“And in the same way, Target Australia could not coexist with Target U.S. if they opened up a store in Kansas.”

While coexistence agreements are “very often how trademark disputes are resolved” and can be effective, he says it is important that both sides carefully consider the terms and length of the deal.

“Just like a co-branding agreement or any sort of agreement where you are letting another party use a similar or same trademark as yours, the terms must be very clear about what you can and cannot do,” says Simpson. “The terms should be clear regarding how the parties distinguish themselves.

“If not, there could be plenty of opportunities for a breach that potentially lands the two parties in court.”