Definition of coexistence agreement

At its simplest, it is any agreement between two (or sometimes more) parties that when they go about their business, one or both of them can do so without fear of infringing on the other party’s intellectual property rights.

Most cohabitation agreements involve trade names and trademarks, so that people with the same or similar names, or who have businesses, can go about their daily business without worrying about being sued for trademark infringement or manipulation. Other cohabitation agreements may involve designs, copyrights, and even patents.

When to enter into an agreement

A coexistence agreement can remove a lot of doubt and difficulty before it happens. This might arise:

If you know that another business is trading, or is about to do so, in a way that could confuse your customers or harm your business
If you are concerned that someone else is seeking to register a trademark that could make it difficult for you to continue or expand your business
The same considerations might apply if a larger company is selling off a subsidiary or splitting up into smaller units, each of which wants to be able to benefit from the original business name.

As a general rule, when you think you might at some point want to sue someone for using your:

• Name
• Brand
• Goodwill
• Acquiring the business

Or when you think they might want to sue you for the same reason, a coexistence agreement might be a good idea.

When not to enter into an agreement

In principle, cohabitation agreements enable companies to protect their own legal interests and shape their own commercial destiny, rather than leaving disputed matters to a court of law which can be costly, unfavourable and slow. But you should not enter into a cohabitation agreement if:

You have not yet sorted out your own business plan (as you may find that you have inadequately defined the natural scope of your business expansion)
If you cannot understand its terms and they have not been clearly explained to you
If you do not own, or have no absolute right to control, the rights which you agree not to enforce

Hiring a lawyer

There is no legal requirement to hire a lawyer to draft a cohabitation agreement. However, the larger and more complex your business is, or the more you invest in the business involved, the wiser it is to seek professional advice from a lawyer, trademark lawyer or patent lawyer.

If you are not using a lawyer, it may be worth starting with an “outside the bond” cohabitation agreement that you can fill in the gaps.

Professional Advice

Further professional advice will generally not be required when entering into a simple cohabitation agreement. There may be an exception in the rare case where a trademark that is the subject of the cohabitation agreement may at some point be used as security for a loan. It may be necessary to consult a financial advisor.

What to Include in a Cohabitation Agreement

Clearly define who is entering into the agreement and who is supposed to be bound by it. A legal person, such as a person, company or partnership, can enter into a contract. A commercial entity, such as a store or restaurant, cannot. Both parties should ensure that the agreement is entered into with someone on the other side who can be legally bound by it.
Clearly define the brands, logos or other things that are allowed to coexist. In the normal course of business, merchants often rebrand or redesign themselves, updating old logos and dropping clumsy terms like “and sons”. The agreement should specify whether it applies only to names, logos and other marks that exist or are in use at the time of the agreement or whether either side has unlimited discretion to redesign its structure without risk of the other party objecting. In this context, you should not ignore colour. Obviously, different companies’ logos are unlikely to confuse consumers when one has a red background and the other has a blue background, and this may not be the case if the red is later changed to blue.
An explicit understanding that domain names and alphanumeric phone numbers, where applicable, are acceptable to each other for use. This important factor is sometimes overlooked in modern trading. Two business names may coexist more easily in the real world for similar businesses in different cities than in cyberspace, where inaccurate spelling, poor spelling, or a poor memory may lead a consumer to the wrong website. A list of business areas and geographic locations where coexistence is definitely allowed and/or not allowed. The less detail there is in this part of the coexistence agreement, the more room there is for ambiguity and misunderstanding. For example, if one business is using its mark for “clothing” and the other business is planning to use its mark for “accessories,” it may not be clear which category items such as hats and shoes fall into. The terms can also be very broad. For example, if a business agrees not to use its mark for “computer,” does that mean only computers, or does it include additional software or equipment such as computer printers or modems? You should consider some descriptions of goods and services that are complementary or complementary to each other. If one business is using a mark for pizza restaurants and another is seeking to use its mark for delivery services, there may be little grounds for objection. But if the pizza mark is to be used on motorcycles used for home delivery services, the situation may be quite different.

This agreement should also reflect the aspirations of the companies in the areas in which they operate and into which they expect to expand their activities. If one company produces goods for commercial buyers (for example, a supplier of cooked food to supermarket chains) and the other companies markets goods directly to the public (for example, burgers sold through burger bars), there are issues such as the potential for confusion or ‘dilution’ of the consumer brand. But the owner of the consumer brand will want to protect its brand by preventing the owner of the commercial brand from subsequently using it in the consumer market in a way that would undermine the object of the co-existence agreement. Particular care should be taken here to ensure that the agreement only provides a bar to use a trade mark or brand in the area of ​​activity that concerns the protection of goodwill. An attempt to prevent another business from entering the market under any trade name in any way may be unenforceable as a restraint on lawful trade.

The start date, and the end date, if any. This should ensure that anything done before the start date will not be considered a breach of the agreement, and that the parties have adequate thought to what will happen in the future.
A statement of the law that applies to the agreement and in which country any legal action should be brought. These issues will not usually be of concern to UK businesses whose business activities are relatively local, although they may be of great relevance to businesses that span the Scottish border because Scotland has its own legal system. Where one or both companies have a significant interest in the European market, or hope to do so, the choice of law and choice of jurisdiction become more important issues. But by this stage, professional advice will likely have already been sought.
If possible, a term that allows the parties to resolve disputes without going to court. If the parties want to avoid the cost and delay associated with litigation, they may agree that any dispute arising from the agreement should be settled by binding arbitration. This may involve nominating a single individual who will hear what each side has to say and then make an award that the courts can, if necessary, enforce. The parties may also wish to provide non-binding mediation, which involves a mediator who listens to the points raised by each side and helps them find common ground so that they can resolve their issues themselves, without the need for a binding award. We offer a specialist mediation service for IP disputes and many other private sector mediation services are also available.
If necessary, an agreement to review how the agreement works and whether any changes are needed. In market sectors where there is a high degree of change, the point at which two companies agree to coexist can quickly shift to the point where one company can no longer operate profitably. If this risk can be anticipated, it may be a good idea to include a review clause in the coexistence agreement after which either side can withdraw from the agreement within a specified period of notice to the other.
There should be a list of “who does what”. Most coexistence agreements do not contain a great deal of “who does what”. In fact, most of what they contain is negative, promises to live and let live. However, to the extent that any positive charges are imposed, for example a duty to inform the other side if, for example, trademark applications are filed for other classes of goods or services, or if signage, packaging and logos are redesigned, the agreement should make clear who is responsible for transmitting this information, under what circumstances and to what address. Ideally, a coexistence agreement will contain a list of permissible variations of the marks it refers to. For example, are the marks excluded from use in certain colours? Can you use the marks with additional terms such as “& Co” or “Bros”, or must you always use the marks with some other specific distinguishing mark, such as a name or one or both? This could change if the business name changes. Can modifications be made (for example, adding .com) for use on packaging or on the Internet? If sound is an issue, should the way the mark is pronounced by one party in its promotion of the mark also be limited? When making provisions of this kind, the parties should ideally agree not to oppose any applications to register these acceptable variations as trademarks, and not seek to cancel any resulting registration once it has been granted. com) for use on packaging or on the Internet? If sound is an issue, should the way the mark is pronounced by one party in its promotion of the mark also be limited? In making provisions of this type, the parties should ideally agree not to oppose any applications to register these acceptable changes as trademarks, and not to seek to cancel any resulting registration once it is granted. com) for use on packaging or on the Internet? If sound is an issue, should the manner in which the mark is pronounced by one party in its promotion of the mark also be limited? In making provisions of this type, the parties should ideally agree not to oppose any applications to register these acceptable changes as trademarks, and not to seek to cancel any resulting registration once it is granted.

Next Steps

Many cohabitation agreements, once concluded, are saved and forgotten as the companies that entered into them move on and return from the negotiating table to their normal business activities. In most cases, the fact that a cohabitation agreement has been forgotten is the best evidence that it has done its job properly. However, it may be unwise to ignore it completely, as failure to take it into account can often lead to a sad scenario: one business does not discover that the other side of the agreement has violated its terms until it hears about it from a disgruntled or confused customer.

A good suggestion is that when the agreement is signed, both parties write down a future date on which they will talk to each other. This conversation has two purposes:

• To confirm that the terms of the cohabitation agreement are respected by both sides.
• To write down a date for the next occasion on which they will repeat this process.

In this way, both sides remain aware of the reality of cohabitation and the potential problems that may arise if they do not respect the terms on which they agreed to trade.

Coexistence agreements and the law

Under each country’s contract law, a coexistence agreement will generally be binding if it consists of a promise made earnestly by each company to be made in exchange for some form of benefit received from the other party. This mutual benefit is lost if one business simply agrees to allow the other to trade under a particular name and receives nothing in return; in such cases, the business may be able to retract its agreement. For this reason, it is important to be able to show that both sides clearly benefit from the cohabitation agreement. If you think this may not be the case, a brief consultation with a professional advisor will quickly clarify the matter.

Assuming that a cohabitation agreement is binding, it may sometimes be unenforceable. This may occur in the rare cases where the agreement is seen as a disguised attempt to divide the market or impose restrictions on trade, thereby reducing competition. Where a coexistence agreement seeks to cover other countries, it may extend to countries where such agreements are treated with suspicion on the assumption that they seek to provide a level of confusion to consumers by allowing two different companies with similar names to continue trading. In such cases, professional advice may be required.