• IN THE UK OFFICE

    Co-Existence Agreements: Handle With Care

    There can scarcely be any practitioner in the U.K. who has not had to draft a co-existence agreement as a means of settling a trade mark dispute. A recent Patent Office case involving the mark BACTI GUARD (and device) shows how important it is to draft such agreements carefully, taking into consideration the effect of the wording not just on the dispute at hand, but also on future disputes.

     

    The Facts

    Fenchurch Environmental Group Limited and Ad Tech Holdings Limited had signed an agreement in 1998 to settle opposition proceedings. Clause 5 included the words “Fenchurch agrees not to object to Ad Tech’s use and registration of the marks BACTI GUARD and BACTI GUARD (and device)”.

    Some years later, Fenchurch filed a revocation action against Ad Tech’s U.K. registration no. 2027376 on the basis of non-use. Ad Tech argued that the mark had, in fact, been used, and alleged that Fenchurch was in breach of the 1998 agreement by filing the application for revocation. At an interim hearing to consider Ad Tech’s application to strike out the revocation proceedings, the Hearing Officer concluded that the parties had, at the time of the 1998 agreement, considered the effect of non-use and that in any event, any agreement which sought to avoid the effects of the law in relation to non-use should be considered to be in restraint of trade.

    An appeal was lodged to the Appointed Person, to determine whether Clause 5 did, in fact, prohibit revocation proceedings for non-use, and, if so, whether it was invalid as a restraint of trade.

     

    Decision in the Appeal

    The Appointed Person considered the meaning of Clause 5 to be clear. It prevented Fenchurch, without limitation, from objecting to Ad Tech’s registration. The question was whether such a clause could be held invalid. Considering the relevant case law, the Appointed Person came to the following general conclusions:

    • That the agreement in question must have been designed to settle a genuine dispute, and to define the boundaries of the parties’ respective trading rights.

    • There must be a presumption that the agreement represented a reasonable division of the parties’ interests. It is therefore incumbent upon the party seeking to avoid the agreement (here Fenchurch) to show that there is a reason to avoid it.

    • Terms which impose perpetual restraints on trading activities are not necessarily void and contrary to public policy.

    • A clause may be found to be void and contrary to public policy if the party seeking to avoid the agreement can show that the restraint extends beyond any legitimate interest of the other party.

    • The position of the parties at the time the agreement was concluded must be considered.

    • Special care must be taken with clauses such as that at issue here. As there is a clear public interest in unused marks being cancelled, the courts must decide whether the party seeking to enforce the no-challenge clause had, at the date of the agreement, a sufficient degree of goodwill or interest in the mark for it to be reasonable to restrain the other party indefinitely from revoking the mark. Fenchurch argued that Clause 5 was, on these criteria, unreasonable. There was no reasonable basis for imposing a perpetual no-challenge clause, and Ad Tech had not used its mark. Ad Tech, however, contended that it had used its mark continuously.

     

    The Appointed Person came to the conclusion that Fenchurch had raised a “serious case that Clause 5 extends beyond any legitimate interest held by Ad Tech at the date of the Agreement”. However, the Appointed Person stated that in order to determine whether this was the case, an examination would have to be made as to whether, and to what extent, the parties had used the mark. The Appointed Person therefore rejected Ad Tech’s request to have the proceedings struck out.

     

    Comment

    This case highlights the need for careful consideration of how clauses being drafted might be interpreted, both now and in the future. The writer believes that EU law must always have prevented the imposition of all-encompassing “no challenge” clauses. It is encouraging that the Appointed Person has recognised that an attempt by a trade mark owner to prevent any challenge whatsoever to his trade mark could constitute “control beyond any legitimate interest”. It will therefore be interesting to see whether, on an examination of the facts in this case, such attempted control is found to be unreasonable.