Do marks on OEM goods infringe domestic trademarks?

Coexistence agreements first began appearing internationally in the 1980s. The International Trademark Association defines a coexistence agreement as “an agreement by two or more parties that similar marks can coexist without any likelihood of confusion; it allows the parties to set rules by which the marks can peacefully coexist”. Coexistence agreements are, at essence, contracts that express the parties’ intent in full. They have been relatively effective in resolving trademark coexistence disputes.

Currently China lacks specific regulations addressing the validity of coexistence agreements in the field of trademark registration. The majority of administrative authorities responsible for trademark registration rely on their examiners’ subjective discretion during substantive review in determining whether the coexistence of trademarks could lead to confusion. They decide whether to accept coexistence agreements and approve registration of the later trademark. As a result, outcomes in similar cases have been vastly different.

This column will briefly consider and analyse whether coexistence agreements are valid and applicable during trademark registration.

International precedent

The World Intellectual Property Organization (WIPO) recognizes coexistence agreements and takes into consideration possible confusions caused by coexistence while reviewing trademark registrations. The decision on whether to accept these agreements must balance a number of factors.

Courts in the US have shown a tendency to treat coexistence agreements as contracts. The courts tend to recognize the validity of the coexistence agreements among parties in practice, so long as issues regarding significant public interest are not involved.

Courts in the UK have applied criteria in practice similar to WIPO in recognizing the validity of coexistence agreements. The courts take into consideration party autonomy, the potential for confusion resulting from the coexistence of trademarks and the protection of consumers’ interests.

In the EU, trademark coexistence agreements initially were not recognized by trademark registrars. Later they began to serve as reference.

China practice

Article 30 of the thrice amended Trademark Law sets out that a trademark office will neither accept a trademark registration application nor publish the mark if a) the mark is not in compliance with the Trademark Law, or b) the mark is identical or confusingly similar to another’s registered or preliminarily approved trademark for identical or similar goods.

In practice, the common option for those whose registration applications have been rejected for the above reasons is to attempt to reach a coexistence agreement with the prior trademark owner (the reference mark owner) with the reference mark owner consenting to the later mark being registered in China.

The coexistence agreement would then be submitted with evidences for the rejection review, and the applicant would request that the Trademark Review and Adjudication Board (TRAB) approve the later mark’s registration.

Chinese laws presently are silent as to the validity of coexistence agreements in trademark right granting cases. However, during the TRAB’s 24th general affairs meeting convened 16 October 2007, the board indicated that it would accept coexistence agreements in rejection review cases under certain conditions.

According to the TRAB, the above article of the Trademark Law had two legislative objectives. The first was to protect prior registered or preliminarily approved trademarks so as to avoid conflicts over trademark rights. The second was to protect the interests of consumers by preventing identical or similar trademarks leading to confusion in the market.

The TRAB was of the opinion that, when deciding whether to permit the coexistence of trademarks, consideration was needed as to whether the trademarks could, on the whole, be distinguished by consumers, and whether their coexistence was likely to lead to confusion among consumers.

TRAB held that two specific factors also required be scrutiny. First, the degrees of similarity of the individual trademarks and the goods for which they are registered. Second, the reputation of relevant marks.

Due to article 30 of the Trademark Law, examiners in practice have a greater tendency to consider whether trademark coexistence would result in confusion among consumers as the most important factor in deciding whether to accept a coexistence agreement.

On coexistence agreements

It can be argued that trademark rights are civil property rights. Potential conflicts between a trademark application and a reference mark is predominately a matter of civil dispute related to private rights.

Reaching a trademark coexistence agreement indicates that a prior trademark rights holder has reached settlement for their rights. The agreement’s validity should be recognized per party autonomy, and the trademark registration should be granted in the absence of damaging important public interests.

The decisions by administrative trademark authorities regarding the degree of confusion caused by coexistence of the marks are merely a presumption of the authority.

The prior trademark rights holder will certainly consider whether the coexistence of trademarks will potentially cause confusion in the market, which is a matter of immediate importance to the holder when agreeing to trademark coexistence. The prior trademark rights holder’s understanding thus should have more weight than that of the authority in the actual circumstances of the coexistence.

Furthermore, even where coexisting trademarks might pose the risk of confusing consumers, the risk could be mitigated by indicating the later products’ trade name or other pertinent information. A presumption of confusion should not be grounds to invalidate a trademark coexistence agreement. Considering the foregoing circumstances, administrative authorities should respect parties’ autonomy when considering trademark registration applications.