co-existence and prior rights agreements in the … and prior rights agreements in the pharma...

Co-Existence and Prior Rights Agreements in the Pharma Industry

PTMG Conference Vienna, October 2013

Frank Meixner - Chief Trademark Counsel Bayer Group

• PTMG Conference Vienna, October 2013

Agenda A.

B.

C.

D.

E.

F.

Introduction

Contract type

Restraint of trade considerations

Typical clauses

Beware of potential downsides

Acknowledgements

A. 1. Definition


“Contract by which the owners of two similar or identical trademarks undertake to delimit their respective scope of activities under the trademark in order to avoid a market confusion and the filing of trademark actions” (Pollaud-Dulian, la Propriété intellectuelle)

“Contract by which in the mutual interest of the contractual parties the scope of use of their respective trademarks is determined in order to avoid confusion or conflicts” (BAT v. Commission 1985 Toltecs/Dorcet II)

A. 1 Definition

Other terms with identical or similar meaning:

Delimitation Agreements

Prior Rights Agreements - often used where

contract only limits registration and/or use of the

junior mark

Consent Agreements - Type of co-existence

agreement typically used to obtain registration

with corresponding right of use in countries with

ex officio examination for relative grounds refusal


A. 2 Relevance

Estimates that co-existence agreements are

concluded in more than 50 % of all trademark

applications

High practical relevance is disproportionate to a

somewhat underdeveloped academic debate

Low number of court precedents


Co-Existence Agreements are a success story

A. 2.1 Globalisation


A growing need for global marks

increases number of conflicts

Linguistic and cultural hurdles in

some countries/regions further

reduce the number of available

candidates

Required global marketing

attractiveness

Regulatory admissibility as a

challenge with a lot of uncertainty

A. 2.1 Globalisation


trademark

availability

no linguistic or

cultural obstacles

acceptable regulatory

risk profile

attractive for

marketing Globalization

A. 2.2 Clogging of trademark registers

Shortage of available

trademarks due to

clogging of registers

Worsened by filing of

several fallback candidates

as a consequence of high

unpredictability of outcome

of regulatory approval

process



Class 5

Other classes

784.820

(79.275)

1.594.628

(68.344)

1.001.605

(79.288) 888.373

(84.839)

461.898

(32.211)


Statistics:

Active registered trademarks (2012)

DE US UK FR CTM


Class 5

Other classes

59.849

(2.271) 40.769

(1.819)


New filings in 2012

DE US UK FR CTM

314.668

(15.094)

86.000

(5.300)

107.924

(10.433)


-8

-6

-4

-2

0

2

4

6

8

10

12

Total

Class 5

DE US UK FR CTM +11,0

+6,1


Growth rate (in %)

-6,6

+5,5

+4,3

-3,6

-5,7

+4,79

+2,4

+4,3

A. 2.3 More competitors from BRIC

and other countries


Traditionally

pharmaceutical

companies

primarily

domiciled in

Europe,

US, Japan

New

multinational

players

(predominantly

generics) in

other regions

such as BRIC

Roll-out of global

mark from different

regions increases the

risk that

trademark conflict is

identified too late for a

switch

Co-existence agreement often the one and only solution

B. Contract classification

License § 30 MarkenG

trademark registration does not entitle

owner ability to grant a right to use

similar trademarks

conflicting trademarks exist

independently, junior trademark is not

a derivation of the prior trademark

only in exceptional case of identical

trademarks (cross-licensing)


Germany


Settlement Agreement § 779 BGB

dispute over specific legal relationship

concessions of both parties

only used to settle pending legal

proceedings with mutual obligations


Germany


Agreement Sui Generis

no specific provisions in German Civil

Code

provisions on general contract law are

applicable

supported by majority of academic

literature


Germany


Settlement agreement Art. 2044 Code civil

a contract according to which the

parties terminate a disagreement and

prevent a dispute from arising

Unilateral contract Art. L 1103 Code Civil

where mutual concessions are

missing and only one party is bound

mere consent


France


Settlement agreement (Apple Corp vs Apple

Computers [1991] 3 CULR 99; WWF Case [2001] EWHC CH 482)

„this was a settlement agreement. It was made on the footing that each party had some legitimate interest in its trademarks and logos which it wishes to protect. The agreement was drawn up specifically so as to avoid challenges and contests in a host of countries. It was implicit in such a settlement that the parties were not attempting a finite assessment of all their rights country by country …“


United Kingdom


Trademark law is much more focused on

consumer protection rather than

trademarks as intangible assets

As a consequence, whether trademarks

really are the full property of their owners

unencumbered by public interest is

subject to debate

Consent agreement serves as evidence

that there is no likelihood of confusion in

order to convince the USPTO of

registrability of junior mark


USA


No big debate about contract classification

except:

„Whereas a license brings the parties together into a common public image and a joint enterprise, a consent agreement keeps the parties apart at a defined distance.

A license integrates, while a consent differentiates”

Mc Carthy on Trademarks §18:79)


USA

C. Restraint of trade considerations


Trademarks are monopoly rights

Such monopolies by definition restrain free competition


EC Toltecs/Dorcet II C 35/83

„delimitation agreements are lawful and useful if they serve to delimit in the mutual interest of the parties, the spheres within which their respective trademarks may be used, and are intended to avoid confusion or conflict between them“

But Art. 101 I TFEU is applicable if

dividing up of the market or

restricting competition in other ways


European Union


Germany: Federal Supreme Court KZR

71/08 Jette Joop

Is there an actual trademark conflict?

Does the conflict justify the contractual

delimitation?

„It is sufficient that the parties consider a conflict situation „seriously possible at the execution date of the agreement or that a serious reason based on objective facts exists …”


Germany


No likelihood of confusion

Territorial scope of the agreement is bigger

than actual conflict situation (no global scope

of delimitation in cases of purely national

conflict)

No-challenge clause prohibits attack on the

validity of the prior trademark on the basis of

non-use or vulgarization (not explicitly

confirmed by German courts)


Germany


France: Court of Appeal of Paris, 4th Chamber,

section A, 1 June 2005, 05/06010

„The admissibility of trademark coexistence agree-ments with the purpose of delimiting in the mutual interest of the parties, the sphere of use of their trademarks with a view to avoiding confusion and conflicts cannot be contested with the sole reservation that they do respect competition law. So that only agreements which are not aimed at protecting the implicit interests of a trademark, but at preventing or restricting in an abusive manner, marketing of com-petitive products, should be prohibited as constituting an abusive use of intellectual property rights.”


France


Exceeding the implicit interests of a trademark

(obligations clearly broader than what could

be requested under trademark law)

Aimed at preventing or restricting marketing of

competing products in a abusive manner

No-challenge clause prohibits attack on the

validity of the prior trademark on the basis of

non-use or vulgarization (not explicitly

confirmed by French courts)


France


UK: WWF (Justice Jacob [2001] EWHC CH

482)

IP rights by definition are an independent restraint on

trade

Settlement agreement must be more than an

undertaking not to infringe the right

It must be possible to independently define what it is

the restrained party must not do

Laws governing IP rights not always clear cut

In the interest of everyone it must be possible to settle

such disputes

As a principle high hurdle to nullify such agreements

based on restraint of trade considerations


United Kingdom


Restraint imposes a real fetter on the other party‘s

trade

Restraint goes beyond any reasonably arguable

scope of protection of the rights in issue

Under special circumstance even that can be

justified by restrainee by showing that restraint

provides a protection which he reasonably needs

Arguably a global settlement would not be deemed

void (“broad brush approach”)

No-challenge clause prohibits attack on the validity

of the prior trademark on the basis of non-use or

vulgarization (not explicitly confirmed by UK courts)


United Kingdom


Different approach: restraints in the

interest of consumer protection

The more the parties are restricted the

more is the consumer protected against

confusion

Antitrust law is rarely discussed in the

context of coexistence agreements


USA


Clorox Co. v. Sterling Winthrop, Inc. (117 F. 3d at 59):

„antitrust laws do not guarantee competitors the right to compete free of encum-brances …. so long as competition as a whole is not significantly affected”

Coexistence presumptively valid under antitrust

law as long as someone can introduce a similar or

identical product under a different mark

Parties can bargain for a greater separation

between their respective uses than would be

required by general trademark and unfair

competition law


USA


Parties have significant discretion since

they know best how confusion can be

avoided

The parties‘ judgment should not be

replaced by USPTO or courts unless it is

a „naked“ consent agreement

Consumer confusion must be avoided

(e.g. no „naked“ consent)


USA

D. Typical clauses


1. Acknowledgement of prior right and no challenge clause

• Acknowledgement of

prior rights

• Undertaking of applicant

not to attack the prior

trademark to the extent

admissible under anti-

trust law

• Toleration of new

registrations and

modifications thereof

Priority No challenge Toleration

Applicant acknowledges the prior rights of Proprietor and

undertakes to refrain from asserting rights deriving from the

registration and/or use of Applicant‘s trademarks against

Proprietor‘s trademark and also to tolerate new registrations of

Proprietor‘s trademark and modifications thereof except for………

D. Typical clauses


2. Delimitation

Means of delimitation used most often

Preferably not only right to use but also scope of registration

(list of goods) restricted

Reference to specific goods rather than classes

by Goods

Color

Size and position

Combination with other elements

by Marks

D. Typical clauses


2. Delimitation

End consumer, professional users, B-to-B

E.g. pharmacies, hospitals, retail or drug stores, online etc.

Risk: unforeseen overlap by change of market environment

(e.g. liberalization of pharmacy market in Germany or France)

by Distribution channels / Clientele

Problematic under anti-trust law since it results in

partitioning of markets

Arguably admissible in conflict between earlier national mark of EU

member state and younger CTM

By Geographical territory

D. Typical clauses


3. Cooperation

• Coexistence may be

problematic in countries

with a strict examination

for relative grounds for

refusal

• Coexistence agreement

usually not considered in

office proceedings

• Letter of Consent may be

necessary to overcome

office objection

Office examination Irrelevance of agreement LoC

At the request of either party, the other shall furnish all declarations

or documents (e.g. a Letter of Consent) reasonably necessary to

allow the other party to obtain the registration of its trademark,

provided that its scope complies with the terms of this Agreement.

The requesting party shall bear all reasonable costs incurred for

the delivery of such declarations / documents.

D. Typical clauses


4. Validity for affiliates, successors in title

US Europe

• Presumption that successor steps

into the shoes of its predecessor or

assignor even without notice

(consumer protection)

• notice requirements in case of

assignment are recommended

• the general notion seems to be

that obligations cannot be

imposed on third parties

(assignees etc.) without their

explicit consent

This Agreement shall inure to the benefit of and be binding on the

parties, their legal successors, assignees, licensees as well as

associated companies. Where appropriate, the Parties undertake

to impose the obligations resulting from this Agreement on their

legal successors, assignees, licensees as well as associated

companies

D. Typical clauses


5. Territorial scope

Principle Exception Risk

• Territorial scope limited to

countries where conflict

already exists

• Purely national conflict

often the beginning of

predictable global conflict

• Parties‘ wish to provide

for global solution of

conflict

• Anti-trust implications

since global agree-

ment not justified by

existing global conflict

This Agreement shall be valid for all countries, where the Proprietor

has acquired or will acquire prior rights. In countries where the

Applicant is entitled to or will acquire the prior rights, it shall allow

the Proprietor to register and use its trademark concerned under

equivalent provisions

D. Typical clauses


6. Termination clause

as a principle parties intend to provide for permanent solution

underlying circumstances subject to unforeseen change

(especially non-use of mark by one party)

arguably in many jurisdictions coexistence agreement as continuing

obligation subject to termination

Termination should be clearly stipulated

This Agreement may be terminated by either party with …….

days prior written notice if the other party has finally given up

use of its trademarks

D. Typical clauses


7. Choice of law and jurisdiction

often this last topic is difficult to be agreed on

preference of most parties for their home jurisdiction

Europeans often try to avoid US jurisdiction, neutral jurisdiction bears risks

difficult choice since it cannot be foreseen where conflict/breach of contract

will first occur

not all jurisdictions recognize validity

may have impact on ability to oppose

D. Typical clauses


6. Termination clause

The evidence before me showed that each of the parties was overtly adamant that it did not whish to accept the other‘s jurisdiction or governing law, and could reach no agreement on any other jurisdiction or governing law. As a result [the agreement] contains no governing law clause and no jurisdiction clause. In addition, neither party wanted to give the other an advantage in terms of where the agreement was finalized. If their intention in doing so was to create obscurity and difficulty for lawyers to debate in future years, they have succeeded handsomely…

Apple Corp. vs. Apple Computer

E. Beware of potential downsides


Dilution

• Coexistence as

reduction of scope

of protection

• Weakened

defense position in

future conflicts

Expansion

hurdle

• Restricted flexibility

in terms of further

expansion or

repositioning of the

mark

Goodwill

• Potential risk to

associated good-

will if trademarks

are too close and

the other side is

subject of a public

scandal

(see WWF case)

Regulatory

• Coexistence

agreement of

trademark priority

not considered by

regulatory bodies

• For patient safety

reasons trade-

marks may be too

close to coexist

• Regulatory appro-

val is at risk if other

party is first to

apply for regulatory

approval

F. Acknowledgements


Simon Bentley,

Abel & Imray,

London

Jeffrey Gitchel,

Bayer Corp.,

Pittsburgh

Emmanuelle Tévenin

Gérard Lamoureux

Hirsch & Associés,

Paris

Thank you for your attention!

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