High Court upholds trademark co-existence agreement

United Kingdom
In Omega Engineering Inc v Omega SA ([2010] EWHC 1211 (Ch), May 28 2010), the High Court has upheld the terms of a trademark co-existence agreement between two businesses using the same name by preventing one party from opposing a subsequent trademark application by the other.

Following the decision, businesses which are party to trademark co-existence agreements can be confident that their terms will be taken into account by the English courts. However, the approach that the Office for Harmonization in the Internal Market will take to such agreements remains uncertain.
 
The case involved the long-running dispute between the US engineering company Omega Engineering Inc and Swiss watchmaker Omega SA.

In 1984 Omega Engineering and Omega SA entered into one of a number of trademark co-existence agreements. Clause 5 of the agreement stated that Omega SA had agreed not to object to the use or registration by Omega Engineering of the word 'omega' in respect of the "excluded goods", which were defined as:
 
"Instruments and apparatus intended for a scientific or industrial application in measuring, signalling, checking, displaying or recording heat or temperature (including such having provision to record heat or temperature over a period of time and/or to display the time of day)."

In May 2007 Omega Engineering applied to register the trademark OMEGA in Class 14 of the Nice Classification in respect of the "excluded goods", as defined above.

Omega SA opposed the registration of this mark on relative grounds under Section 5(1) to (4) of the Trademarks Act 1994 (ie, Omega SA's own pre-existing trademarks and other rights in the Omega name). Omega Engineering resisted the opposition on the grounds of clause 5 of the agreement, contending that the agreement amounted to consent under Section 5(5) of the act, which states that the registration of a trademark may not be opposed on relative grounds when the proprietor of the earlier mark or other right consents to the registration.

Before the hearing officer of the UK Intellectual Property Office, Omega SA relied on the decision of the Court of First Instance in Omega SA v OHIM (Case T-90/05), contending that consent was irrelevant to an objection on relative grounds. Omega SA also argued that, on the true construction of the agreement, the consent given in clause 5 in respect of the "excluded goods" extended only to registrations in Class 9 (which excludes clocks and watches) and not Class 14 (which includes such things). The hearing officer rejected these arguments and held that the agreement constituted consent under Section 5(5) of the act in relation to registrations in any appropriate class.

Omega SA appealed in December 2009, making the same arguments, but also alleging that Section 5(5) of the act had been impliedly repealed. Omega Engineering commenced proceedings in February 2010 for breach of clause 5 of the agreement and later applied for summary judgment. Both the appeal and the summary judgment hearing were held together before the High Court.

The court favoured Omega Engineering's arguments regarding construction of the agreement. It felt that, since other provisions of the agreement (including its undertaking not to use the disputed mark) extended to unregistered trademarks, it was difficult to see why clause 5 should be seen as depending on the particular class in which the disputed marks are to be registered. The agreement concerned the use of trademarks in trade, so to interpret the "excluded goods" by reference to the classification of goods for the purposes of registration would be "to permit the tail to wag the dog".

Omega SA had raised defences of estoppel, variation and acquiescence on the basis (among other things) that Omega Engineering had not objected to other oppositions made by Omega SA in relation to its trademark applications for goods in Class 14. However, these were swiftly dismissed by the court because Omega Engineering had never made any positive representation about its interpretation of the agreement, and any delay of Omega Engineering in raising an objection did not amount to acquiescence.

In relation to Omega SA's assertion that, following Omega SA v OHIM, the agreement was irrelevant to oppositions on relative grounds, the court examined the decision and did not agree with Omega SA's interpretation. The reasons for the decision were not clear, although one possible reason suggested was that because, in proceedings relating to relative grounds for refusal, the examining officer is limited (under Article 74(1) of the Community Trademark Regulation (40/94)) to an examination of the "facts, evidence and arguments", it does not have to take account of private agreements since these are not "facts", as their terms are subject to interpretation. However, the court thought that the existence of an agreement between the parties was a "very palpable fact". The fact that the agreement was a private right was not sufficient to render it irrelevant, since private rights could be invoked as a relative ground of objection under the regulation, and a co-existence agreement is relevant to an application for a declaration of invalidity under (what is now) Article 53(3) of the regulation.

Regarding Omega SA's argument that Section 5(5) of the act had been impliedly repealed, the court noted the recent change to the act (following SI 2007/1976) requiring objections on relative grounds to be raised by the proprietors of the rights in question (as opposed to being raised by the examiner). However, it did not agree that this meant that the rationale for Section 5(5) of the act had "evaporated", since it viewed the new provisions as entirely consistent with Section 5(5).

Co-existence agreements remain a practical way to resolve conflicts between identical or similar marks in different markets or jurisdictions, to avoid protracted litigation. However, this and other recent decisions point to careful thought over the potential scope and the drafting of such agreements, given their long-term impact on the way in which a trademark may be used in the respective businesses in the future.
 
Joel Smith and Daniel Pearce, Herbert Smith LLP, London

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