Beware of Undertakings in Trade Mark Infringement Disputes

Undertakings are a routine feature of trade mark infringement disputes, particularly at the pre-litigation stage. However, they should never be given lightly as they can have serious and lasting commercial consequences on your business.

A typical use case is a business trading successfully under a brand in Australia when they receive a Cease and Desist letter from a law firm. The letter is typically formal, urgent, uncompromising, and a short deadline is imposed for you to take action. The message is clear: sign the undertakings now to avoid litigation, or face serious consequences.

This is precisely the point at which many businesses can make mistakes. We prepared this guide to provide context on how to deal with requests for undertakings.

What are Undertakings in a Trade Mark Dispute?

An undertaking is a legally binding promise to do, or to refrain from doing, specific acts. From a trade mark owner’s perspective, undertakings are therefore particularly attractive. They require a potentially infringing third party to follow a defined course of conduct and, in doing so, provide a powerful and efficient enforcement mechanism.

In trade mark disputes, undertakings commonly require a party to:

• give commitments to a trade mark owner to cease use of a mark,
• withdraw products from the market and destroy stock bearing the mark,
• agree to a rebranding within a certain timeframe,
• avoid future use of the mark or similar signs, or
• accept limitations on future branding.

Once given, an undertaking is binding and enforceable. Any subsequent dispute will generally move away from whether trade mark infringement exists, which may be complex and fact dependent, to whether the undertaking has been breached. That issue is typically more straightforward and turns on compliance with the terms of the undertaking.

Why Undertakings can be problematic?

Signing undertakings in a hurry, simply to make a dispute go away, can be more damaging than defending the claim made against you. The cost or inconvenience of litigation is not a good reason to accept restrictions that may harm a business long after the dispute has ended. Avoiding the expense of proper legal advice in the short term can result in long term commercial damage.

Undertakings may be particularly problematic because they are difficult to unwind, even if the facts later change or the legal position shows that they were never justified. In practice, undertakings often go further than any court would. They can impose obligations that are broader, last longer, and are more restrictive than a court order. They may also restrict use outside the registered specification, capture trade marks that were never in dispute, or impose permanent limits on a branding strategy.

Why Undertakings should not be signed without legal advice

Before agreeing to undertakings as part of a settlement, several basic issues must be checked:

• The claims in the cease and desist letter may be exaggerated or legally weak;
• The trade mark being the base of the claim may be vulnerable for cancellation or removal;
• The party making the demand may not have the right to enforce the trade mark;
• The proposed undertakings may unnecessarily restrictive for your business;
• The obligations may go far beyond what is necessary to address the alleged conduct.

What is the risk for your business?

We regularly see undertakings treated as an administrative formality. This is a dangerous assumption. Once signed, these provisions can quietly control a business for years. It can shape how a business brands, expands, restructures, or exits long after the original dispute has disappeared.

This risk is amplified where there is an imbalance in size and/or resources between the parties. In many cases, a business that signs an undertaking ends up in a worse position than if it had contested the claim and lost. While a court order is limited by law, evidence, and proportionality, an undertaking has no such limits and may be damaging for your business.

How to recognise the Red Flags in Overreaching Undertakings

The common potential red flags in overreaching undertakings are as follows:

• Unlimited duration: the undertaking is expressed to operate indefinitely and is not tied to the life of the relevant trade mark registration. ‍
• Vague scope: the wording is imprecise and leaves future compliance to subjective interpretation rather than a defined legal test.‍
• ‍Restrictions to future branding: the undertaking extends beyond the existing mark to cover future names, logos, or brands that do not yet exist.‍
• Coverage of unrelated goods or services: the obligations extend beyond the goods or services said to infringe into areas where no legal conflict exists.‍
• ‍Binding unknown future entities: the undertakings aim to bind future companies, affiliates, successors, or related entities.‍
• No carve-outs for legitimate use: there are no exceptions for descriptive use, nominative use, or good faith use, despite these being legitimate uses of a sign.

Undertakings can be a legitimate and safe legal tool

None of the above means that undertakings are inherently inappropriate in trade mark disputes.

When used carefully and proportionately, undertakings can resolve disputes efficiently and avoid litigation. The problem is not the undertakings themselves, but how often they are accepted too quickly and without proper thought.

For that reason, any request for undertakings should be approached carefully, with a clear plan for how to respond and what, if anything, should be agreed to.

How to respond to a request for Undertakings

Before agreeing to any undertaking, several key questions should be addressed:

• Is the person making the claim entitled to do so?
• Is there a real and tangible risk of confusion, or only an arguable similarity between the marks?
• Is the trade mark relied upon vulnerable to cancellation, non-use, or limitation?
• Would a court realistically grant comparable remedies or impose similar restrictions?

If the answer to those questions are uncertain, signing unrestricted undertakings is rarely justified. In many cases, the appropriate response is to negotiate the scope of the undertaking so that it goes no further than what is strictly necessary to resolve the dispute.

In many cases, an available option is to negotiate the content of the undertakings to what is strictly necessary to address the matter at stake or consider alternative options such as consent orders, co-existence agreements or cooling off agreements.

How IP SERVICE INTERNATIONAL can assist

Receiving requests for undertakings is common in Australian trade mark disputes. The appropriate outcome is rarely to agree without proper consideration. In most cases, the response requires a careful legal analysis to find a proportionate commercial strategy.

IP SERVICE INTERNATIONAL regularly advises clients on assessing, negotiating, and responding to requests for undertakings in Trade Marks disputes. We help clients avoid unnecessary admissions and exposure to risk, and limit long-term commercial constraints and future enforcement issues.

If you would like guidance on responding to a request for undertakings, we invite you to book a complimentary consultation.