Trademark Settlement Agreement: What It Should Cover

What Is a Trademark Settlement Agreement?

A trademark settlement agreement is a contract in which two businesses resolve a trademark dispute on written terms. It sets the rules each business will follow for its marks, resolves pending filings and lawsuits, and releases the claims the dispute raised.

Because the deal is a contract, Minnesota courts apply contract principles to decide whether a settlement exists. In Jallen v. Agre, 119 N.W.2d 739 (Minn. 1963), the Minnesota Supreme Court said that “A compromise settlement of a lawsuit is contractual in nature.” The court added that “To constitute a full and enforceable settlement, there must be such a definite offer and acceptance that it can be said that there has been a meeting of the minds on the essential terms of the agreement.” In Voicestream Minneapolis, Inc. v. RPC Properties, Inc., 743 N.W.2d 267 (Minn. 2008), the court confirmed that a settlement agreement “can be enforced by an ordinary action for breach of contract.”

A trademark settlement can come at any stage of a dispute. It can answer a cease and desist letter before anyone files anything, end a lawsuit in state or federal court, or close an opposition or cancellation proceeding at the TTAB. The terms change with the stage, but the agreement’s job stays the same: it replaces an open legal fight with written rules both businesses can follow.

What Terms Should a Trademark Settlement Agreement Include?

A trademark settlement agreement should identify the marks, define what each business may and may not do with them, set any transition period, dispose of every pending filing, state any payment, release the claims, and say how disputes about the agreement will be handled. Each term answers a question the businesses would otherwise fight about later.

1. The parties and the marks. The agreement should name each business by its legal name and list each mark with any registration or application number, because a later dispute can turn on which marks the deal covered.
2. Permitted and prohibited uses. For each business, the agreement should state the goods or services, the territory, how the mark may be presented (words, logos, colors), and the online uses it covers, such as domain names, social media handles, and search-ad keywords. Federal infringement of a registered mark requires use by a person acting “without the consent of the registrant” under 15 U.S.C. § 1114(1), and Minnesota’s statute for state-registered marks, Minn. Stat. § 333.28, uses the same words. Written consent with defined limits speaks to that element for the uses the agreement allows.
3. A transition period. When one business is changing its name, the agreement should set the date by which the old mark comes off signs, packaging, websites, and accounts, and say what inventory may be sold in the meantime. I once advised a business owner whose demand letter ended with a signature block labeled as an agreement. Signing it as written would have accepted every demand, including stopping all use at once, when the owner needed time to finish commitments already booked. A negotiated settlement is where a transition period like that gets written down.
4. Pending filings. The agreement should list every trademark application, registration, and TTAB proceeding involved and say what each side will file, as the filings section below explains.
5. Payment. If money changes hands, the agreement should state the amount, the due date, and what happens if a payment is late.
6. Release and no admission. Each side should release the claims described in the release section below, and the agreement can state that neither side admits liability.
7. Cooperation against confusion. The agreement can commit both businesses to report instances of customer confusion to each other and to work together to correct them. A clause like this also helps if one side later applies to register its mark, as the filings section explains.
8. Dispute terms. The agreement should choose the governing law and the court for disputes about the agreement, require written notice and a chance to cure before either side sues, and say whether the agreement binds a buyer or successor of either business.

When both businesses will keep using similar marks for years, I suggest checking the draft against the mistakes that undo a coexistence agreement, because a coexistence deal has to work long after the people who negotiated it have moved on.

What Claims Should the Release in a Trademark Settlement Cover?

The release should cover every claim the dispute could support under federal and Minnesota law, not only the claim named in the demand letter or complaint.

The claims a trademark dispute in Minnesota can raise include:

1. Infringement of a federally registered mark under 15 U.S.C. § 1114(1).
2. Infringement of an unregistered mark and false designation of origin under 15 U.S.C. § 1125(a), which makes the violator “liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”
3. Dilution of a famous mark under 15 U.S.C. § 1125(c) and cyberpiracy involving domain names under 15 U.S.C. § 1125(d).
4. Infringement of a Minnesota-registered mark under Minn. Stat. § 333.28. Under Minn. Stat. § 333.29 subd. 1, “The court, in its discretion, may enter judgment for an amount not to exceed three times the profits and damages and reasonable attorneys’ fees of the prevailing party if the court finds the other party committed the wrongful acts with knowledge or in bad faith or otherwise as according to the circumstances of the case.”
5. Deceptive trade practices. Minn. Stat. § 325D.44 subd. 1 covers a business that “causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services,” and under Minn. Stat. § 325D.45 subd. 1, “A person likely to be damaged by a deceptive trade practice of another may be granted an injunction against it under the principles of equity and on terms that the court considers reasonable.”
6. Dilution of a mark famous in Minnesota. Under Minn. Stat. § 333.285, the owner of a mark famous in this state may, “subject to the principles of equity and upon terms the court considers reasonable,” seek an injunction against another’s commercial use that “begins after the mark has become famous and causes dilution of the distinctive quality of the mark.”

The stakes behind those claims explain why each side wants them released. Under 15 U.S.C. § 1116(a), “A plaintiff seeking any such injunction shall be entitled to a rebuttable presumption of irreparable harm upon a finding of a violation identified in this subsection in the case of a motion for a permanent injunction or upon a finding of likelihood of success on the merits for a violation identified in this subsection in the case of a motion for a preliminary injunction or temporary restraining order.” Under 15 U.S.C. § 1117(a), “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”

I suggest stating whether the release reaches only conduct before signing, because use after signing is governed by the consent and use terms, and a gap between the two provisions invites a new dispute. Whether a release should also reach claims neither side knows about yet is its own drafting question, covered in releasing unknown claims.

How Does a Settlement Handle Trademark Applications, Registrations, and TTAB Cases?

The settlement should list every pending application, registration, and TTAB proceeding and say exactly what each side will file. Several USPTO rules turn on the other side’s written consent, so the signed agreement should supply that consent.

The TTAB rules in 37 C.F.R. part 2 set these consent requirements:

1. Withdrawing an opposition. Under 37 C.F.R. § 2.106(c), “After the answer is filed, the opposition may not be withdrawn without prejudice except with the written consent of the applicant or the applicant’s attorney or other authorized representative.”
2. Withdrawing a cancellation petition. Under 37 C.F.R. § 2.114(c), “After the answer is filed, such petition or counterclaim petition may not be withdrawn without prejudice except with the written consent of the registrant or the registrant’s attorney or other authorized representative.”
3. Abandoning an opposed application. Under 37 C.F.R. § 2.135, once an opposition has begun, “if the applicant files a written abandonment of the application or of the mark without the written consent of every adverse party to the proceeding, judgment shall be entered against the applicant.”
4. Surrendering a challenged registration. Under 37 C.F.R. § 2.134(a), once a cancellation proceeding has begun, “if the respondent applies for cancellation of the involved registration under section 7(e) of the Act of 1946 without the written consent of every adverse party to the proceeding, judgment shall be entered against the respondent.”

These rules decide whether the case ends with a judgment on the record. A settlement that has one side abandon an application or surrender a registration should therefore include the other side’s written consent to that filing. For a mark registered with the Minnesota Secretary of State, Minn. Stat. § 333.25 subd. 1 directs the Secretary of State to cancel “any registration concerning which the secretary of state shall receive a voluntary request for cancellation from the registrant.” For how these proceedings run before a settlement, see the overview of a TTAB opposition.

One business may plan to register a mark that the other’s rights would otherwise block. In that case, the settlement should be a detailed consent agreement rather than a bare permission. Federal law, in 15 U.S.C. § 1052(d), bars registering a mark that is too close to a registered mark or to a mark previously used in the United States by another and not abandoned. The test is whether the new mark so resembles the other mark “as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive,” in the statute’s words. In In re E. I. du Pont de Nemours & Co., 476 F.2d 1357 (C.C.P.A. 1973), the court said that a bare consent “may carry little weight,” while “The weight to be given more detailed agreements of the type presented here should be substantial.” In In re Four Seasons Hotels Ltd., 987 F.2d 1565 (Fed. Cir. 1993), the Federal Circuit reversed a refusal to register. The agreement there limited each party to defined names and locations and committed both to cooperate to “eliminate or minimize” any confusion that arose.

When Is a Mediated Trademark Settlement Binding in Minnesota?

When a trademark dispute is mediated under the Minnesota Civil Mediation Act, the signed settlement is binding only if it states that it is binding and states that the parties were advised in writing of three points, or the parties were otherwise advised of them. Under Minn. Stat. § 572.35 subd. 1, “A mediated settlement agreement is not binding unless” one of those two conditions is met.

The first condition is that the agreement “contains a provision stating that it is binding and a provision stating substantially that the parties were advised in writing that (a) the mediator has no duty to protect their interests or provide them with information about their legal rights; (b) signing a mediated settlement agreement may adversely affect their legal rights; and (c) they should consult an attorney before signing a mediated settlement agreement if they are uncertain of their rights.” The second is that “the parties were otherwise advised of the conditions in clause (1).” Beyond that, “The effect of a mediated settlement agreement shall be determined under principles of law applicable to contract.”

The rule applies to mediations run under the Act’s definitions. An “agreement to mediate” is a written agreement that, among other things, “provides for termination of mediation upon written notice from either party or the mediator delivered by certified mail or personally to the other people who signed the agreement, is signed by the parties and mediator and is dated,” under Minn. Stat. § 572.33 subd. 3. A “mediated settlement agreement” settles a controversy “identified in an agreement to mediate, signed by the parties, and dated,” under subdivision 4.

The Minnesota Supreme Court applied the binding-statement requirement strictly in Haghighi v. Russian-American Broadcasting Co., 577 N.W.2d 927 (Minn. 1998). The parties signed a handwritten settlement at the end of a mediation conducted under the Act, but the document did not say it was binding. The court held it unenforceable and rejected the argument that the rule should not apply when both sides have lawyers: “Requiring that a settlement agreement contain a provision stating that it is binding, even when both parties are represented by attorneys, does not produce an absurd result.” The statute the court applied did not yet contain the current second condition. The Eighth Circuit then reversed the order that had enforced the document in Haghighi v. Russian-American Broadcasting Co., 173 F.3d 1086 (8th Cir. 1999).

The fix is one paragraph. Any term sheet signed at the end of a mediation should say it is binding and recite the three advisories, because a missing paragraph can leave a full day’s agreement unenforceable. Even a binding agreement can be undone: under Minn. Stat. § 572.36, a court “shall set aside or reform a mediated settlement agreement if appropriate under the principles of law applicable to contracts, or if there was evident partiality, corruption, or misconduct by a mediator prejudicing the rights of a party.”

What Changes When the Settlement Includes a License or an Assignment?

A settlement that lets one business keep using the other’s mark under the owner’s control is a license, and a settlement that moves ownership of a mark is an assignment. Each carries federal and Minnesota rules beyond the ordinary contract terms.

A license needs quality control. Two federal provisions set the rule. Under 15 U.S.C. § 1055, “Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration.” 15 U.S.C. § 1127 defines a “related company” as “any person whose use of a mark is controlled by the owner of the mark with respect to the nature and quality of the goods or services on or in connection with which the mark is used.” The same section treats a mark as abandoned when the owner’s course of conduct causes it “to lose its significance as a mark,” and Minn. Stat. § 333.18 subd. 6 uses nearly the same words for Minnesota marks. I suggest that a settlement license include quality standards and a right to inspect, because those terms are the control the federal definition describes. The terms a stand-alone trademark license should carry apply here too.

An assignment needs goodwill, a writing, and recording. Federal law addresses all three. Under 15 U.S.C. § 1060(a), a registered or applied-for mark “shall be assignable with the good will of the business in which the mark is used,” and “Assignments shall be by instruments in writing duly executed,” so the transfer needs both the goodwill and a signed writing. An application filed on an intent to use the mark is limited. It cannot be assigned before the applicant files an amendment to allege use or a verified statement of use, except to a successor to the applicant’s ongoing and existing business to which the mark pertains. Recording protects the buyer of the mark. The statute provides: “An assignment shall be void against any subsequent purchaser for valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the United States Patent and Trademark Office within 3 months after the date of the assignment or prior to the subsequent purchase.” For a Minnesota registration, Minn. Stat. § 333.23 provides: “An assignment of any registration under sections 333.18 to 333.31 shall be void as against any subsequent purchaser for valuable consideration without notice unless it is filed with the secretary of state within three months after the date of the assignment or before the subsequent purchase.” Because these windows can change, I suggest checking the current text of both statutes when the assignment is signed. The drafting points for a trademark assignment agreement apply to an assignment made inside a settlement.

How Is a Trademark Settlement Agreement Enforced After a Breach?

In Minnesota state court, a party can enforce a settlement agreement through a separate breach-of-contract lawsuit or, generally, by motion in the original lawsuit. In federal court, the judge who dismissed the case can enforce the settlement only if the dismissal order retains jurisdiction over it or makes its terms part of the order.

For state court, Voicestream states both routes. A settlement agreement “can be enforced by an ordinary action for breach of contract,” and “Generally speaking, settlement agreements can also be enforced by motion in the original lawsuit.” The court then held “that a district court shall treat a motion to enforce a settlement agreement as it would a motion for summary judgment, and explicitly grant or deny each claim.”

Federal court works differently, and the difference is decided by the dismissal papers. A plaintiff can dismiss without a court order by filing “a stipulation of dismissal signed by all parties who have appeared” under Fed. R. Civ. P. 41(a)(1)(A)(ii). Rule 41(a)(1)(B) adds that “Unless the notice or stipulation states otherwise, the dismissal is without prejudice” for these dismissals. Otherwise, under Rule 41(a)(2), “an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.” In Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375 (1994), the Supreme Court held that the federal court in that case had no jurisdiction to enforce the settlement. There, the stipulation and order dismissing the case “did not reserve jurisdiction in the District Court to enforce the settlement agreement; indeed, it did not so much as refer to the settlement agreement.” The Court explained that “The judge’s mere awareness and approval of the terms of the settlement agreement do not suffice to make them part of his order.” When the settlement terms are made part of the order, “a breach of the agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.” Without that, “enforcement of the settlement agreement is for state courts, unless there is some independent basis for federal jurisdiction.”

For a trademark case in the U.S. District Court for the District of Minnesota, that rule shapes the closing paperwork. If the parties want the judge who handled the case to enforce the deal, the stipulation or proposed dismissal order should ask the court to retain jurisdiction over the settlement or should incorporate its terms. Some parties instead ask the court to enter a consent judgment, which puts agreed terms into a court order.

Why Can a Trademark Settlement Raise Antitrust Concerns?

A trademark settlement can be an agreement between competitors about how each will sell, and Minnesota law makes unlawful “A contract, combination, or conspiracy between two or more persons in unreasonable restraint of trade or commerce” under Minn. Stat. § 325D.51. Under Minn. Stat. § 325D.53 subd. 1, a contract “between two or more persons in competition” for “allocating or dividing customers or markets, functional or geographical, for any commodity or service” is among the agreements that “shall be deemed to restrain trade or commerce unreasonably and are unlawful.” In the federal appeals decision below, restrictions tied to protecting the marks counted as a procompetitive justification.

A federal appeals decision that addresses these agreements directly is 1-800 Contacts, Inc. v. FTC, 1 F.4th 102 (2d Cir. 2021). The Second Circuit’s decisions do not bind Minnesota courts, but the case shows how a court weighs these agreements. The Federal Trade Commission had challenged settlements in which online contact-lens sellers agreed not to bid on each other’s trademarks as search-advertising keywords and to use negative keywords. The court held “that trademark settlement agreements are not automatically immune from antitrust scrutiny.” It then applied the rule of reason, concluded that “The protection of Petitioner’s trademark interests constitutes a valid procompetitive justification for the Challenged Agreements,” and vacated the Commission’s order.

The court also set a limit: “That does not mean that every trademark agreement has a legitimate procompetitive justification.” It flagged a concern that the negative-keyword requirement could keep a rival’s ads off a search even when the rival never bid on the trademark, but it did not decide the point because the Commission had made no separate findings on it. I suggest keeping each restriction in a settlement tied to the marks and the confusion the dispute was about, because the court’s analysis rested on that connection to trademark protection.

Next Steps for a Minnesota Business Settling a Trademark Dispute

Before signing, four checks cover the main risks on this page. The first is whether the agreement states every essential term in a signed writing, and the second is whether it releases every claim the dispute could support. The third is whether it includes the other side’s written consent to each USPTO filing that the TTAB rules tie to that consent. The fourth, for a federal lawsuit, is whether the dismissal order retains jurisdiction or incorporates the terms, if the parties want that court to enforce the deal. If the deal is reached in mediation, the binding statement and the three advisories in § 572.35 belong in the signed document. If it includes a license or an assignment, the quality-control and recording rules apply as well.

If you are weighing whether to settle at all, the strength of the underlying claim matters, and the test is likelihood of confusion. More on trademark law for Minnesota businesses is on the practice page. If you would like to know whether a proposed trademark settlement covers the claims, filings, and use limits your business needs, email [email protected] with a short description of how each business uses its mark. I will run an intake and conflict check before you send any confidential documents.