The Supreme Court has handed down its long awaited and highly anticipated judgement in the litigation between Sky Ltd (Sky) and SkyKick UK Ltd (SkyKick), centred around what constitutes a bad faith trade mark filing. It held that Sky’s trade marks were indeed filed in bad faith and that the trade mark specifications should be restricted accordingly. We reflect on the headline points and key takeaways from the judgment below.
Background
The dispute has been running since 2018 and there have since been four High Court judgements, a reference to the Court of Justice of the European Union (CJEU) and a Court of Appeal judgement. The parties involved in the dispute are Sky, the well-known UK broadcast company and household name, and SkyKick, a SaaS company that make software for Cloud Migration and Backup services.
Sky actively enforce an extensive portfolio of trade mark registrations for the word SKY, including the five EU and UK registrations relied upon in this case. These marks were registered in respect of very broad specifications, including general terms and goods and services far removed from its commercial interest (some of the most obscure being whips and live crustaceans).
Summary of the various legal proceedings
Sky brought an infringement action against SkyKick to the High Court, claiming that use of the sign “SkyKick” for Cloud migration and backup services infringed its earlier marks. Sky relied upon trade marks registered in respect of computer software, and other related goods and services in Classes 9 and 38.
SkyKick retaliated with a counterclaim that Sky’s trade marks should be declared invalid on the basis that its goods and services were not specified with sufficient clarity and precision and the applications had been made in bad faith as Sky had no intention to use its marks in relation to their entire (over 8000 word long) specifications.
The High Court initially found SkyKick to have infringed Sky’s trade marks in respect of SkyKick’s Cloud Migration and Cloud Backup activities, on the basis of a finding that Cloud Migration was an electronic mail service, and that Cloud Backup involved ‘computer services for accessing and retrieving audio, visual and/or audiovisual content and documents via a computer or a computer network’. Before considering the counterclaim for invalidity, Lord Justice Arnold referred questions to the CJEU which included whether it could constitute bad faith to register a trade mark without any intention to use it in relation to certain goods or services covered by the registration.
The CJEU ruled that a trade mark cannot be declared wholly or partially invalid on the basis of lack of clarity or precision when specifying goods and services. It also found that the absence of intention to use a mark in relation to certain goods or services does not necessarily constitute bad faith, it must also be shown that the Applicant had either a dishonest intention of undermining the interests of third parties, or an intention to obtain an exclusive right for purposes falling outside the functions of the trade mark. In this case, it ruled there can be a finding of partial bad faith.
As a result of the CJEU’s decision, the case went back to the High Court and Lord Justice Arnold found Sky had acted in bad faith by applying to register marks for which it had had "no foreseeable prospect that they would ever intend to use the Trade Marks in relation to such goods and services" and had sought this broad protection purely for the purposes of using the trade marks as a "legal weapon" against third parties. As a result Sky had to re-draft its specifications accordingly. However, Sky were ultimately successful as SkyKick were still found to have infringed the marks in their restricted forms.
Both parties filed appeals (Sky appealed the finding of bad faith and partial invalidity and SkyKick appealed the finding of infringement). The Court of Appeal overturned the High Court decision that Sky had acted in bad faith as it was deemed that a broad specification or not having an intention to use a mark for the entire specification, is not evidence of bad faith in itself, and the approach taken by Lord Justice Arnold was said to be unfair. It was held that given the repute and widespread use of their marks, Sky have commercial justification for covering broad specifications.
As Sky’s appeal was allowed and their registrations were restored to original breadth, SkyKick’s appeal against the finding of infringement had to be dismissed. However, had it been considered, the Court of Appeal would have allowed SkyKick’s appeal in respect of Cloud Migration services but rejected it for Cloud Backup services. SkyKick appealed the decision to the Supreme Court, asking the court to decide:
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What is the test for determining bad faith; and
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If bad faith is found, what is the correct approach for determining the specification of goods/services for which the trade mark can remain registered?
Supreme Court Decision
The Supreme Court has upheld the High Court’s initial finding that Sky had acted in bad faith and provided guidance on the circumstances which may amount to bad faith.
Bad Faith: The main issue at play is whether a trade mark can be found to have been registered in bad faith due to the breadth of the specification, and therefore wholly or partially invalidated. The Supreme Court found that the Court of Appeal was wrong to conclude that the breadth of a specification and the use of broad terminology cannot lead to an inference of bad faith. Rather, a finding of bad faith will depend on the relevant circumstances of the case at hand and whether these indicate an abuse of the system.
The Supreme Court emphasised that the primary function of a trade mark is to denote origin of goods and services. If found that trade marks must be used for this purpose by their proprietors, noting that whether an overly broad filing indicates bad faith depends on the extent to which it deviates from this essential function.
Sky were found to have acted in bad faith by filing in respect of goods and services which it could never have intended to offer to market, whilst still being “prepared to deploy the full armoury presented by these SKY marks against a trader whose activities were not likely to cause confusion and did not amount to passing off”. Sky had been very active in enforcing its trade mark rights with the court noting that Sky had a ‘remarkable’ 800 decisions partially or wholly in its favour worldwide, some in relation to goods and services which have no connection to Sky’s core services.
Infringement: The Supreme Court found that the Court of Appeal was right to conclude that on the basis of the narrowed specifications, SkyKick’s use for Cloud Migration services does not infringe the earlier marks in respect of "mail services". It was also found that the Court of Appeal was right not to reverse the finding that SkyKick’s use for Cloud Backup services infringes the earlier marks in respect of "computer services for accessing and retrieving audio, visual and/or audio-visual content and documents via a computer or a computer network". The Supreme Court noted that where a specification includes terms which are ambiguous and not clear, the specification should be construed as those goods or services which are clearly covered.
Other points raised
Jurisdiction: In reply to Sky’s claim that UK Courts do not retain jurisdiction over matters involving EUTMs following Brexit, it was confirmed that the EUTM Regulation continues to have effect in proceedings involving EUTMs before UK Courts initiated before the end of the Brexit transition period. The decision confirms UK Courts can continue to decide on issues of infringement and validity of EUTMs.
Settlement: The Parties applied for permission to withdraw the appeal shortly before the decision was due to be issued following a settlement outside of Court. However, it was decided that there were compelling reasons to refuse the request. The Court still ruled on the matter as it was within public interest.
What the decision means for trade mark owners
It remains to be seen how this decision will be applied in future cases. The bad faith aspect of the decision has important implications, and several UKIPO and Court actions have been suspended pending the outcome of the case, which will now resume. For now the key takeaways are as follows:
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When filing new applications, a more cautious approach should be taken regarding the breadth of the specification. This deviates from the current practice in the UK/EU where broad wording is accepted, and moves closer towards the system seen in the US, which requires a trade mark applicant to specify a narrow and precise category of goods and/or services in its application.
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The decision may make things easier when clearing marks for use and registration, as we may start to see less “broad brush” specifications on the registers and can consider potential bad faith invalidity actions to mitigate any third party risks where there is broad specifications and no obvious use.
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Trade mark owners/practitioners should review their existing scope of protection and whether any rights may be at risk of potentially invalidity based on overly broad specifications. Caution should be taken when enforcing rights against third parties to ensure that claims are not unduly broad and the goods/services relied on do not extend beyond the scope of their actual commercial intentions, where the registrations may be vulnerable to attack.
At Kilburn & Strode, we have developed BrandFit®, a portfolio “health check” to make sure your trade mark portfolio is fit for purpose. If you have any questions or require further information, please do not hesitate to contact Ruby Vinsome, Carol Nyahasha, or your regular advisor at Kilburn & Strode.