UK: Sky v SkyKick

The eagerly anticipated decision in the case of Sky v SkyKick was issued by the CJEU on 29 January 2020. On the face of it, the decision will provide some relief to proprietors of trade mark registrations that cover broad terms such as "Computer software" as the CJEU has ruled that a trade mark cannot be invalidated on the grounds that a term lacks clarity or precision. The CJEU has also held that a trade mark filed without an intention to use the mark in accordance with the essential functions of a trade mark can constitute bad faith but such a mark can only be invalidated in respect of the specific goods and/or services that were filed in bad faith. 

Recap:

Sky, the well-known broadcaster and telecommunications company, brought an action against SkyKick, a US start-up offering cloud migration software. Sky alleged that use of the sign SkyKick and its variants constituted passing off and infringed four of its EUTMs and one UKTM Registration comprising the word "Sky". See [2018] EWHC 155 (Ch) for full judgment.

The marks relied on by Sky contain a number of broad terms (e.g. computer software, telecommunication services and entrainment services) and two of the registrations cover 22 different classes. By way of counterclaim, SkyKick argued that Sky's Trade Mark Registrations should be declared wholly or partly invalid on the grounds that the specifications of goods and services lack clarity and precision and that the applications were made in bad faith.

Mr Justice Arnold (now Lord Justice Arnold) referred five questions to the CJEU for a preliminary ruling:

1. Can an EU trade mark or a national trade mark registered in a Member State be declared wholly or partially invalid on the ground that some or all of the terms in the specification of goods and services are lacking in sufficient clarity and precision to enable the competent authorities and third parties to determine on the basis of those terms alone the extent of the protection conferred by the trade mark? 

2. If the answer to question (1) is yes, is a term such as 'computer software' too general and covers goods which are too variable to be compatible with the trade mark's function as an indication of origin for that term to be sufficiently clear and precise to enable the competent authorities and third parties to determine on the basis of that term alone the extent of the protection conferred by the trade mark?

3. Can it constitute bad faith simply to apply to register a trade mark without any intention to use it in relation to the specified goods or services?

4. If the answer to question (3) is yes, is it possible to conclude that the applicant made the application partly in good faith and partly in bad faith if and to the extent that the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use the trade mark in relation to other specified goods or services?

5. Is section 32(3) of the UK Trade Marks Act 1994 compatible with Directive 2015/2436 and its predecessors?

The Advocate General (AG) issued his opinion on 16 October 2019.

The Requirement for Clarity and Precision

• In response to the first question, AG Tanchev was of the view that a trade mark cannot be declared invalid simply because some or all of the goods and/or services covered by a registration lack clarity and precision. This is because the AG was unable to find a provision in any of the relevant EU legislation to support a lack of clarity and precision as a distinct ground for invalidity.

• The AG was very clear in his opinion that broad terms such as "computer software" were unjustified and contrary to public interest. Whilst the term "computer software" is clear (it comprises computer code"), it lacks precision since the nature of the computer software is not defined. It could lead to situations where a trade mark proprietor that sells computer software for the operation of smart fridges could object to an identical or similar mark being used in respect of sophisticated medical software on the basis that its earlier registration covers the broad term "computer software". AG Tanchev was therefore of the opinion that marks covering overly broad terms that lack clarity and/or precision could potentially be invalidated on the basis that they are contrary to public policy.

• The AG was of the opinion that, in certain circumstances, applying for a trade mark registration without any intention to use it in respect of the specific goods and/or services applied for could constitute bad faith. This could be the case where the sole objective of the Applicant was to prevent a third party to enter the market.

• There were concerns that a finding of bad faith on the basis that the proprietor did not intend to use the mark in respect of some goods and/or services could result in the registration being declared invalid in respect of all goods and/or services. AG Tanchev was of the opinion that a trade mark registration should only be declared invalid in relation to the specific goods and/or services that were filed for without an intention to use.

• Section 32(3) of The UK Trade Marks Act 1994 provides that a UK Trade Mark Application must state that the trade mark is being used, by the applicant or with their consent, or the applicant has a bona fide intention to use the mark in relation to the goods and/or services applied for. The provision is not mandated by the Regulation and there is no counterpart in the EU Trade Mark Regulation. Mr Justice Arnold asked whether the provision is compatible with the Directive. The AG confirmed that it is compatible, provided that it is not the sole basis for a finding of bad faith.

CJEU Ruling:

1. Does a lack of clarity and precision in the terms used to describe the goods and/or services covered by the trade mark registration constitute, in itself, an absolute ground for invalidity?

The Court first dealt with the question of whether a European or National Trade Mark Registration could be declared wholly or partially invalid on the basis that it contains goods and/services that are described by terms that lack clarity and precision.

The CJEU noted that Article 3 of First Directive 89/104 provides a list of the grounds for invalidity of national trade mark registrations, the seventh recital states that those grounds are listed in an exhaustive manner. This prohibits Member States from introducing grounds for invalidity other than those expressly provided for in the Directive.

Likewise, Articles 7(1) and 51(1) of Regulation No 40/94 must be interpreted as providing an exhaustive list of the absolute grounds for invalidity of a European Trade Mark. The CJEU found that none of the abovementioned provisions contain a distinct ground that enables National or EU Trade Mark Registrations to be invalidated solely on the basis that the terms used to designated the goods and/or services in question lack clarity and precision.

2. Can a lack of clarity and precision fall within the scope of one of the absolute grounds for invalidity expressly provided for?

SkyKick argued that the requirement of clarity and precision of the goods and services relate to the requirement of graphic representation (Articles 4 and 7(1)(a) of Regulation No 40/94 and Articles 2 and 3(1)(a) of First Directive 89/104). The CJEU rejected this argument and highlighted that the requirement of clarity and precision established in Sieckmann (C‑273/00) only applies to the sign applied for and not the terms used to describe the goods and/or services in question.  

The Court then considered the important question of whether it is possible to invalidate a trade mark registration, that contains terms that lack clarity and precision, on the basis that it is contrary to public policy within the meaning of Article 7(1)(f) of Regulation No 40/94 and Article 3(1)(f) of First Directive 89/104. The CJEU did not follow the AG opinion and found that a lack of clarity and precision of the terms designating the goods and/or services covered by a trade mark registration cannot be considered contrary to public policy, within the meaning of those provisions.

Key point on clarity and precision:

• A National or EU Trade Mark Registration cannot be declared wholly or partially invalid on the ground that terms used to designate the goods and services in respect of which that trade mark was registered lack clarity and precision.

• The Court did not answer the question as to whether the term "Computer software" lacks clarity and precision.

3. Can it constitute bad faith simply to apply to register a trade mark without any intention to use it in relation to the specified goods and/or services?

The CJEU examined whether Article 51(1)(b) of Regulation No 40/94 and Article 3(2)(d) of First Directive 89/104 must be interpreted as meaning that a trade mark application made without any intention to use the trade mark in relation to the goods and/or services covered by the registration constitutes bad faith within the meaning of those provisions. These provisions state that a trade mark may be declared invalid where the applicant, when filing the trade mark application, was acting in bad faith.

The Court stated that applicant is not required to indicate or even to know precisely, on the filing or examination date, the use that they will make of the mark applied for. The Applicant has a period of 5 years to begin actual use consistent with the essential function of that trade mark.

The registration of a trade mark by an applicant without any intention to use it in relation to the goods and/or services covered by that registration may constitute bad faith, but only where it is apparent from relevant and consistent indicia that the proprietor has filed the application "with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark."

The Court added that bad faith cannot be presumed on the basis of the mere finding that, at the time of filing, the applicant had no economic activity corresponding to the goods and services referred to in that application. 

4. Is a trade mark wholly or partly invalid if it has been registered without an intention to use the mark in accordance with its essential functions?

The CJEU found that a trade mark will only be invalid in respect of the specific goods and/or services which were registered in bad faith.

Key points on bad faith:

• A trade mark application made without any intention to use the trade mark in relation to the goods and services covered by the registration constitutes bad faith, within the meaning of those provisions, if the applicant for registration of that mark had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.

• When the absence of the intention to use the trade mark in accordance with the essential functions of a trade mark concerns only certain goods or services referred to in the application for registration, that application constitutes bad faith only in so far as it relates to those goods or services.

5. Is 32(3) of the UK Trade Marks Act 1994 compatible with Directive 2015/2436 and its predecessors?

The CJEU considered the question of whether First Directive 89/104 should be interpreted as precluding a provision of national law under which an Applicant must confirm that it is using the mark, or has a bona fide intention to use the mark, in respect of the goods and/or services applied for.
 
The First Directive 89/104 prohibits Member States from introducing additional grounds for refusal or invalidity. However, they remain free to fix the provisions of procedure concerning the registration, revocation and invalidity of trade marks. Section 32(3) of the UK Trade Marks Act 1994 is therefore compatible with Directive 2015/2436, provided that a lack of use or intention to use does not constitute, in itself, a ground for invalidity of a registered trade mark.
 
Key points:

• The requirement under UK law to state that the mark is being used, by the applicant or with their consent, or the applicant has a bona fide intention to use the mark in relation to the goods and/or services applied for is compatible with EU law provided that a lack of intention to use does not in itself act as a ground for invalidity.

What this means:

The full implications of this preliminary ruling will not become clear until the rationale is interpreted and applied in the national courts.

For now, the decision appears to be good news for proprietors that own trade mark registrations containing broad terms such as "Computer software" as it confirms that a trade mark registration cannot be invalidated simply because it contains broad terms that lack clarity and precision. Whilst a lack of clarity and precision may not constitute a distinct ground for invalidity, we could see the EUIPO and UKIPO change its practice in respect of broad terms such as "Computer software" in the future. The EUIPO and various national organisations, offices and user associations collated a list of 197 general indications of the class headings of the Nice Classification which were deemed not to be sufficient clear and precise in accordance with the IP Translator case (C-307/10). It is possible that the indications could be extended in the future to encompass other broad terms such as "Computer software" which would result in applications for "Computer software" being refused unless the term is limited to define the nature and/or commercial field of the computer software. Mr Justice Arnold was very critical of the monopoly conferred by registrations that cover broad terms such as "Computer software". Brexit could see the UK Trade Mark system diverge from the EU Trade Mark system over time and the UK classification practice might become closer to a US-style practice whereby terms must specify the nature and/or commercial field of the goods and/or services in question. 

The points on bad faith also appear to be good news for some trade mark proprietors. The CJEU has confirmed that a lack of intention to use may constitute bad faith and a ground for invalidity but it appears to be a high threshold. Not indicating or knowing precisely the goods and/or services that the mark will be used on at the date of filing or examination does not appear, in itself, to be enough to justify a finding of bad faith. It appears that applicants will continue to have five years to fully commercialise their mark before it can be revoked on the grounds of non-use in respect of any goods and/or services with which use is not forthcoming.

Applicants should seek appropriate advice before filing broad specifications or repeat applications to ensure that their actions do not constitute bad faith. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.