The Supreme Court's long-awaited judgment in SkyKick v Sky has made it easier to challenge trade mark registrations in relation to overly broad classes of goods and services on the basis that they were applied for in bad faith. This briefing provides an overview of this significant decision and what it means for trade mark owners.
1 Bad faith in a trade mark context - a brief reminder
A registration of a trade mark can be invalidated in whole or in part on the basis that the application to register the mark was made in bad faith because the applicant did not, at the time the application was made, have a genuine intention to use the mark in relation to some or all of the goods or services for which protection was sought.
There is no legislative definition of bad faith. As a "useful guide" (according to the Supreme Court in SkyKick), bad faith will be established where the trade mark owner either intends to undermine the interests of third parties "in a manner inconsistent with honest practices" or intends to obtain an exclusive right for purposes other than those falling within the functions of a trade mark, particularly its function as a badge of origin.
2. The background to SkyKick
The SkyKick saga began in 2016, when Sky brought infringement and passing off claims against SkyKick for using the mark 'SkyKick' in relation to cloud migration, backup and management services. Sky relied on its prior EU and UK trade marks across a broad range of goods and services - so broad that certain registrations, e.g. for "bleaching preparations" and "insulation materials", seemed incongruous in the context of Sky's business, and others were for general terms, such as "computer software" (rather than for sub-categories of software). SkyKick counterclaimed, attacking the validity of Sky's trade marks on the basis that they had been applied for in bad faith because Sky had no genuine intention to use them in respect of all the goods and services covered by the registrations.
The High Court decision
Arnold J (applying the CJEU's conclusions in response to the reference that he made to it) found that SkyKick had infringed Sky's trade mark but that some of Sky's trade mark registrations should be partially invalidated on the grounds of bad faith because: (i) Sky did not intend to use the trade marks at the application dates in relation to some of the goods and services covered by the specifications, and there was no foreseeable prospect that they would ever do so; and (ii) in applying for the marks, there was a deliberate strategy of seeking very broad protection, without commercial justification, as a legal weapon.
The court cut down Sky's trade mark specifications to reflect what it considered to be "the extent of the bad faith proved, but no more, and [to give Sky] fair protection".
The Court of Appeal decision
The Court of Appeal rejected the High Court's ruling on bad faith. It held that simply not knowing whether a trade mark would be used in respect of a broad based registration, and every one of the goods and services within the specification, wasn't sufficient to establish bad faith, particularly given that Sky had a very substantial active business, with significant potential for expansion.
3 The Supreme Court's decision on bad faith
The parties had already reached a settlement but, against their wishes, the Supreme Court used its discretion to give judgment because of the importance of the decision to trade mark law.
The Supreme Court allowed the appeal in part and upheld the High Court's finding that Sky's trade mark applications had partially been made in bad faith.
The Supreme Court rejected the Court of Appeal's finding that the width or size of the specification of goods or services could never, of themselves, be sufficient to rebut the presumption of good faith. Instead, the Supreme Court held that it may be reasonable to infer bad faith by comparing the width of the specification relative to the size of the applicant's business, but it will depend on all the circumstances of the case.
What other circumstances may be relevant to a finding of bad faith?
When assessing the relevant circumstances, the fact that a trade mark owner has a significant reputation is not a justification for registrations outside the scope of its business (e.g. in Sky's case, registrations for bleaching preparations).
However, the following factors supported an inference of bad faith:
- Sky's lack of contemporaneous evidence to justify filing
for broad protection.
- Sky's aggressive enforcement strategy to oppose third party applications for the registration of marks in which it did not trade and had never traded. The fact that Sky only narrowed the scope of goods and services as a basis for its claim very late in the process – 5 weeks before trial and then again at the time of closing submissions – was also considered by the court to form part of a sequence of events that provided "powerful support" for SkyKick's argument that Sky was using its registration as a legal weapon.
The Supreme Court also concluded that if a trade mark owner uses class headings and broad terminology – such as "computer software" – so that goods and services in relation to which the owner has no intention of using the mark are effectively bundled with those where there is no genuine intention of use, they should not benefit from better protection than an applicant which uses appropriate sub-categories; rather, that trade mark owner should be vulnerable to a finding of bad faith in relation to goods and services in relation to which they have no intention to use the mark.
4 What is this decision likely to mean for trade mark applications and disputes?
This decision gives trade mark applicants who are tempted to make broad applications in relation to goods and services which have no relevance to their business, or that use broad terminology/ class headings, rather than subcategories, greater pause for thought. However, although there is now an increased risk of bad faith counter attacks, arguably there is still limited jeopardy for a trade mark applicant who overreaches. The CJEU made clear that a finding of bad faith does not lead to an invalidation of the whole trade mark - rather, if challenged, the applicant "risks" its trade mark specification being cut down to reflect the goods and services which it should have applied for in the first place. Whether there will be a significant shift in the scope of filings in practice therefore remains to be seen.
It is likely, however, that this decision will encourage applicants at the time of filing to document their commercial rationale for a broad scope of protection more carefully.
Moreover, this decision is likely to lead to more invalidity actions based on bad faith, including counterclaims in infringement actions, in circumstances where the specifications are broad and include goods and services in which the trade mark owner has had no dealings.
Given that Sky's history of enforcing registrations in respect of goods and services in which it was not trading counted against it in this case, as did its continued reliance on the full extent of its registrations until late in the litigation process, brand owners may also wish to reflect on their trade mark enforcement strategies.
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.
