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Bad faith in trade mark applications: What does the Sky v SkyKick ruling mean for brand owners?

Last week the High Court handed down its much-anticipated judgment in relation to the Sky v SkyKick case, ruling that a number of the media giant’s trade marks are partially invalid on the grounds of bad faith.

Background

Filing to secure trade mark protection over a broad range of goods and services is quite common among large brand owners, even if those goods and services are not within the core business focus. One such brand owner, Sky, the well-known media and telecommunications giant, owns a portfolio of trade marks providing protection across a wide variety of goods and services.  For example, its trade marks protect some very broad terms, such as “computer software”. This will cover every form of computer software in relation to the provision of any services, whether that’s gaming, music, accounting, video or any other form of software. Sky also has protection in relation to goods such as “bleaching preparations” and “whips”. 

This case relates to a dispute with SkyKick, which provides various cloud-based services to SMEs that are ‘Microsoft Partners’. The services include email migration software and SaaS solutions, allowing for the wholesale backup of Microsoft Office 365 data, amongst other things.

The initial proceedings in the High Court 

The original hearing in this series of cases was heard by the High Court in January 2018. Sky claimed against SkyKick for infringement of various trade marks owned by Sky. SkyKick denied infringement, and counter-claimed that Sky’s trade marks should be declared wholly or partly invalid on the grounds that they were applied for in bad faith. SkyKick contended that Sky had no intention of using the marks for all the goods and services for which they were registered and instead suggested that the purpose of the wide specification was to prevent others from registering and using similar marks in these classes. 

Mr Justice Arnold (as he was then) referred a number of questions to the CJEU to establish, in particular:

  1. whether it can constitute bad faith to apply to register a trade mark without any intention to use it in relation to the specified goods or services; and
  2. whether it is possible to conclude that Sky made the applications partly in good faith and partly in bad faith if its intention to use the trade mark was limited to only some of the specified good and services.

Response from the CJEU

The CJEU responded as follows:

  1. it is possible for a trade mark to be invalidated on grounds of bad faith, but only where the proprietor had the intention of “undermining, in a manner inconsistent with honest practices, the interests of third parties” or “obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a Trade Mark”; and
  2. where bad faith arises, the trade mark is only invalid in relation to those goods and services where bad faith was identified.The interpretation from the CJEU meant that the status quo was largely maintained in relation to bad faith. In other words, this absolute ground of refusal is available, but only in very limited circumstances and, unless the entire specification is made in bad faith, the trade mark cannot be wholly invalidated. 

Back to the High Court

Lord Justice Arnold (as he is now) then applied these findings to the current dispute and found that Sky did act in bad faith in relation to some of the categories of goods and services applied for. He was of the view that not only did Sky not intend to use the trade marks in relation to some goods and services covered by the specifications at the application dates, but there was no foreseeable prospect that they would ever use those trade marks for those goods and services.

He went on to say that:

“Sky made the applications pursuant to a deliberate strategy of seeking very broad protection of the trade marks regardless of whether it was commercially justified”  and that Sky had therefore “applied for the trade marks with the intention of obtaining an exclusive right for purposes other than those falling within the functions of a trade mark, namely purely as a legal weapon against third parties, whether in threats of infringement claims or actual infringement claims or oppositions to third party applications for registration.”

Having found that using a trade mark as a legal weapon did not fall within the functions of a trade mark, Lord Justice Arnold set about reducing the scope of Sky’s specifications. 

With regard to his approach, Lord Justice Arnold allowed the specification to cover the goods and services currently provided by Sky, as well as goods and services that may form part of its business going forward. He acknowledged that it remains legitimate for a proprietor to obtain a “modest penumbra” of protection in relation to areas that it may, one day, expand into. 

As a result, this has meant for Sky that “computer software” was narrowed in scope quite dramatically.  As an example, it has reduced to: “computer software supplied as part of or in connection with any telecommunications apparatus or service”.

Despite the blow to Sky’s specification, the partial invalidity of Sky’s mark did not impact the finding of infringement, and SkyKick was found to have infringed due to its email migration service being identical to the “electronic mail services” cited in Sky’s specification.

Conclusion and implications

Sky is not the only company that owns a trade mark portfolio covering goods and services outside the scope of its commercial activities. The CJEU judgement allowed such companies to breathe a sigh of relief, as the status quo was ultimately maintained: there is a high threshold to a finding of bad faith. However, Lord Justice Arnold’s application of the CJEU’s interpretation indicates that the threshold isn’t so high that it can’t be reached. 

Is this the end of the Sky saga? Quite possibly not, and it would not be a surprise to many if the High Court’s judgement was appealed. Watch this space …

If the judgement is not appealed then trade mark applicants should be realistic about which part of their applications fall within the legitimate functions of a trade mark, or whether certain goods and services are included for use as a “legal weapon”. The court was quick to acknowledge the legitimacy of registering a trade mark in relation to goods and services that fall outside the scope of the applicant’s business, on the basis that it could extend its business to these areas in the future. This means that companies are unlikely to dramatically alter their current approach to drafting trade mark specifications, if at all, because there are no punitive consequences for overstepping the mark. But let’s see what happens in relation to any appeal first.

For more information on trade marks, get in touch with our team.

Contributor: Harry Gillen

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.

 

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