The Sky and SkyKick case clarifies trade mark law on bad faith

The ruling by the Court of Appeal, delivered in the context of the long-running dispute between Sky and SkyKick, will be welcomed by trade mark owners, who are now less likely to have trade mark rights invalidated on ‘bad faith’ grounds than they were previously.

The Sky v SkyKick dispute

Broadcaster, telecoms, and broadband provider Sky and Skykick, a US supplier of email migration and cloud storage services, have been embroiled in a dispute concerning trade mark rights and alleged ‘passing off’.

The main question at the heart of their litigation is whether an EU or national trade mark covering a very broad range of goods and services can be invalidated, wholly or partially, because the application for that trade mark was made bad faith in that the trade mark owner had no intention of using the mark in relation to the extended goods and services.

Sky claimed that SkyKick was infringing five of its UK and EU trade marks for ‘SKY’ by providing its services under the sign ‘SKYKICK’. SkyKick denied infringement and counterclaimed for a declaration that Sky’s marks were invalidly registered due to bad faith.

Sky’s marks covered a very broad range of goods and services, including many that had no direct relevance to its core business.

The case came before the High Court for a trial and in 2018 the judge found that Sky’s trade marks to be infringed, provided they could withstand the counterclaim for invalidity. Before ruling on that point, however, the judge asked the Court of Justice of the EU (CJEU) to help him interpret the scope of invalidation for bad faith under EU trade mark law.

The CJEU held that a trade mark application made without any intention to use the mark for the specified goods and services is made in bad faith if there is "objective, relevant and consistent indicia" demonstrating that the applicant 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 [the] trade mark". The CJEU confirmed that partial invalidation of a mark was possible where the bad faith infected only some of goods and services. 

With the CJEU having provided its guidance on the application of the relevant law, the High Court considered how it applied to the specifics of the Sky and SkyKick dispute. The judge, Lord Justice Arnold, curbed the scope of trade marks owned by Sky after he ruled Sky had partly registered them in bad faith. He said Sky had deliberately registered trade marks for goods and services they had no intention of using their rights for, citing its “deliberate strategy” of seeking broad trade mark protection without any commercial justification and intention of using the marks as a “legal weapon”. 

However, despite partially invalidating those marks that had been infected by bad faith registration, the judge held that Skykick’s activities still infringed the trade marks in their restricted form and awarded Sky an injunction and damages.

Sky appealed the finding of partial invalidity and consequent restriction of their trade marks. Skykick also cross appealed on the findings of infringement.

Appeal judgment

The appeals raised by the two companies were considered in the Court of Appeal. The aspect of its judgment of most relevance to other businesses was the court’s assessment of whether Sky had acted in bad faith when applying for its trade marks covering an extensive range of goods and services.

On this issue, Sir Christopher Floyd, who gave the leading judgment for the court with which the other two judges who were sitting agreed, held that he was “in no doubt that Sky's appeal… should be allowed and the judge's order set aside insofar as it cut down the specifications of goods and services of the trade marks…”. 

In reaching this decision, the Court of Appeal carried out a detailed review of existing EU and UK case law on bad faith. What emerges from the judgment is clarification on when a trade mark applicant will be considered as acting in bad faith when applying to cover a broad range of goods and services. The position adopted by the Court of Appeal is different from that taken by the High Court.

Analysis

The Court of Appeal’s primary criticism of Lord Justice Arnold judgment concerned his interpretation of the CJEU’s bad faith test. The judge’s approach was that an applicant will be acting in bad faith if they simply do not intend to use the mark for some of the goods or services covered by the registration, with the outcome being that the mark will be partially invalidated in respect of those goods and services. According to Lord Justice Arnold, that lack of intention in and of itself justifies a finding of bad faith.

The Court of Appeal held that that approach is incorrect. It confirmed that merely applying for a mark to cover a very broad range of goods and services is not evidence of bad faith. Similarly, it said it will not automatically be bad faith if the applicant does not intend to use the marks for all of those goods and services. More is needed to demonstrate a bad faith registration.

The Court of Appeal said it is necessary to show that the applicant has no commercial justification for applying to cover those goods and services, meaning no intention to use the mark in respect of them, so that the sole objective of the applicant is to undermine the interests of third parties or obtain an exclusive trade mark right for purposes other than indicating that those goods and services originate from the applicant.  

In light of these conclusions, the Court of Appeal overturned Lord Justice Arnold’s finding of bad faith on the facts. The court considered Sky to have good commercial justification for applying for broad specifications of goods and services. This included high levels of recognition of the Sky brand, meaning that a broader penumbra of protection was justifiable, as well its previous prolific growth of the business and future expansion plans. 

Other significant observations by the Court of Appeal

The two rulings of the High Court in this case have been interpreted to mean that a trade mark applicant must provide a commercial justification for all of the goods and services included in the application, so indicating an intention to use the mark for all of those goods and services, or risk partial invalidation of the mark for any goods or services that cannot be so justified. The Court of Appeal’s judgment suggests that applicants have more leeway than that.

While it is still the case that an applicant must generally be able to justify commercially why goods and services are included in the application, the Court of Appeal clarified that an applicant does not need to have a plan to use the mark for all goods and services within each category of goods or services the mark is registered for.

The category in issue will be significant to the assessment of bad faith. The Court of Appeal took the category of ‘computer software’ as an example and said that it would be possible for a small computer software company marketing only one program to make an application in good faith for a trade mark for ‘computer software’. It would not be bad faith simply because that company did not intend to use, and there was no prospect of them using, the mark in respect of every conceivable sub-division of computer software.

The Court of Appeal also confirmed on more than one occasion in its judgment that the burden of proving bad faith is on the party alleging it. Mere broad-brush accusations will not be accepted, and a claimant will be required to particularise its bad faith allegations in detail, including providing redrafts of the trade mark specification in issue if required to do so by a court.

Takeaways from the ruling

The judgment of the Court of Appeal has been met with strong criticism but will be regarded by others as a pragmatic approach to bad faith. The decision will be welcomed by trade mark applicants seeking a broad penumbra of protection. Following the Court of Appeal’s judgment, such an approach is permissible provided that the claimed scope of protection can be generally commercially justified, assessed on a category-by-category basis, with the caveat that no one reasonably expects a business to use a mark for all goods and services claimed.

The decision will, however, make it difficult to clear a new brand for use. Long and broad specifications of goods and services will undoubtedly result in a more “clogged up” register, making it increasingly difficult to find marks that do not pose a risk for new trade mark applicants.

It remains to be seen whether the UK Supreme Court recalibrates the law in this area further.

A version of this article was first published by the International Law Office in its IP newsletter.