Sky faces costs burden after bad faith trade mark registrations

The costs order was imposed by the High Court in London in part to sanction Sky for partially registering trade marks in bad faith.

While aspects of the ruling are the subject of appeal, trade mark law expert Iain Connor of Pinsent Masons, the law firm behind Out-Law, said the judgment "will reset how trade mark infringement cases are launched in the UK"

The High Court reached the verdict after it ruled earlier this year that Sky had partly registered EU and UK trade marks in bad faith. The trade marks at issue cover goods and services falling within a number of technology categories. That ruling means that Sky's trade mark rights which cover 'computer software' and 'data storage' were partially invalidated in respect of other goods and services and are therefore more limited as a result of SkyKick's counterclaim.

Despite its findings against Sky, however, the High Court did uphold the company's claim that SkyKick was responsible for infringing its trade mark rights as they apply to SkyKick's email migration service. In its latest ruling, and in an unusual step at a costs hearing, the High Court additionally made the substantive finding that SkyKick had infringed Sky’s trade marks in relation to its cloud backup services.

Sky was successful in asking the court to revisit the question of infringement during the latest proceedings after highlighting wording the judge had used in his earlier ruling. That wording indicated that there was infringement "at least" in respect of the specific case of email migration service that he referenced at the time.

On the basis of his findings on infringement, Lord Justice Arnold granted Sky's application for an injunction to be issued against SkyKick to restrain it from continuing to infringe its trade marks. He rejected SkyKick's arguments against an injunction. SkyKick had argued that the application by Sky should be rejected by way of a sanction against its partial bad faith registrations, and it also claimed an injunction would be a disproportionate measure. In this regard, it said an injunction would have "massive consequences" for its business in terms of costly and disruptive rebranding, and that this would "jeopardise the survival" of the company.

However, Lord Justice Arnold said that "the consequences which will be suffered by SkyKick are largely self-inflicted", highlighting the company's failure to carry out a full freedom to operate search before it began trading; to heed subsequent warnings about possible infringement of Sky’s trade marks, or to take any avoiding action in response to letters Sky had sent it before lodging legal proceedings.

The injunction was granted "in the standard form", save that the judge made it ‘Brexit-proof’ so that it continues to apply to Sky’s UK trade marks cloned from their EU trade marks at the end of the transition period. The injunction will not take effect for three months.

Lord Justice Arnold went on to reject SkyKick's application for an order publicising the partial invalidity findings the court had made against Sky previously. He said it would be unfair to apply a "one-sided" order and difficult to distil his judgments in the case to-date "into a simple summary".

In seeking to apportion liability for costs related to the proceedings, the judge first considered who had 'won' the case. Almost invariably the 'loser pays' principle applies to litigation before the courts in England and Wales. However, in this case, despite finding that Sky had been overall successful by demonstrating that its trade mark rights had been infringed by SkyKick, Lord Justice Arnold said SkyKick had succeeded on some of the points that were raised during the proceedings and that this should be reflected in the apportioning of costs. He also said that "Sky's bad faith should be reflected in costs".

For reasons of fairness and simplicity, the judge said both companies should bear their own costs – approximately £1.52m in Sky's case, and £1.97m in SkyKick's.

"Rights holders will have to make sure that they only assert rights against defendants that read directly onto the alleged infringers’ activities or risk severe costs sanctions," said Iain Connor of Pinsent Masons.

"The fact that Sky ‘won’ but still had to pay all its own costs is a salutary lesson to companies seeking to assert trade marks to create overly broad monopolies. However, on the flip side, SkyKick must be kicking itself for not conducting any due diligence before entering a market under a brand where Sky was a major obstacle; something even the most basic searches would have revealed," he said.