SkyKick secures try at the final whistle

Summary

The UK litigation between Sky and SkyKick is arguably the most significant trade mark case in the UK for the last 5 years.

Over 8 years on since it commenced in 2016, it has seen no less than 10 judgments and 5 rounds in different courts, including the Court of Justice of the EU, prior to Brexit. It reached the UK Supreme Court, a rarity for trade mark cases and on 13 November 2024, the Supreme Court gave its landmark judgment.

The Supreme Court upheld the basis of invalidity for trade marks filed, in whole or on part, in bad faith where the applicant did not intend to use the mark for the goods or services for which it sought protection.

Background

SkyKick launched as a start-up under the SkyKick brand providing a range of IT migration, back-up and management services to IT solution providers who partner with Microsoft and act as an adjunct to Office 365. Sky provides its customers with a wide range of pay TV, home entertainment, broadband and telephone services under the SKY brand.

Sky brought proceedings against SkyKick for trade mark infringement in relation to a number of its SKY marks back in 2016. SkyKick denied infringement and counterclaimed for a declaration that Sky's marks were wholly or partially invalid on two grounds (a) the trade marks were filed in bad faith; and (b) the specification lacked clarity and precision.

High Court

Mr. Justice Arnold (as he then was) found the marks would be infringed on the basis of likelihood of confusion, if valid. The claims based upon dilution and passing off were rejected.

SkyKick's principal attack was based upon bad faith, arguing that section 32(3) of the domestic Trade Marks Act 1994 set out an express requirement for an applicant to state that the trade mark is to be used or that it has a bona fide intention to use. Yet, the specifications ran to over 8,000 words and SkyKick argued this amounted to an abuse of the trade mark system. The Judge forensically examined the caselaw finding no cases that established definitively that a lack of intent to use specific goods/services amounted to bad faith, as the caselaw was focused on more extreme and egregious breaches, such as blocking registrations or ever-greening, where there was a deliberate dishonest filing strategy. However, the Judge found that Sky had no intent to use at all, especially given the class headings were so broad, that it could not possibly have intended to use across of the terms. Accordingly, he found Sky's declaration to use the trade mark at the time of filing was false in part. Yet Sky had acted consistently with OHIM's guidance at the time in terms of filing across the class headings, prior to the IP Translator challenge. Given that the caselaw was not acte claire, especially where the applicant may have mixed motives for filing, the Judge made a reference to the CJEU.

On the second question, SkyKick argued that the requirement for a trade mark under Art 4 of the TM Directive to be sufficiently clear and precise could be asserted as a ground of invalidity. Accordingly, terms such as "computer software" lacked that clarity and precision.

CJEU

The CJEU gave its decision in 2020, largely retaining the status quo for trade mark owners. The CJEU rejected a ground of invalidity based upon a lack of clarity or precision, as the TM Directive was intended to set out grounds exhaustively. The proper route to challenge should be revocation for non-use after the event, if there had been no genuine use of the particular goods or services within 5 years.

On bad faith, the CJEU confirmed that bad faith may be triggered in exceptional circumstances, where it could be demonstrated that the applicant deliberately chose to monopolise goods or services in order to block or undermine the interests of other businesses. The court would not presume bad faith from mere lack of economic activity, but rather would look at the motives of the applicant and whether they intended to abuse the system by blocking a competitor.

High Court again

In June 2020, the UK High Court decided the case on the basis of the CJEU’s decision, with Sky succeeding in its claim for trade mark infringement, although with the Court finding that SkyKick had successfully established that some of Sky’s marks had been applied for in bad faith and were invalid, based upon its alleged strategy of deliberately filing very broad specifications as legal weapon. The case based on lack of clarity and precision was rejected. The judge pared back Sky’s registrations and invited Sky to withdraw its allegations of infringement, save in relation to email services for which the Judge found SkyKick had infringed.

Court of Appeal

On appeal, the Court of Appeal found that although lack of intention to use could in some circumstances be relevant to and evidence of bad faith, it did not mean that it equated to or amounted to bad faith on its own. You needed "objective, relevant and consistent indicia of a positive intention either of undermining the interests of a third party or obtaining an exclusive right for purposes not falling within the functions of a trade mark, i.e. evidence of a subjective bad faith intention, e.g. blocking. It was akin to an allegation of dishonesty and a high bar to establish.

The declaration an applicant made under s.32(3) had no EU equivalent. The Court gave a long leash to trade mark applicants in that it was not intended as a requirement to use (or intend to use) for all possible types of goods within the category, just goods of that kind of description. To do otherwise would place an impossible burden on applicants and prejudice the trade mark system. It recognised that a brand owner's commercial strategy would evolve over time as the business developed.

The Court found that a trade mark applicant should be given a very considerable latitude before an application could be considered in bad faith. Even where there was a mixed motive, a commercial motive of legitimate protection of its actual or potential extended future trade would be sufficient, overriding any argument of a demonstrable blocking intention. It held that Sky had a substantial present trade and a future expectation of trade in relation to the goods and services in question. Sky’s "particularly prolific” expansion and extensive brand recognition were cited as a reason for justifying registrations with a broad specification.

The door was however left open to a finding of bad faith where the sole objective of the application is to provide an exclusive right to stop third parties' use, with a trade mark which would not be used at all, or to pursue any other exclusive purpose which was not in accordance with honest practices. The Court held, in that case, it would be clear that the mark should be declared invalid as a whole. The Court also indicated that a finding of bad faith might be made, if there was no intention to use a whole category of goods or services.

The Court of Appeal held that, it is not necessary for a trade mark owner to intend to use the mark in respect of all conceivable sub-divisions of a particular good or service, for example, computer software. The Court did however indicate that this would be different, if the trade mark owner had no intention to use the mark for a specific category at all.

The Court of Appeal dismissed SkyKick’s cross-appeal on partial invalidity and SkyKick’s appeal on infringement was rendered moot by the result of Sky’s appeal. Sky’s appeal against the refusal of its passing off claim was refused.

The Supreme Court

First despite the fact that the parties had already settled the dispute, in a rare step, The Supreme Court decided nevertheless to go ahead and publish its judgment in any event, given the wider public interest in the outcome, including for the future policy of the Trade Marks Registry. The court saw no point in limiting the judgment to a general statement of the law, but applied it to the dispute in hand, notwithstanding the settlement.

Lord Kitchin gave the lead judgment concluding that applying to register trade marks across a wide breadth of good of services, without a genuine intention to use at the time of applying, amounts to bad faith, for which the mark may be invalidated. Supported by the IPO who intervened, the Supreme Court was driven by the policy concern that a cluttered trade mark register could have in distorting competition, by blocking or undermining the future activities of innocent and unobjectionable activities of third parties. This could leave the trade mark system open to abuse.

Lord Kitchin sets out a succinct blueprint of the principles that underpin establishing the ground of “bad faith” drawn from the caselaw of the CJEU, including the Judgment relating to SkyKick (Paragraph 240 of the Judgment). If the court concluded that despite formal observance with the rules and conditions for filing, the purpose of the rules had not been achieved, and there was an intention to take advantage of the rules by creating artificially the conditions for obtaining the registration, this may amount to an abuse sufficient to find the application was made in bad faith.

This concern would be acute, where a trade mark owner might file to obtain a mark, not for obtaining the exclusive right for the purpose of falling within the functions of a trade mark, but purely as a legal weapon against third parties, whether in threats of infringement claims, actual infringement claims or oppositions to third party applications for registration.

This could be seen if a trade mark owner sought to deploy its full “armoury” against a trader to enforce its rights, where in fact the activities of the third party trader were not likely to cause confusion and did not amount to passing off.

For those reasons, The Supreme Court found the Court of Appeal fell into error and reinstated the finding by the trial judge that the trade marks had been applied for, in part, in bad faith.

The Supreme Court also concluded that the procedure that the trial judge had followed had been fair, in terms of focussing the respective partes’ case on selected goods and services from Sky’s trade marks.

The Supreme Court upheld the findings of the Court of Appeal, finding no infringement by SkyKick’s cloud migration service of “email services”, but upholding the trial judge’s finding that the cloud backup service did amount to infringement of the SKY marks (based upon the revised amended specification), so far as they were registered for the relevant computer services.

The Supreme Court also ruled that it continued to have jurisdiction to provide relief as an EU Trade Marks Court under the EU Trade Marks Regulation, even after Brexit, as the proceedings were pending prior to IP completion day (through a complex analysis of The European Union (Withdrawal Agreement) Act 2020, The Trade Marks (Amendment etc,) (EU Exit) Regulations 2019 and The Intellectual Property (Amendment etc.)(EU Exit) Regulations 2020).

Comment

This decision provides welcome clarity on when applications are made in bad faith and are liable to be invalid (in whole or in part), even if the outcome may lead to some uncertainty for brands with existing portfolios and may have an impact upon decisions to enforce by brands against third parties (who may fear challenge to their core marks).

However, it is still the case that, even with trade marks with very wide specifications of goods and service, any suggestion of an improper motive may be dispelled by evidence that the applicant filed legitimately with a genuine intention to use the marks across the full specification, in accordance with the functions of a trade mark and without abuse of the trade marks’ system.

Going forwards, brands should continue to frame specifications for new trade marks carefully and responsibly. In particular, brands filing for new trade marks should: (i) avoid claiming goods/services for which there is no realistic prospect of ever expanding the business in that direction (e.g. gladstone bags for a TMT company); (ii) draft specifications so that they claim protection for both broad terms and more specific terms in case amendment is required later; and (iii) undertake regular audits to ensure they have sufficient protection.

For enforcement, businesses should not be afraid to protect their brand but think carefully about how broadly their rights are asserted to avoid bad faith counterclaims.