HomeInsightsCourt of Appeal overturns High Court decision on bad faith and specification restrictions to SKY trade marks in SkyKick case

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Facts

Sky initially brought proceedings for infringement under Articles 10(2)(b) and 10(2)(c) of the Trade Mark Directive (2015/2436/EU) by SkyKick of four of Sky’s EU trade marks and one UK trade mark for SKY registered in relation to various services, including “telecommunications services”, “electronic mail services” and “computer software”. For its infringement claim, Sky relied on the following “Selected Goods and Services”:

  • computer software (Class 9);
  • computer software supplied from the internet (Class 9);
  • computer software and telecoms apparatus to enable connection to databases and the internet (Class 9);
  • data storage (Class 9);
  • telecommunications services (Class 38);
  • electronic mail services (Class 38);
  • internet portal services (Class 38); andcomputer services for
  • accessing and retrieving information/data via a computer or computer network (Class 38).

Sky’s case was targeted at two products/services marketed by SkyKick: (i) Cloud Migration, an email migration product; and (ii) Cloud Backup, a product providing cloud-based, wholesale backups of Office 365 data.

SkyKick counterclaimed that Sky’s marks should be declared (partly) invalid on the ground that they were registered for certain goods and services, namely “computer software”, that were not specified with sufficient clarity and precision. SkyKick also said that the trade marks were registered in bad faith because Sky did not intend to use them in relation to all the goods and services specified, excluding “telecommunications services” and “electronic mail services”.

On a referral from the High Court, the CJEU found that a trade mark cannot be declared wholly or partially invalid on the ground that the specification of the goods and services lacks clarity and precision. It also found that if the applicant applied for the registrations with no intention of using the mark in accordance with the essential functions of a trade mark in relation to some, but not all, of the goods and services in the specification, then the application can be found to have been made in bad faith in respect of those goods or services only.

Back in the High Court following the CJEU judgment, Lord Justice Arnold sitting at first instance: (i) declared Sky’s marks to be invalid as specified in a Schedule to the order, which restricted protection to goods and services with some connection to Sky’s established businesses; (ii) dismissed Sky’s claim for passing off; (iii) dismissed SkyKick’s counterclaim alleging lack of clarity and precision in the specification wording; and (iv) (save to the extent provided for in the Schedule to the order) made no order on SkyKick’s counterclaim alleging bad faith in filing the marks. Arnold LJ also said that SkyKick’s email migration and cloud storage services infringed Sky’s marks, even in their restricted form, and granted Sky an injunction to restrain SkyKick from infringing the marks and monetary relief for past infringement.

Sky appealed against the finding of partial invalidity and consequent restriction of its marks, and the dismissal of the passing-off action. SkyKick cross-appealed against the findings of infringement and contended for a more extensive restriction of Sky’s marks.

Decision

Bad faith

Giving the lead judgment, Sir Christopher Floyd said that it was implicit in the way that the case was pleaded, the way it was put at the trial, and in Arnold LJ’s ultimate findings, that Sky’s trade mark applications were made, at least in part, with the intention of protecting the use of the mark in relation to goods and services in which Sky had a substantial present trade and a future expectation of trade as a result of planned expansion of the business.

Sir Christopher said that the CJEU had resolved the partial good faith question, meaning that it was essential to determine whether the protection sought for the Selected Goods and Services was applied for in good faith. SkyKick was therefore precluded from arguing that an entire category of goods or services could be declared invalid because there was bad faith in relation to only some of the goods or services that fell within it.

The CJEU’s finding on partial good faith also meant that caution had to be taken when applying findings about the trade marks as a whole to the question of whether the Selected Goods and Services were applied for in bad faith. The overall width of the specification of goods was not a ground for concluding that the applications were made in bad faith, but even if it were, it could not be a ground for finding that a particular part of the application was made in bad faith. Further, a lack of intention to use in relation to some of the goods and services was not a ground for finding that there was a lack of intention to use in respect of the other goods and services. Each category of goods and services therefore had to be considered in its own right. In any event, as the CJEU had also effectively confirmed, lack of intention to use was not of itself a ground for a finding of bad faith. Finally, the question of legitimate interest was also sensitive to the particular goods or services. The extent to which Sky’s reputation, brand recognition and prolific expansion justified a wide claim would vary depending on what the category under discussion was.

Arnold LJ had found that, in relation to some of the goods and services, Sky did not intend to use the marks and there was no foreseeable prospect that it would ever do so. Sir Christopher said that the difficulty with this “no prospect of use conclusion” was that its significance to a finding of bad faith varied dramatically depending on which goods and services were being considered. In the case of “computer software”, the category was very wide.

SkyKick’s argument was that Sky did not intend to use the marks in respect of all computer software, and there was no prospect of it using the mark in relation to all computer software. It was true that Sky had no prospect of using the mark in relation to every conceivable sub-division of computer software but that was not a relevant or objective indication of bad faith, Sir Christopher said.

Arnold LJ had also found that Sky had applied for the marks pursuant to a deliberate strategy of seeking very broad protection, regardless of whether it was commercially justified. Again, Sir Christopher said, this “broad strategy/no justification conclusion” varied depending on which goods and services were being considered.

Sir Christopher noted that a trade mark applicant does not have to formulate a commercial strategy for using the mark in relation to every type of goods or services falling within a general description. Clearly, there would be no prospect whatsoever of an applicant using the mark for every variety of goods within the description, but that did not mean that the application had been made in bad faith. It was not bad faith to employ a strategy of applying for protection of sufficient width to cover some further, as yet unformulated, goods within the same category. In Sir Christopher’s view, an applicant with only one item of computer software could apply in good faith for “computer software” as a whole and the absence of a plan to use a mark for all goods or services within a certain category was not relevant to bad faith.

Accordingly, Arnold LJ had been wrong to hold that any of the Selected Goods and Services was applied for in bad faith.

Passing off

Sky criticised Arnold LJ’s findings, saying that he had made no assessment of the ambit of Sky’s goodwill, despite his findings that SKY had become a household name, that Sky could show broad, extensive and longstanding use of the SKY mark, and that the SKY mark enjoyed a moderately high degree of inherent distinctive character. In those circumstances, he should have found that there was a misrepresentation.

Sir Christopher disagreed, finding that Arnold LJ had given a proportionate amount of attention to the passing off claim, given the relative lack of importance that the parties had attached to it. He would have had well in mind his findings about the extent of Sky’s reputation and use, and its degree of inherent distinctiveness. Against this was the fact that there had not in fact been any confusion. Whilst other judges might have assessed the matter differently, there was no basis on which the Court of Appeal could interfere with Arnold LJ’s evaluation of the passing off claim.

Conclusion

Sky’s appeal in relation to the partial invalidity of the trade marks for the Selected Goods and Services was allowed, but not otherwise. SkyKick’s cross-appeal on partial validity was dismissed. SkyKick’s cross-appeal on infringement was rendered moot by the result of Sky’s appeal. (Sky Ltd v SkyKick, UK Ltd [2021] EWCA Civ 1121 (26 July 2021) — to read the judgment in full, click here).

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