Some 17 months after hearing the parties' oral arguments, the Supreme Court has finally given judgment in Sky v SkyKick, concluding a case widely recognised as one of the most important UK trade mark cases for many years. The parties had settled their dispute before the decision was handed down but the Supreme Court exercised its discretion to proceed to give its judgment as it considered there were a number of issues of general public importance before the Court to resolve.
Whilst upholding the decision of the lower Courts that use of the mark SkyKick on a cloud-backup product amounted to trade mark infringement, it is the Supreme Court's finding that Sky's registrations were partially invalid on the grounds of bad faith (because "Sky had applied for and secured … registrations across a great range of goods and services which they never had any intention to sell or provide") combined with the fact that brands owners have filed, and the UK and EU IPOs have accepted, broad terms as a matter of common practice for well over two decades - which makes the judgment so consequential.
The Supreme Court's finding on validity represents a fundamental change in UK trade mark law and is likely to have profound implications on the scope of protection (and therefore enforcement) of existing trade mark registrations and filing practice for new applications.
Background
In early 2016, SkyKick issued proceedings against Sky in the Intellectual Property Enterprise Court seeking a declaration of non-infringement (following receipt of a demand letter from Sky). Sky subsequently sued SkyKick in the High Court and it was that action – not the IPEC claim - which proceeded to trial. Sky claimed that the offer and supply of email migration and cloud storage products and services by SkyKick amounted to trade mark infringement and passing off. Sky relied upon five registrations for the mark Sky in word and logo form (four EUTMs and a single UKTM) (the proceedings were issued not only before the UK's departure from the EU but indeed before the Brexit referendum).
In addition to conventional lines of defence (namely that there would be no likelihood of confusion or the taking of unfair advantage), SkyKick counterclaimed that Sky's registrations had been applied for in bad faith because they covered goods and services which – SkyKick contended – Sky had no intention to use as at the date of filing. SkyKick claimed Sky's registrations covered goods and services where Sky could not point to any clear intention to use (such as whips) but also goods and services where Sky had used or had intent to use but not across its full breadth (most relevantly for 'computer software').
The trial judge referred various questions to the EU Court of Justice (CJEU) which determined that a trade mark application made without any intention to use in relation to goods and services covered by the registration constitutes bad faith if the applicant had the intention either of (i) undermining, in a manner inconsistent with honest practices, the interests of third parties, or (ii) obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.
The CJEU went on to find that, where the absence of an intention to use the trade mark in accordance with the essential functions of a trade mark concerns only certain goods or services referred to in the application for registration, that application constitutes bad faith only in so far as it relates to those goods or services.
When the case returned to the UK following the CJEU decision, the trial judge (Arnold LJ) held that Sky's registrations had been applied for in part in bad faith and ordered the paring back of Sky's goods and services in dispute down to descriptions which the Court considered to be commercially justified. For example, "computer software", was narrowed down to:
"computer software supplied as part of or in connection with any television, video recording or home entertainment apparatus or service; computer software supplied as part of or in connection with any telecommunications apparatus or service; electronic calendar software; application software for accessing audio, visual and/or audio-visual content via mobile telephones and/or tablet computers; games software".
Notwithstanding the narrowing down of Sky's trade mark specifications, the trial judge held that SkyKick infringed and made an order for an injunction and damages in favour of Sky (orders which were stayed pending appeal).
On appeal, the Court of Appeal overturned Arnold LJ's finding on validity, deciding that he had taken too extreme a view, and that Sky did have a commercial rationale and was not therefore acting in bad faith, in applying for, for example, computer software:
"…there was obvious commercial justification for applying for computer software, namely that Sky had a very substantial business in computer software which their trade mark for that description of goods and services would protect in accordance with the proper functions of a trade mark. Computer software was exactly the kind of goods and services in relation to which the marks would be used. These conclusions only have any traction if one treats the applicant as obliged to have a prospect of or strategy for using the mark in relation to every type of goods and services falling within a category."
The Court of Appeal confirmed the trial judge's finding of infringement although it held that one of SkyKick's products (referred to as "cloud migration") was in fact dissimilar to anything covered by Sky's registrations and should therefore not be covered by any injunction. The Court of Appeal also confirmed the decision of the trial judge that Sky's passing off claim should be dismissed.
The Supreme Court's Decision
On validity, the Supreme Court overturned the Court of Appeal and endorsed the finding of the trial judge, namely that the Sky registrations had been applied for – in part - in bad faith ("he [the trial judge] had sufficient material before him on which properly to find that SkyKick had established that Sky had applied for and were prepared to take enforcement action for alleged infringement of the registrations of marks in respect of goods and services of such a range and breadth that it was implausible that Sky would ever provide them, or that Sky ever had any genuine intention (whether provisional or conditional) to provide them under the SKY marks"). Such activity on the part of a trade mark owner amounted, according to the Supreme Court, to obtaining an exclusive right for purposes other than those falling within the functions of a trade mark (in particular the essential function of indicating origin).
The factual underpinning of the Supreme Court's decision was heavily based upon Sky's approach to how it enforced its trade marks, even though such enforcement action post-dated the filing of the registrations relied upon by Sky (bad faith must be determined at the date of the filing of the application in question). This finding may give rise to interesting considerations in future cases: in particular, will a finding of bad faith be harder to establish where a trade mark owner with a broad term (such as computer software, financial services etc.) has no history of taking enforcement action? Arguably, the Supreme Court's conclusion is particularly curious given the facts of the SkyKick case itself: whilst the Supreme Court deprecated Sky's broad specification because it could, the Court said, be deployed against traders "whose activities were not likely to cause confusion", each of the trial judge, the Court of Appeal and the Supreme Court held that SkyKick infringed Sky's registrations due to the presence of a likelihood of confusion.
Ultimately, the scale of a trade mark owner's enforcement action may not matter - the Supreme Court's final paragraph of the validity section of its judgment held:
"Where… the broad description includes distinct categories or subcategories of goods or services, as "computer programs" and "computer services" undoubtedly do, then…the proprietor may be found to have acted in bad faith in relation to one or more of those, and it would be manifestly unjust if it escaped that consequence simply because it had framed its specification using general terminology. In my judgment, that was the position here and I do not accept that the judge fell into error in this respect in the manner found by the Court of Appeal."
Although not going so far as to find that a broad term will inevitably lead to a finding of bad faith, the Court appears to be giving a relatively clear pointer that broad terms may not, as a rule, survive future challenges. That is just one of many questions which will need to be considered in future cases.
As regards infringement, the Supreme Court - like the trial judge - held that SkyKick still infringed Sky's registrations (although the Court also agreed with the Court of Appeal that SkyKick's cloud migration product did not infringe).
Impact
Filing
Inevitably the Supreme Court's decision will impact on future clearance, filing and enforcement in the UK. Although not guaranteed, the UKIPO – which intervened before the Supreme Court – will likely issue new filing guidance. Such guidance is much anticipated – in particular will it "ban" broad terms absent the applicant providing contemporaneous justification? If not, on what basis will broad terms be allowed? Perhaps the UKIPO will not revise its filing practice but will instead issue a "health warning" to applicants to the effect that broad terms may not survive contact with a third-party challenge in an opposition/invalidity action or in a counterclaim to a claim for infringement.
Applicants may also want to record in writing - at the time of filing – their commercial rationale (should they be required to prove their thinking in later proceedings). This, of itself, raises interesting issues: written material prepared by in house legal or trade mark attorney teams will likely be privileged and applicants may be reluctant – understandably – to waive such privilege. Further, the Court will no doubt want to be satisfied that such accounts are not self-serving documents which bear only a passing acquaintance with reality. And what is the position in relation to registrations which were filed say 20 years ago and/or which were acquired from third parties (including from individuals (who may no longer be alive), receivers, liquidators and/or the Crown)? In such cases how does a trade mark owner establish commercial rationale at the time of filing?
Enforcement and Clearance
Trade mark owners also need to accept that existing registrations for broad terms – especially those within the 5-year non-use grace period – are not as expansive (i.e. as broadly enforceable) as the specification "on the page". Likewise, those clearing trade marks in the UK may conclude they can take more calculated risks if broad registrations are in fact "paper tigers". However, before reaching such a conclusion it would be prudent to undertake investigations to determine whether and to what extent the trade mark owner has enforced its rights because, as noted, this is a factor the Supreme Court considered relevant in determining whether there had been bad faith in the SkyKick case.
Final Comments
The decision of the Supreme Court is without question significant. Not only does it usher in a new, albeit uncertain, era as to how the UKIPO will examine trade mark applications and how UK tribunals will enforce them, it also represents a significant departure from EU practice which – ironically grounded in the CJEU's decision in the SkyKick case – takes a more permissive approach to broad terms in trade mark specifications.
As noted, the UKIPO intervened in the Supreme Court; indeed, one of the reasons why the Court decided to hand down judgment following the commercial settlement between the parties was because the Comptroller-General of Patents, Designs and Trade Marks had emphasised it was desirable to clarify this area of law. However, it must be questioned whether the Supreme Court's decision will deliver such clarity. Given decades of practice at both the UK and EU IPO of accepting broad terms at the application stage (and further noting that on Brexit, the UK register expanded overnight from circa 1.5 million registrations to circa 3.7 million as a result of the creation of UK clones) there are untold thousands of applications and registrations with such terms, the scope of which are to a large extent uncertain and unknown.
Mishcon de Reya acted for Sky in these proceedings