Impact of the SkyKick UK Supreme Court decision

Can a trade mark registration be invalidated (wholly or in part) for bad faith if, when the application was made, the applicant did not have a genuine intention to use the mark for all or some of the goods and services for which it sought protection? This is the question that has vexed judges since 2016 when Sky first brought a claim against SkyKick that its email migration and cloud storage products and services infringed Sky’s registered trade marks. The answer is of general importance to the trade mark world as it speaks to filing practice and the balance between fair protection for applicants and potential barriers to entry for third parties wishing to use the same (or similar) mark.

 

Executive summary

On 13 November 2024, given the importance of the matters under appeal, the UK Supreme Court handed down its judgment despite the parties having settled their dispute. The Supreme Court (with Lord Kitchin writing the leading judgment) unanimously overturned the Court of Appeal and held that Arnold J (as he then was and who heard the case originally) was entitled to find the Sky marks were applied for (in part) in bad faith and upheld the terms of his 2020 order on validity. On the question of infringement, the Supreme Court held that the Court of Appeal made no error in finding infringement by the SkyKick cloud back up services, but their cloud migration service did not infringe. As well as questions of infringement and validity the judgment included a review of the Court’s jurisdiction post Brexit given that the original claims included EUTMs. However, the central issue in the case which will affect brand owners everywhere is what could be construed by the courts as bad faith and how that will impact trade mark filing practice going forward. That is the issue on which we will focus in this note, and we will set out some guidance for brand owners following the judgment.

 

Background

Sky chose four EUTMs and one UK word and figurative marks for “Sky” as the basis for its infringement claim against SkyKick. Applications for the marks had been made between 2003 and 2008. When proceedings began, none of these marks was susceptible to revocation for non-use as they were all in the 5-year grace period. (Under EU and UK trade mark law, a trade mark may be revoked if or to the extent a registration has not been used for 5 years after completion of the registration process where there is no proper reason for non-use.) The wide range of goods and services for which all the marks were registered included goods and services in many of the 45 classes of the Nice Classification in accordance with what was not unusual filing practice at the time. Sky complained about SkyKick’s use of the mark SkyKick and variants of the mark from 2014 when SkyKick started to target the UK market.

As an added complexity, after the end of the Brexit transition period, the 4 EUTMs in dispute no longer applied in the UK. From 1 January 2021, existing EUTMs became comparable UK trade marks as a result of the UK leaving the EU. This is the reason why the Court had to consider the impact of Brexit on its jurisdiction. (The Supreme Court confirmed that the UK courts continue to act as EU trade mark courts for all proceedings pending before 31 December 2020.)

 

The legal framework

When Sky applied for the Sky marks, trade mark law was governed by the Paris Convention which through the Nice Agreement adopted the Nice Classification i.e. a common classification across the EU (including the UK) of goods and services for the registration of marks. The Nice Classification contains 34 classes of goods and 11 classes of services. Each class is designated by one or more general “class headings”. This is followed by an alphabetical list of goods and services falling within that class. The terms used in some class headings are relatively precise while others are more open. Any application to register an EUTM or UK trade mark must (i) specify the class or classes to which it relates; (ii) contain a statement of the goods and services for which registration is sought; and (iii) list the goods and services appropriate to that class describing them in a way that indicates their nature and allows them to be classified appropriately. Applicants have often used class headings or terms used in class headings to identify the goods or services in respect of which they wish to register their marks. This has led to clarity issues and differences of opinion as to whether by using a class heading the applicant intended to include all the goods and services falling in that class.

The EUIPO’s practice since 2003 has been to consider that the use of a class heading gives protection for all the goods and services that fall in that class. The UKIPO, on the other hand, has adopted a more restrictive approach. Some of the confusion was dispelled by the CJEU’s 2013 IP Translator case which clarified that if an applicant used a class heading it should specify if its application intended to cover all the goods and services included in the alphabetical list or, if only some of them, the applicant should specify which were intended to be covered. Following this decision certain terms within class headings themselves were no longer considered sufficiently clear and precise to be acceptable.

 

The business of the parties and the dispute

Sky is a well-known TV programme broadcaster and telephony and broadband provider. Some of the goods and services for which the Sky marks were registered which were relevant for this dispute included computer software (class 9); data storage (class 9); telecommunication services (class 38); electronic mail services (class 38); and computer services for accessing and retrieving information/data via a computer (class 38).

SkyKick is a specialist IT provider with two main products, an email migration product and a back-up facility that provided cloud-based back-ups of customers’ Microsoft data.

Sky alleged trade mark infringement and passing off. As well as denying infringement, SkyKick counterclaimed for a declaration that the Sky marks were wholly or partly invalid first on the basis that the specification of goods and services lacked clarity and precision and secondly on the basis that the applications had been made in bad faith because Sky had no genuine intention of using the trade marks in relation to all (or at least some) of the goods and services for which they were registered.

 

The earlier judgments on infringement and validity

At first instance, after making a reference to the CJEU (as this was pre-Brexit), Arnold J held that Sky had applied for the Sky marks partly in bad faith as it did not intend to use the marks in relation to some of the goods and services covered by the specification at the application date. The judge recast the specification and held that SkyKick had infringed in relation to their email migration and cloud back-up product insofar as the Sky marks were registered for electronic mail services and computer services for accessing and retrieving audio, visual and/or audio-visual content and documents via a computer.

Both parties appealed. In 2021, the Court of Appeal allowed Sky’s appeal on SkyKick’s claim for a declaration of invalidity on the grounds of bad faith and the specifications were restored to their full width.

SkyKick contended that the Court of Appeal had approached the issue of bad faith incorrectly and invited the Supreme Court to declare that the Sky marks were invalid or to order the specifications be amended in the manner advanced by Arnold J on the basis that Sky had framed the specifications in their applications too broadly and without reference to any intention to use them as trade marks in relation to most of the claimed goods and services.

 

The concept of bad faith in trade mark law

There is no definition of the concept of bad faith in EU law and thus different member states have historically applied the concept differently. More recently the CJEU has explained the basic principles underlying the concept. (Notwithstanding Brexit the parties agreed that the UK applies the same principles).

The circumstances of a finding of bad faith tend to fall into two categories:

• where the application was made with the intention of undermining third party interests rather than engaging fairly in competition eg appropriating another trader’s marks (such as in the Lindt chocolate bunny case) or making the application in breach of an agreement; or
  
  
• where the application was made with the intention of obtaining an exclusive right for purposes other than those falling within the fundamental functions of a trade mark especially as a badge of origin.

In determining whether there has been bad faith the court will take into account all relevant factors including the applicant’s intention (which is normally inferred from the relevant objective circumstances).

 

The Supreme Court’s decision

The Supreme Court held that the Court of Appeal had adopted an unduly restrictive approach to the meaning of bad faith and did not take into account all relevant facts so that its overall conclusion could not be supported. The Supreme Court agreed with Arnold J’s finding of bad faith and the modification of the categories of goods and services in the specification in the manner set out in his judgment.

In reaching its conclusion, the Supreme Court seems to have been persuaded by the fact that Sky relied on a very broad range of goods and services until narrowing it 5 weeks before trial and then narrowing the range even further at the end of the trial. The range of goods and services in the original specification included goods and services that the Court felt Sky would never have marketed such as whips, bleaching preparations and insulation materials. This supported SkyKick’s case that Sky had secured protection across a range of goods and services they did not intend to sell or provide, but were prepared to enforce the marks against a trader whose activities were not likely to cause confusion or amount to passing off.

The Supreme Court held that the Court of Appeal made no error in finding that infringement by cloud migration services had not been established but use of the SkyKick mark for the cloud back-up services did infringe the Sky marks.

 

Practical takeaways

• While there is no requirement of use or intention to use when filing a trade mark in the EU (c.f. the bona fide declaration of intention to use required on the UKIPO application form), many applicants still file broad applications. This Supreme Court ruling will encourage brand owners to be more cautious in their filing strategy in the UK and EU and to be more precise when drafting trade mark specifications.
  
  
• Registration of a mark without any intention to use it in relation to the goods and services covered by the registration may constitute bad faith.
  
  
• The use of general terms and broad categories to describe goods and services is inadvisable.
  
  
• It is a question of balance that will differ in each case – the aim is to achieve a specification that is broad enough to meet the brand owner’s commercial needs while limiting the risk of a bad faith invalidity attack. Having a clear and justifiable commercial rationale for the scope of protection sought at the time of application is important.
  
  
• If there is no rationale for an application in light of the function of a trade mark as a badge of origin or the facts suggest that when the application was filed the applicant intended to undermine third party interests in a way that is inconsistent with honest practices, the mark may be susceptible to invalidity (in whole or part).
  
  
• Where the applicant can justify registration for only some of the goods and services covered in the application, the registration may be invalid as regards those goods and services for which there is no justification.
  
  
• Brand owners would be wise to review their existing portfolios and identify any marks that may be vulnerable in light of the ruling, particularly those which are key to the business and where enforcement is contemplated.
  
  
• Where possible, applicants entering a new market should use the grace period following registration when non-use attacks cannot be made to try to establish a business across the full range of goods and services for which the mark is registered or have a plausible commercial explanation for seeking a broad scope of protection. The fact that invalidity applications can be filed at any point following registration means there will be no need to wait for 5 years to attack a registration which covers goods/services that do not have an apparent commercial rationale for the applicant. As a result, it will be important for applicants to be clear on why they are seeking protection for each of the goods/services terms covered by their applications.