The Supreme Court has handed down its much-anticipated judgment in SkyKick UK Ltd and another (“Skykick”) v Sky Ltd and others (“Sky”), unanimously upholding the decision of the High Court that certain trade marks registered by Sky were done so in bad faith.

It is a judgment that has garnered significant attention, and left brand owners to contend with the implications for their trade mark filing strategies of the Court’s indication that the use of “overly broad” applications may amount to bad faith.

It is also a judgment that may never have seen the light of day as – unusually – the parties requested at a late stage that the Court should not give judgment as they had reached settlement (or, failing that, that the Court “limit judgment to what would be, in effect, some kind of advisory opinion”). Rejecting these appeals, the Court determined that the issues in the case were of sufficient general public importance, and sufficiently affected other traders and the public, to justify handing down its judgment.

The judgment itself is of considerable length and addresses a range of matters (including, for example, confirmation that courts in the UK previously designated as EU trade mark courts retain that status and retain the jurisdiction to decide cases pending prior to the end of the Brexit transition period on 31 December 2020). This note concentrates on what Lord Kitchin, who delivered the judgment of the court, described as the central issue of the case, namely “whether a registration of a trade mark can be invalidated in whole or in part on the basis that the application to register the mark was made in bad faith because the applicant did not, at the time the application was made, have a genuine intention to use the mark in relation to some or all of the goods or services for which it sought protection”.

Background

The dispute dates back to over eight years ago, when Sky issued proceedings against Skykick alleging that – among other things – it had infringed a number of registered trade marks owned by Sky by offering and supplying their email migration and cloud storage products and services under the mark ‘SkyKick’.

In response, Skykick counterclaimed that Sky’s trade marks were wholly or partly invalid (a) on the basis that the specification of goods and services for each of them lacked clarity and precision; and (b) on the basis that the applications had been made in bad faith because Sky had no genuine intention of using the marks in relation to all (or at least some of) the goods and services for which they were registered.

High Court

At the High Court, Arnold J (as he then was) found that Sky did not intend to use the marks in relation to all of the goods and services covered by the specifications. First, the specifications included goods such as “bleaching preparations” and “insulation materials” in relation to which that Sky had no intention to use the marks. Second, as Arnold J put it, “the specification included categories of goods and services that were so broad that Sky could not, and did not, intend to use the Trade Marks across the breadth of the category. The paradigm example of this is “computer software” in EU112, EU992 and UK604, but there are others such as “telecommunications/telecommunications services””. Third, the specifications were intended to cover all of the goods and services in relevant classes.

Arnold J added that the specifications included goods and services in respect of which Sky had no reasonable commercial rationale for seeking registration, and the reason for including such goods and services was that Sky had a strategy of seeking very broad protection of the marks regardless of whether it was commercially justified.

However, whether, in light of these findings of fact, the marks were invalid on the basis of being registered in bad faith was a matter that first required guidance from the CJEU. Therefore, Arnold J referred a number of questions, including:

1. Can an EU trade mark or a national trade mark registered in a Member State be declared wholly or partially invalid on the ground that some or all of the terms in the specification of goods and services are lacking in sufficient clarity and precision to enable the competent authorities and third parties to determine on the basis of those terms alone the extent of the protection conferred by the trade mark?
2. Can it constitute bad faith simply to apply to register a trade mark without any intention to use it in relation to the specified goods or services?

In response, the CJEU stated that, as regards question (1), trade marks cannot be declared wholly or partially invalid on the ground that the terms used to designate the goods and services in respect of which that trade mark was registered lack clarity and precision. Therefore, that aspect of Skykick’s counterclaim was dismissed.

As regards question (2), the CJEU confirmed that “when the absence of the 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”.

In the light of the CJEU’s ruling, and referring back to his earlier findings of fact, Arnold J held that Sky applied for the trade marks partly in bad faith: “not merely did they not intend to use the Trade Marks in relation to some goods and services covered by the specifications at the application dates, but there was no foreseeable prospect that they would ever intend to use the Trade Marks in relation to such goods and services. Moreover, Sky made the applications pursuant to a deliberate strategy of seeking very broad protection of the Trade Marks regardless of whether it was commercially justified. Sky thus applied for the Trade Marks with the intention of obtaining an exclusive right for purposes other than those falling within the functions of a trade mark, namely purely as a legal weapon against third parties, whether in threats of infringement claims or actual infringement claims or oppositions to third party applications for registration”. Accordingly the marks were held to be partially invalid in respect of those goods and services for which Sky had no intention to use the marks, and the specifications of the relevant goods and services were narrowed to reflect the finding of bad faith.

Court of Appeal

The Court of Appeal disagreed with the High Court’s decision. It held, among other things, that it is not bad faith simply to apply for a registered trade mark without any intention to use it in relation to the goods and services covered by the registration. Instead, the Court held that there will only be bad faith where the absence of intention to use is coupled with “objective, relevant and consistent indicia” of a positive intention to file the trade mark either (a) “for the purposes of undermining a third party’s interests, in a manner inconsistent with honest practices” or (b) even in the absence of a third party, to seek protection “for purposes other than those falling within the functions of a trade mark”.

Furthermore, the Court of Appeal held that overall width or size of the specification of goods was “not a ground for concluding that the applications were made in bad faith at all, but even if it were, it could not be a ground for supposing that a particular, narrow part of the application was made in bad faith”.

Supreme Court

SkyKick appealed to the Supreme Court, arguing – among other things – that the Court of Appeal had no basis for reversing Arnold J on the issue of bad faith.

The Supreme Court’s judgment deals at some length with the background to the question of what constitutes bad faith in trade mark law, noting that “it is striking that despite the importance of the concept of bad faith in EU law, there is no definition of it in any of this legislation and as a result there was for many years a good deal of variation in the way the concept was understood and applied by courts in different Member States”. It surveys recent case law at the CJEU before attempting to, as Lord Kitchen puts it, draw the relevant threads together and arrive at a series of ‘general principles’ which are set out in full at the end of this article.

The Court goes on to identify three aspects of the decision of the Court of Appeal “that appear to restrict the scope for third parties to invalidate trade mark registrations for lack of intention to use them, namely: (i) in respect of goods and services for which there is no prospect of use at all; (ii) in respect of overly broad descriptions of the owner’s actual or intended goods and services; and (iii) the introduction of a requirement for the third party to identify precisely which goods and services the applicant should have applied for and which are the subject of the bad faith allegation”.

Taking each in turn, in the context of registering trade marks for goods and services for which there is no prospect of use, the Court held that “the question in any such case is whether, absent an explanation and rationale consistent with the functions of a trade mark, it is reasonable to infer from the size and nature of the list of goods and services the subject of the application and all the other circumstances, including the size and nature of the applicant’s business, that the application constituted, in whole or part, an abuse of the system and was for that reason made in bad faith”.

On the use of general terms and broad categories – the part of the judgment that has garnered the most attention in recent days – the Court held that the Court of Appeal was “wrong to preclude a finding of bad faith arising from the use by the applicant of overly broad categories of goods and services (for example, software) where the applicant had an intention to use the mark in relation to some but not all of the goods and services within that broad category, and that this appears to be so even where such a term manifestly covers sub-categories of goods or services in relation to which the applicant never had any intention of using the mark and there was no realistic prospect of it ever doing so”.

As the Court explains, it would be “anomalous for traders who use broad terminology to describe the goods and services for which they seek protection to find themselves in a more favourable position than those who use appropriate sub-categories to describe the same goods and services, and I would reject any interpretation of the legislation that necessarily leads to that conclusion. Of course, the matter must be judged as at the time of the application. Further, in so far as the applicant was required or encouraged to use class headings or other terminology to describe the goods and services which are the subject of the application, this may be a matter properly to take into account in assessing whether the application was made in bad faith. But subject to considerations such as these, I see no reason why a person should be permitted to apply to register a mark or retain a registration in respect of distinct categories of goods or services in relation to which it never had any intention to use the mark, simply because it chose to use a broad description of those goods and services which meant they were encompassed together with goods or services about which no complaint is made”.

Finally, on the suggestion (which the Court of Appeal endorsed) that a party must identify precisely which goods and services the applicant should have applied for and which are the subject of the bad faith allegation, the Court held that “a party seeking a declaration of invalidity in a case such as this and without knowledge of the applicant’s true intentions when it made the application to register the mark, is unlikely to be able to specify with any degree of precision the particular specification of goods and services to which the registration should be restricted, always assuming that the applicant did intend to use the mark in relation to such a narrower class or category of goods or services. Moreover, so far as they concern the applicant’s intentions, these are matters of which the applicant will itself have knowledge…In such a case the party seeking the declaration of invalidity may be constrained to explain its case that the application constituted an abuse by relying on the objective facts available to it and, in that way, to establish a case that, if unanswered, is likely to be accepted as sufficient to displace the presumption that an applicant was acting in good faith. It is then for the applicant (or owner, as the applicant may by that time have become) to answer that case so far as it is able and chooses to do so”.

Applying these findings to the facts of the case, the Supreme Court held that the Court of Appeal “failed properly to appreciate the scope and component elements of the bad faith objection to the validity of a trade mark that the application was made in bad faith in respect of some or all of the goods or services for which protection was sought”. Furthermore, the Court did not accept that Arnold J “made any material error in applying the relevant principles to the facts in the circumstances of this case”.

In addition, the Court held that the Court of Appeal “did not take into account properly or at all a number of highly significant facts and matters, namely that Sky originally relied upon the full range of the goods and services for which each of the SKY marks was registered, and that this range was in each case very broad indeed; that Sky maintained that position in the face of the bad faith objection until around five weeks before trial; and only at this point did they present a narrower range of goods and services as the basis of the claim. Furthermore, it was not until the time for closing submissions that Sky narrowed the range still further”. AS the Court put it, this “provides powerful support for the general case advanced by SkyKick, namely that Sky had applied for and secured these registrations across a great range of goods and services which they never had any intention to sell or provide, and yet they were prepared to deploy the full armoury presented by these SKY marks against a trader whose activities were not likely to cause confusion and did not amount to passing off”.

Finally, and in conclusion, the Court held that Arnold J “cannot be criticised for approaching the matter as he did; and further, that he 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”. The same was true for any questions of procedural unfairness: the Court held that Arnold J was “entitled to take the approach he did in all the circumstances of this case and having regard to all the steps in the proceedings that had already taken place”.

The judgment can be read in full here.

Below are the “general principles” identified by the Court in relation to the law on bad faith at paragraph 240 of the judgment:

• It is an absolute ground of invalidity of an EU trade mark that the application for that registered mark was made in bad faith, and this ground may be relied upon before OHIM (or, now, the EUIPO) or by means of a counterclaim in infringement proceedings.
• The date for assessing whether an application to register an EU trade mark was made in bad faith is the date the application for registration was made.
• Bad faith in this context is an autonomous concept of EU law which must be given a uniform interpretation in the European Union, and must be interpreted in the context of Directive 89/104 in the same manner as in the context of Regulation 40/94;
• While, in accordance with its usual meaning in everyday language, the concept of bad faith presupposes the presence of a dishonest state of mind or intention, the concept must also be understood in the context of trade mark law, which involves the use of marks in the course of trade. Further, it must have regard to the objectives of the EU law of trade marks, namely the establishment and functioning of the internal market, and a system of undistorted competition in which each undertaking must, in order to attract and retain customers by the quality of its goods or services, be able to have registered as trade marks signs which enable consumers, without any possibility of confusion, to distinguish those goods or services from those which have a different origin;
• Consequently, the objection will be made out where the proprietor made the application for registration, not with the aim of engaging fairly in competition but either (a) with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties; or (b) with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, and in particular the essential function of indicating origin;
• The intention of the applicant is a subjective matter, but it must be capable of being established objectively by the competent administrative or judicial authorities having regard to the objective circumstances of the case;
• The burden of proving that an application for a registered mark was made in bad faith lies on the party making the allegation. But where the circumstances of the case may lead to a rebuttal of the presumption of good faith, it is for the proprietor of the mark to explain and provide a plausible explanation of the objectives and commercial logic pursued by the application for registration;
• Whether the applicant was acting in bad faith must be the subject of an overall assessment, taking into account all of the factors relevant to the particular case;
• The applicant for a trade mark is not required to indicate or to know precisely when the application is filed or examined, the use that will be made of it;
• Nevertheless, the registration by an applicant of a mark without any intention to use it in relation to the goods and services covered by the registration may constitute bad faith where there is no rationale for the application in the light of the aims referred to in Regulation 40/94 and Directive 89/104;
• Such bad faith may, however, be established only where there are objective, relevant and consistent indicia tending to show that, when the application was filed, the applicant for registration had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark;
• It follows that the bad faith of the applicant cannot be presumed on the basis of a mere finding that, at the time of filing the application, the applicant had no economic activity corresponding to the goods and services referred to in the application;
• When the absence of an intention to use the 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 constitutes making the application in bad faith only in so far as it relates to those goods or services;
• If, at the end of the day, the court concludes that, despite formal observance of the relevant rules and conditions for obtaining registration, the purpose of the rules has not been achieved, and that there was an intention to take advantage of the rules by creating artificially the conditions laid down for obtaining the registration, this may amount to an abuse sufficient to find that the application was made in bad faith;
• Directive 89/104 does not preclude a provision of national law under which an applicant for registration must state that the mark is being used in relation to the goods or services in relation to which it is sought to register the mark, or that the applicant has a bona fide intention that it should be used, provided that infringement of such an obligation cannot constitute a ground for invalidity. It may, however, constitute evidence for the purposes of establishing possible bad faith on the part of the applicant when the application was filed.