The UK Supreme Court has unanimously agreed that software company SkyKick’s appeal “must be allowed in part”, in a controversial case which centred on whether media giant Sky’s filing of overly broad trademarks amounted to bad faith applications.

The UK’s highest court ruled that the High Court was entitled to find that the SKY marks were applied for in bad faith to the extent that it did, and the Court of Appeal was wrong to reverse that finding.

Lord Kitchin in his delivery to the court on 13 November described the circumstances that could amount to bad faith applications. These included seeking broad protection regardless of whether it is “commercially justified” and with the intention of obtaining an exclusive right not to use the mark for the goods and services in which the mark is then registered “but as a legal weapon against third parties”.

“The Court of Appeal was therefore wrong to reverse the decision by the High Court on this issue,” he said.

Richard May, IP partner at Osborne Clarke, said that the Supreme Court’s decision will have “wide ramifications for brand owners as it effectively opens the door for broad registrations to be attacked on grounds of bad faith”.

He added that it also represents a “controversial row back from the Court of Appeal’s more pragmatic and brand-friendly approach”.

The Supreme Court bench was made up of Lords Reed, Lloyd-Jones, Kitchin, Hamblen and Burrows and found that the High Court had sufficient material before it to find that SkyKick had established its case that Sky had applied for and was prepared to take enforcement action for alleged infringement of the registrations in respect of goods and services of such a range and breadth that “it was implausible that Sky would ever provide them”.

It also found that the consequences of a bad faith finding depend on the circumstances and an entire term may be struck out or narrowed to exclude ‘overbroad’ protection.

Infringement and jurisdiction  

On the issue of infringement, the Supreme Court agreed with the Court of Appeal that SkyKick’s Cloud Backup services had infringed Sky’s trademarks, but the Court of Appeal was right to reverse the lower court’s findings – SkyKick’s Cloud Migration marks had not infringed Sky’s marks. 

Another issue the Supreme Court was asked to consider was jurisdiction as proceedings had begun before the UK left the EU. It ruled that the EU Trade Mark Regulation “continues to have direct effect in the context of proceedings pending before a United Kingdom court designated as an EU trademark court prior to the end of the transition period on 31 December 2020 (‘IP completion day’)”.

The court found at a late stage that the parties had settled their dispute. Both parties withdrew their appeal and asked the court not to give judgment. Lord Kitchin said: “The controller general, on the other hand as intervener asked the court to proceed to give judgment in the usual way.” Kitchin added that taking both sides into account the court had “decided it was appropriate to proceed”.

Long running case 

This long-running trademark case dates back eight years when Sky brought actions against cloud storage software company SkyKick for infringement of its EU and UK trademark registrations for SKY across a range of goods and services, while SkyKick challenged those trademarks’ validity.

In the High Court, Lord Justice Arnold declared Sky had acted in bad faith by including the term “computer software” in its trademark specification as, at the date of filing, Sky had no intention of using the mark in relation to all computer software. The order declared its trademarks partially invalid, but also found that SkyKick’s email migration and cloud storage services had infringed some of Sky’s valid trademarks.

In July 2021, the Court of Appeal allowed Sky’s appeal, ruling that bad faith required more than merely applying for a trademark to cover a broad range of goods and services without intending to use it for them. Largely confirming the status quo.

The Court of Justice of the EU (CJEU) also provided interpretation on points of EU law, it was one of the last referrals to the court from the UK before the country left the EU.

Reaction

Kerry Russell, an IP partner at Shakespeare Marineau, said the decision had certainly sent “shockwaves throughout trademark law”.

She said that businesses should remember that in order to invalidate a trademark “there is a robust and often costly procedure to follow, either at the IPO or the UK Courts. Any business wishing to attack a trademark on the basis that the specification is unduly broad, and therefore applied for in ‘bad faith’, must evidence this intention”.

She added: “This can be done either by proving that the application is intended to undermine the rights of a third party, or was filed to obtain a right beyond the trademark’s essential function. The Supreme Court has said that this argument is only applicable where there are ‘objective, relevant and consistent’ indications that the mark was applied for in bad faith.”

Peter Vaughan, chartered trademark attorney and associate professor at Nottingham Law School, said: “This likely brings to a dramatic halt the common practice of a broad brush approach to trademark coverage. This allowed use of a trademark as a ‘legal weapon against third parties’. This seemingly is now over.”

He added that although the focus will be on the impact on the larger brand owners who have typically had the broader terms in their trademarks and the more aggressive enforcement strategies there may be “unintended consequences”.  

Many smaller businesses, especially those which filed their own trademarks were able, if not encouraged, for a time to simply select all the terms listed in a particular class. This resulted in extremely bloated and broad specifications.  

“These businesses will no doubt have concerns as to the impact that this decision may well have on their own trademark registrations and the protection contained within,” Vaughan said.

He noted that while the decision does not propose that these registrations should be cancelled in full it does introduce some uncertainty. He called for urgent guidance from the UK Intellectual Property Office “to reassure those smaller businesses of the impact and it is likely this will be swift in coming”. 

Varuni Paranavitane, of counsel at Finnegan, said: “Any applicants may consider a more conservative filing strategy until there is more certainty and application of this decision by the lower courts. I envisage that there will be more invalidity claims for ‘bad faith’ filings and this being used strategically by parties who have been sued for trademark infringement.”

May agreed, saying: “We can now expect bad faith claims to become a common feature of trademark disputes in the UK. There are already significant delays at the UK Intellectual Property Office due to the volume of cases, so this decision has the potential to compound the problem.”

Mark Buckley, a commercial litigation partner at UK law firm Fladgate, said there was some good news for trademark applicants. The judgment states that where the absence of an intention to use the mark in accordance with its essential functions concerns only some of the goods or services referred to in the application “the trademark can be cut down rather than cancelled altogether”.

Farah Mukaddam, counsel at Norton Rose Fulbright, also thought the decision benefits businesses and organisations looking to launch a brand by giving them greater confidence regarding unused marks.

She added that regarding the infringement aspect, “the Supreme Court states that a specification that includes ambiguous terms should be interpreted to cover just those goods and services that are clearly covered. This will also be welcome news for new brands entering the market”.

Tristan Sherliker, of counsel at Bird & Bird, also viewed the decision positively, pointing out that his firm acted for Lidl in the recent case of Lidl v Tesco, the first case in which reputation rights were relied on alone. 

Sherliker said: “The success of that case shows that it is not necessary to register more broadly: and the SkyKick decision today shows that it is not desirable, either.”

He added that bad faith is to be measured in the objective circumstances, and it is a matter of degree. “If you file for a very broad description, you will be setting yourself a higher hurdle to prove good faith if the time comes; that is a risk, which should be weighed against the ever-present temptation to file for broader protection.”