In late July 2021, the Court of Appeal handed down its highly anticipated judgment in Sky v Skykick.(1) This dispute began as regular trademark infringement (and passing off) proceedings in the High Court but evolved into a landmark case around the meaning of "bad faith" in the context of trademarks. The question at the heart of this litigation is whether an EU or national trademark covering a broad range of goods and services can be invalidated (wholly or partially) because the application was made in bad faith in that the trademark owner had no intention of using the mark in relation to the extended goods and services.
The issue arose in a dispute between broadcaster, telecoms and broadband provider Sky, and Skykick, a US supplier of email migration and cloud storage services. Sky claimed that Skykick was infringing five of its UK and EU trademarks for SKY by providing its services under the sign SKYKICK. Skykick denied infringement and counterclaimed for a declaration that Sky's marks were invalidly registered due to bad faith. Sky's marks covered a broad range of goods and services, including many that had no direct relevance to its core business.
At trial,(2) Mr Justice Arnold (as he then was) found Sky's trademarks to be infringed, provided that they could withstand the counterclaim for invalidity. He sought clarification from the Court of Justice of the European Union (CJEU) on the scope of invalidation for bad faith.
The CJEU held(3) that a trademark application made without any intention to use the mark for the specified goods and services is made in bad faith if there is "objective, relevant and consistent indicia" demonstrating that the applicant had the intention:
of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of [the] trade mark.
The CJEU confirmed that partial invalidation of a mark was possible where the bad faith infected only some of the goods and services.
Back in the High Court,(4) Lord Justice Arnold (as he had become) held that Sky had obtained its trademarks in bad faith because of its "deliberate strategy" of seeking broad trademark protection without any commercial justification, intending to use the marks as a "legal weapon".(5) He partially invalidated the marks, limiting the goods and services covered to reflect the extent of the bad faith proved. He held, however, that Skykick's activities still infringed the trademarks even in their restricted form and awarded Sky an injunction and damages. In short, "Sky emerged from the battle bruised (in that their registered trade mark rights had been cut down . . . ) but overall the victors".(6)
Sky appealed the finding of partial invalidity and the consequent restriction of its trademarks. Skykick also cross-appealed on the findings of infringement.
In the Court of Appeal, Sir Christopher Floyd gave the leading judgment, with which Nugee and Newey LJJ agreed. The most important aspect of this judgment was the Court of Appeal's assessment of whether Sky had acted in bad faith when applying for its trademarks covering an extensive range of goods and services. On this issue, Sir Christopher Floyd held that he was "in no doubt that Sky's appeal . . . should be allowed and the judge's order set aside insofar as it cut down the specifications of goods and services of the trade marks". In reaching this decision, the Court of Appeal carried out a detailed review of existing EU and UK case law on bad faith. What emerges from the judgment is clarification on when a trademark applicant will be acting in bad faith when applying to cover a broad range of goods and services, and the position is arguably significantly less onerous than it was perceived to be following Arnold LJ's first-instance decisions.
Bad faith test
The Court of Appeal's primary criticism of Arnold LJ's judgment concerned his interpretation of the CJEU's bad faith test. Arnold LJ's approach had been that an applicant will be acting in bad faith if they simply do not intend to use the mark for some of the goods or services covered by the registration (and the mark will be partially invalidated in respect of those goods and services). According to Arnold LJ, that lack of intention in and of itself justifies a finding of bad faith.
The Court of Appeal held that this approach was incorrect. The Court of Appeal confirmed that merely applying for a mark to cover a broad range of goods and services is not evidence of bad faith. Similarly, it will not automatically be bad faith if the applicant does not intend to use the marks for all of those goods and services. More is needed. It is necessary to show that the applicant has no commercial justification for applying to cover those goods and services (meaning no intention to use the mark in respect of them) so that the sole objective of the applicant is to undermine the interests of third parties or obtain an exclusive trademark right for purposes other than indicating that those goods and services originate from the applicant.
In light of these conclusions, the Court of Appeal overturned Arnold LJ's finding of bad faith on the facts. The Court of Appeal considered Sky to have good commercial justification for applying for broad specifications of goods and services. This included high levels of recognition of the Sky brand (meaning that a broader penumbra of protection was justifiable), previous prolific growth of the business and future expansion plans.
Other significant observations
Arnold LJ's first-instance decisions have been interpreted to mean that a trademark applicant must provide a commercial justification for all of the goods and services included in the application (so indicating an intention to use the mark for all of those goods and services) or risk partial invalidation of the mark for any goods or services that cannot be so justified. The Court of Appeal's judgment suggests that applicants have more leeway than that. While it is still the case that an applicant must generally be able to justify commercially why goods and services are included in the application, the Court of Appeal clarified that an applicant need not have a plan to use the mark for all goods and services within each category.(7)
The category in issue will be significant to the assessment of bad faith. The Court of Appeal took the category of "computer software" as an example and said that it would be possible for a small computer software company marketing only one program to make an application in good faith for a trademark for "computer software". It would not be bad faith simply because that company did not intend to use, and there was no prospect of them using, the mark in respect of every conceivable subdivision of computer software.
The Court of Appeal also confirmed on more than one occasion in its judgment that the burden of proving bad faith is on the party alleging it. Mere broad-brush accusations will not be accepted, and a claimant will be required to particularise its bad faith allegations in detail, including providing redrafts of the trademark specification in issue if required to do so by a court.
The judgment of the Court of Appeal has been met with strong criticism but will be regarded by others as a pragmatic approach to bad faith. The decision will be welcomed by trademark applicants seeking a broad penumbra of protection. Following the Court of Appeal's judgment, such an approach is permissible, provided that the claimed scope of protection can be generally commercially justified, assessed on a category-by-category basis, with the caveat that no one reasonably expects a business to use a mark for all goods and services claimed. The decision will, however, make it difficult to clear a new brand for use. Long and broad specifications of goods and services will undoubtedly result in a more "clogged-up" register, making it increasingly difficult to find marks that do not pose a risk for new trademark applicants.
Are things back to business as usual? Perhaps so, unless and until the Supreme Court intervenes.
For further information on this topic please contact Gill Dennis or Florian Traub at Pinsent Masons by telephone (+44 20 7418 8250) or email ([email protected] or [email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
Endnotes
(1) Sky Limited v Skykick, UK Limited [2021] EWCA Civ 1121.
(2) Sky v Skykick [2018] EWHC 155 (Ch).
(3) Skykick C-371/18, EU: C:2020:45.
(4) Sky v Skykick [2020] EWHC 990 (Ch).
(6) Supra at 1, Sir Christopher Floyd in paragraph 2.
(7) See, for example, paragraph 116 of the Court of Appeal's judgment.