Sky v Skykick:

In his recent judgment of 6 February 2018, concerning Sky plc (“Sky”) and SkyKick Inc (“SkyKick”), Mr Justice Arnold posed five questions to be referred the CJEU regarding the validity of trade marks, which if they are referred, may have a significant impact upon rights holders, and their trade mark protection strategies.

Background

In 2011, two former Microsoft employees created SkyKick Inc, a software product that automates the transfer of email account settings from earlier to later versions of Microsoft Office. The product was solely sold via Microsoft authorised partners, and initially launched in the US in April 2012. Despite conducting trade mark clearances in the US, and securing a US trade mark registration, SkyKick failed to conduct searches in the EU, or elsewhere. Prior to launching in the EU, they were made aware of the SkyDrive proceedings in the UK, in which it was found that Microsoft’s cloud-based storage product was infringing and passing off Sky’s earlier rights.

SkyKick proceeded to incorporate SkyKick UK Limited on 14 November 2014, and started to target customers in the EU and the UK. In January 2016, Sky sent SkyKick a letter before action, and commenced proceedings on the basis of trade mark infringement and passing off in May 2016. SkyKick responded with a counterclaim that Sky’s earlier trade marks were invalid on the basis that:

i) Certain terms, including “computer software” covered by the registrations were insufficiently clear or precise

ii) The applications had been filed in bad faith, as Sky lacked an intent to use the mark for all of the terms covered by the registrations

Considering the invalidity claims first, Arnold J found as follows:

Clarity and Precision:

In his judgment, Arnold J referred to IP Translator, which had found that a trade mark specification must cover goods and services with sufficient precision and clarity. He then questioned whether a lack of precision and clarity could be a ground for invalidity. SkyKick had alleged that Sky’s earlier registrations did not conform with Art 4 of the trade marks directive. However, the wording of Article 4 does not explicitly provide for a lack of clarity and precision in a trade mark specification being a ground on which a mark should not be registered.

Whilst Sky accepted that, at some point, this issue would likely have to be referred to the CJEU, they countered that this present case was not the appropriate time to refer this question, as they considered that the terms in question (computer software and others) were sufficiently clear and precise.

SkyKick countered that there were three reasons for which these terms were insufficiently clear and precise. First, they quoted the Common Communication of the TMDN (European Trade Mark and Design Network) following the IP Translator decision, citing the same reasoning behind the term machines being too broad to designate. Second, they quoted Laddie J in Mercury (1995), in which he had found that the term “software” granted too broad a monopoly, and that software should be defined by its function. Third, they referred to the US PTO requirement that the term computer software had to be qualified by reference to its purpose and field of use to be acceptable. Whilst Arnold J agreed that the term computer software was too broad, it did not necessarily follow that the term lacked clarity or precision. As such, he referred the following questions to the CJEU:

1) Can an EU TM be found partly/wholly invalid on the ground that some or all of the terms in the specification are lacking in sufficient clarify/precision to enable competent authorities/third parties to determine the extent of protection conferred by a trade mark?

2) If YES – does “computer software” lack sufficient clarify/precision to enable competent authorities/third parties to determine the extent of protection.

Bad Faith

Arnold J then considered SkyKick’s claim that Sky’s earlier trade mark registrations were either wholly or partly invalid on the basis that Sky did not intend to use the marks for all of the goods and services covered at the time the applications were filed. Arnold J considered the relevant bad faith case law, distilling it into the following points:

  1. There is no case law that definitively says that a lack of intent to use a mark in respect of specific goods and services at the time of filing constitutes bad faith
  2. In some cases, a trade mark application without an intent to use could constitute bad faith – however, it is worth noting that in all of the cases cited, there was some other factor that gave rise to a finding of bad faith, for example an intent to prevent a specified third party from using the mark, to be able to secure a non-distinctive domain name registration or to support a dishonest trade mark filing strategy)
  3. Filing an application covering a broad specification or where there was merely a contingent intent to use particular goods and or services would be insufficient to show bad faith
  4. There is a suggestion in the case law than an application can have been filed partially in bad faith
  5. Case law suggests that, provided that it is applied consistently with s3(6), s 32(3) is consistent with EU law

Arnold J then considered whether, if a trade mark is found to have been filed in bad faith (arising due to a lack of intent to use for some (but not all) goods and services) should the application be invalid in its entirety, or merely in respect of those goods and services for which the applicant did not have an intent to use.

Arnold J considered Sky’s intent. Skykick had accepted that Sky had an intent to use for some of the specification. However, they argued that Sky had deliberately drafted their specifications much more widely than their intent.

Sky countered that there was a commercial rationale for filing so widely. Arnold commented that Sky had not disclosed contemporaneous evidence from the time that the applications in question had been filed. Whilst he said that this would not create any adverse finding against Sky per se, they would have to look elsewhere to find evidence of an intent to use.

Arnold J dismissed some of Sky’s evidence an ex post facto explanation of an intent to use the goods and services for which protection was sought, for which, at the time of filing, there was no reasonable commercial rationale for seeking protection. He therefore found that Sky lacked an intention to use its marks in respect of some of goods and services, and that such lack of intent could be categorised into three sorts:

i. Sky had no intent to use at all

ii. The terms were so broad that Sky couldn’t possibly have intended to cover them all

iii. The coverage of class headings, which were so broad that it was impossible to have had an intent to use for all of the terms.

Arnold therefore found that Sky’s declaration of a bona fide intent to use the UK trade mark registration at the time of application was false in part. He therefore referred the following questions to the CJEU:

3) Was an application made in bad faith if there was no intention to use the mark in respect of specified goods or services?

4) If so, can we conclude that the applicant made the application partially in bad faith and partially in good faith if the applicant had an intention to use in respect of some of the goods or services?

5) Is s 32(3) TMA compatible with the Directive?

Trade mark proprietors will have some time to wait for the answers to these questions (if they remain as phrased, if they are referred, and indeed, if the Brexit transitional provisions mean that we receive an answer at all). A key concern arises about the extent to which trade mark proprietors who have class headings, or broad terms such as computer software in their registrations risk having those rights declared invalid, in whole or in part. Certainly proprietors of such right may find greater difficulty in enforcing such broad specifications than previously.

In the interim, trade mark applicants will want to consider:

i) The breadth of specification for which they seek protection, particularly in the case of trade mark applications covering computer software.

ii) Making available evidence from the time of filing a trade mark application to support a declaration of an intent to use the mark in respect of the full specification, to defend a potential bad faith opposition or invalidity. This could include evidence of internal business communications or plans discussing product and service provision in the future.