Background
Decision
Comment


The High Court has ruled in favour of British Sky Broadcasting Group plc (BSkyB) following a trademark dispute with Microsoft Corporation over Microsoft's SkyDrive online storage facility. The judge held that Microsoft's use of 'SkyDrive' in relation to cloud storage services infringed BSkyB's trademarks and further amounted to passing off. In reaching this decision, the judge relied heavily on the evidence of actual confusion submitted by BSkyB.

Background

BSkyB is a renowned provider of telecommunications services in the United Kingdom. For over 10 years, BSkyB has offered its popular set-top box service Sky+, which allows customers to record, store and replay digital content. Since 2006, BSkyB has provided a broadband service to its customers and in 2012 it was estimated that 4.1 million UK households were using BSkyB's broadband service.

This case concerned four of BSkyB's core UK and Community registered trademarks for the word SKY, registered for a plethora of goods and services (eg, computer software, online storage of files and sharing files, images, music, videos, photos, drawings, audiovisual material, text, documents and data).

In 2007 Microsoft launched Windows Live SkyDrive, an online storage facility. It enabled users to store documents and photos online, making them accessible from anywhere with an internet connection. By 2012, the SkyDrive branding had transitioned away from 'Windows Live' and 'SkyDrive' was used alone in the form of the signs pictured below. SkyDrive featured as one of the main start-up tiles on Microsoft's Windows 8 operating system and SkyDrive apps are available for most mobile devices.

BSkyB claimed against Microsoft for trademark infringement under Sections 10(2)(b) and 10(3) of the Trademarks Act 1994 and Articles 9(1)(b) and 9(1)(c) of the EU Community Trademark Regulation,(1) and also for passing off. Meanwhile, Microsoft counterclaimed for a declaration of partial invalidity in respect of all four SKY marks on the grounds of descriptiveness for cloud devices, and for one of BSkyB's Community marks on the basis of alleged bad faith.

Decision

Likelihood of confusion
The judge considered the salient question of whether, by reason of similarity between the SKY mark and the SkyDrive sign and the identity/similarity of the goods and services for which the sign was used and those for which the mark was registered (software for the online storage and sharing of files), there was a likelihood of confusion among the relevant public.

It was common ground that the SkyDrive sign was being used in relation to identical goods and services covered by the earlier SKY marks.

In terms of the comparison between the respective marks, BSkyB submitted that the term 'drive' was simply descriptive and generic. BSkyB argued that the average consumer, aware that BSkyB operates in this field, would take SkyDrive to be another BSkyB operation or, alternatively, a sub-brand of BSkyB. In support, BSkyB put forward actual examples of confusion recorded on BSkyB's customer service helpline. BSkyB produced evidence of 17 calls to the helpline from people seeking to attribute problems with SkyDrive to BSkyB.

Microsoft, on the other hand, argued that consumers would read the SkyDrive sign as a single word (like PayPal or DreamWorks), and so would not associate it with BSkyB. Microsoft also argued that 'sky' was a term that would be understood by the average consumer as descriptive of the services or goods being offered, and referred to various articles in which 'sky' was used as a metaphor for the Internet. Following this line of argument, Microsoft suggested that the descriptive nature of the SKY mark in the context of cloud storage detracted from BSkyB's ability to denote origin.

The judge rejected Microsoft's arguments and held that 'drive' was descriptive and 'sky' must be seen as the dominant element of the SkyDrive sign. In light of the evidence provided, the judge succinctly summarised that, having undertaken a global assessment, there was every reason to conclude that there was a likelihood of confusion.

Non-identical services
BSkyB also sought to rely on the non-identical goods and services covered by its earlier SKY marks, such as the provision of a broadband service. Microsoft acknowledged that there was some similarity between broadband provision and cloud storage.

The judge accepted that there was a particularly complementary connection between the provision of broadband services and file storage, management and sharing software. The judge also observed that a significant number of broadband providers also provide data storage. In reaching her conclusion that there was a likelihood of confusion under this head, the judge noted the close conceptual similarity of the goods and services, together with the aural similarity of the SKY mark and the SkyDrive sign.

BSkyB's reputation
BSkyB went on to rely on its reputation in the SKY marks within the United Kingdom. On the basis of the judge's previous conclusions on infringement, and not least because of the examples of actual confusion provided by BSkyB, it was also clear to the judge that the average consumer would make a link such that 'SkyDrive' called to mind the SKY mark. The judge went on to conclude that dilution of BSkyB's marks was an obvious inference.

Passing off
It was not disputed that BSkyB had extensive goodwill. The judge concluded, paying particular attention to BSkyB's successful demonstration of actual confusion, that there was a likelihood of confusion and that damage was inherently likely where the customers of a business frequently incorrectly connected it with another.

Microsoft's counterclaims
Microsoft made two counterclaims:

  • The SKY marks should be declared invalid on the basis that the word 'sky' was simply descriptive of online or digital storage; and
  • Sky had acted in bad faith at the time when it applied to amend certain goods and services covered by its Community trademarks (which allegedly widened the coverage of the registration).

The judge dismissed Microsoft's first counterclaim on the basis that there was no evidence to suggest that the average consumer would understand the word 'sky' as referring to cloud computing or to be descriptive of the Internet at the time that the SKY marks were registered (in 2002 and 2006).

The judge then found that there was no evidence of bad faith and confirmed the position that bad faith is to be assessed at the time that an application is actually filed – not at some later date.

Comment

At a time when surveys are often being criticised (as was the case in this decision), and so reliance on them may be more limited, evidence of actual confusion remains key. The evidence of real-life confusion in the form of customer calls to BSkyB's helpline, in which those customers wrongly enquired about Microsoft's SkyDrive, played a crucial role in this judgment. As an aside, it did not assist Microsoft in its defence that there were numerous examples of 'SkyDrive' appearing with little or no Microsoft branding.

From an evidential perspective, brand owners should ensure that if litigation is anticipated, all personnel are notified of the need to look out for any confusion so that such evidence is captured. From a disclosure obligation viewpoint, brand owners should also ensure that all potentially relevant calls within their organisation are recorded and retained (it was acknowledged in this decision that call recordings are typically kept only for six months).

Microsoft indicated that it will appeal this decision and so the battle may continue.

For further information on this topic please contact Jeremy Drew or Rebecca Williams at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (jeremy.drew@rpc.co.uk or rebecca.williams@rpc.co.uk).

Endnotes

(1) EU Regulation 40/94 of December 20 1993 on the Community Trademark (replaced by EU Regulation 207/2009 of February 26 2009).