The CJEU has handed down its answers to the questions referred by the High Court of Justice England and Wales in the Sky v Skykick case (C-371/18).

Brief background to the dispute

Sky is suing SkyKick for infringement in the UK High Court for use of Skykick word marks and SKYKICK figurative marks in relation to a cloud migration service. Sky is relying on four EU TMS and one UK TM in respect of a very broad range of goods and services including “computer software; Computer software supplied from the Internet”.

SkyKick are counterclaiming that Sky’s registrations:

  • are invalid for lack of “clarity and precision”; and
  • are registered in bad faith because Sky lacked an intention to use the mark SKY in relation to the broad spectrum of goods/services applied for.

Due to the timing of when Sky’s marks were filed, the applicable legislation is Regulation No 40/94 concerning the EU TMs and First Directive 89/104 concerning Sky’s national TM in the proceedings. However, had the current legislation been applicable the decision would not have been affected.

Executive Summary

The referred questions address some key aspects of EU trade mark law that, so far, have not been considered to such a depth: the functioning of the trade mark specification and the concept of bad faith.

The Skykick decision will not signal a new approach to overly broad terms. Something the decision does positively do, albeit to a limited extent, is to add to the expanding body of case law interpreting the concept of bad faith under EU TM law.

The questions referred and CJEU’s response

  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?

The CJEU held that a lack of clarity and precision is not listed as a ground for invalidity of an EU or national mark in the provisions applicable to Sky’s marks (Article 3 Dir. and Articles 7(1) and 51(1) EUTMR). Further, the seventh recital to the Directive states that those invalidity grounds are exhaustive.

The CJEU reiterated its position that the need for clarity and precision in the specification, which stemmed from the judgment in Case (C‑307/10) Chartered Institute of Patent Attorneys (IP-Translator), applies in the context of a new EU trade mark application. The IP-Translator findings therefore are not applicable to Sky’s marks that are already registered.

The CJEU was not amenable to the Advocate General’s reasoning that a lack of clarity and precision could be shoehorned into the existing grounds for invalidity. Neither the requirement for graphic representability laid down in Article 4 EUTMR and Article 2 Dir., nor the ground for invalidity on the basis a mark is contrary to public policy (Article 7(1)(f) EUTMR and Article 3(1)(f) Dir.) were found to encompass a lack of clarity and precision.

The CJEU found that the graphic representability requirement clearly relates to the sign, and held that the concept of public policy in the legislation could not apply to the characteristics of a trade mark application in isolation from the characteristics of the sign.

Referred Question 2

  1. If so, is a term such as ‘computer software’ too general and [does it cover] goods which are too variable to be compatible with the trade mark’s function as an indication of origin for that term to be sufficiently clear and precise to enable

Given the CJEU’s findings in relation to the first question, Arnold LJ’s second question as to whether a term such as ‘computer software’ might be too general to be sufficiently clear and precise fell away.

Referred Questions 3 & 4

  1. 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?
  2. If so, does the bad faith infect the whole mark rendering it invalid?

The CJEU held that where an application for a mark has been made in order to undermine, in a manner inconsistent with honest practices, the interests of third parties or to obtain, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, that application is invalid on the basis of bad faith.

This confirms the findings made in the recent decision in Case C‑104/18 P, Koton Mağazacilik Tekstil Sanayi ve Ticaret v EUIPO (Koton). Considering the ordinary meaning of the term in the context of the aims of EU TM law, “bad faith” should be found where an applicant had a dishonest intention at the time of filing that does not match up to the aims of the EU trade mark system. An applicant does not need to have had a third party’s activity in mind in order to have acted in bad faith.

As EU trade mark proprietors have 5 years to put their mark to use to fulfil the essential function of a trade mark, the CJEU held a lack of economic activity on the part of the applicant at the time of filing an application cannot itself lead to a finding of bad faith.

It was considered by the court to be clear from the legislation that a finding of bad faith for only part of a specification can only render that part invalid, and does not infect the entire registration.

Referred Question 5

  1. Is section 32(3) of the UK Trade Marks Act 1994 compatible with the EU Trade Mark Directive and its predecessors?

The CJEU had already held as clear the position that the absolute grounds for invalidity laid out in the legislation are exhaustive. However, it noted that Member States have freedom to fix procedural provisions relating to applications for registration.

Therefore providing it does not amount to a new ground for refusal or invalidity in itself, the UK requirement for trade mark applicants to state their intent to use or that the mark is being used is not contrary to the EU Trade Mark Directive and its predecessors.

Approach to broad terms like computer software

This case had the potential to trigger a shift in approach to the ability of third parties to monopolise broad terms, such as computer software. The CJEU’s answers in Skykick meant however that it was not necessary to consider the suitability of including terms such as computer software in trade mark specifications.

On the one hand, there could be some relief for trade mark proprietors to know that where this term is covered by a TM registration (and it is covered a lot) it is not liable to be declared invalid simply by virtue of it appearing in the registration.

The CJEU decision on this point is perhaps not all that surprising. However, some disappointment should be felt. The breadth of some currently acceptable terms such as ‘computer software’ and ‘financial services’ presents significant challenges to the functioning of our trade mark system. By granting a monopoly for these types of general descriptions of a category of goods and services that have a myriad of different commercial purposes and functions, the current trade mark system provides trade mark holders with ability to enforce their monopoly against third parties, even where the respective business purposes give no potential for confusion and where there is no realistic possibility that the trade mark owner could provide every type of ‘computer software’ or ‘financial service’. Such terms cause difficulties when conducting clearance work to ascertain the risk level in adopting a new brand, as such terms can rarely reflect the true commercial scope of activity of a trade mark holder.

Unfortunately the Skykick case is not going to facilitate a change in practice that might allow for closer alignment of Trade Mark law with the modern commercial reality that users of the system face.

The CJEU reminded us in this decision that the non-use provisions do exist in EU TM law to act as a mechanism for any registered marks that cover such broad terms to be cut down to something both clear and precise. AG Tanchev opined in Skykick that the approach to this should follow the principles laid down in the decision in Reckitt Benckiser (España) v OHIM — Aladin (ALADIN) (T‑126/03). This still prompts numerous further questions and future cases are needed to properly refine how the ALADIN principles should be applied.

The CJEU is quick to identify what is a matter for consideration during the application process and that the job of ensuring clarity and precision on the register should fall to the trade mark offices. With regard to “computer software”, certainly from a UK perspective, in his decision of 6 February 2018, Arnold LJ made his feelings on the term clear: it is too broad to be justifiable in a trade mark specification. This trend has earlier roots in UK case law (see Laddie J in Mercury Communications Ltd v Mercury Interactive (UK) Ltd [1995] FSR 850 at 864-865). Will this be one of the first points of departure we see in a post Brexit trade mark system come 2021? We will wait and see.

Bad faith

The CJEU Skykick decision confirms the Koton case to find that bad faith is a dishonest intention at the time of filing, and a finding that an application was made in bad faith does not depend on the applicant knowing of third party activity.

In this sense, the decision further clarifies the concept of bad faith under EU law.

However, while the court did not clearly rule out that applying to register a mark that you have no intention to use could be bad faith, it does seem that an absence of intention to use alone is not enough. The decision indicates that it has to be shown that there was a dishonest or nefarious intention when applying for the trade mark. This implies that some evidence of a dishonest intention may be required, and that may be difficult for an invalidity applicant to obtain. Although there can be circumstances in which an invalidity applicant will be able to get such evidence later in proceedings (e.g. by disclosure), it is a relatively high hurdle. It remains to be seen if Skykick will seek relevant disclosure from Sky in the matter in an attempt to apply the CJEU judgment to its case.

Further cases looking at bad faith in more detail are likely as a result of the Skykick decision. We await more development as to the parameters of good faith trade mark applications in the coming years.