Supreme Court clarifies ‘bad faith’ trade mark law in Sky case

The Supreme Court’s judgment further puts an onus on businesses to be prepared to explain the rationale behind the goods and services they specify in their trade marks application – to avoid those marks being invalidated in cases where the marks have been registered and are challenged as having been applied for in ‘bad faith’.

Brand protection experts at Pinsent Masons said the judgment will have an immediate and direct impact on trade mark protection strategies.

The guidance given to brand owners was contained in a ruling in which the Supreme Court held that broadcaster, telecoms, and broadband provider Sky had registered UK and EU trade marks in bad faith, overturning an earlier ruling by the Court of Appeal in England and Wales.

UK trade mark law provides that a trade mark shall not be registered if or to the extent that the application is made in bad faith. UK and EU trade marks that are registered but later found to have been applied for in bad faith are liable to be invalidated. The Supreme Court determined Sky had applied for its relevant marks in bad faith after concluding that it never had any intention to use those marks for the full range of goods and services for which it had registered the marks.

The Supreme Court considered Sky’s intended use of the trade marks in the context of a long-standing dispute the company has had with SkyKick, a US supplier of email migration and cloud storage services. The High Court, Court of Appeal, and the Court of Justice of the EU (CJEU) had all issued decisions in relation to the case at earlier stages of proceedings.

Florian Traub said: “Not only did the UK Supreme Court decide to issue the decision despite the fact that the parties have actually settled their dispute, importantly, it appears to rein in the practice of applying for overly broad trade mark specifications. The court found that trade mark registrations can be invalidated if the applicant did not have a genuine intention to use the mark for some or all of the goods or services at the time of the application. This issue is significant for trade mark law and practice, as it affects the ease of obtaining registrations and the potential for abuse of the trade mark system.”

Gill Dennis said: “Applications will now need to be laser focussed on seeking trade mark rights relevant to the brand owner’s current core business and commercially genuine future expansion plans. Applying for or enforcing rights beyond that scope may no longer be tolerated by the UK Intellectual Property Office or the courts.”

After the CJEU had provided some guidance on the application of EU trade mark law – relevant in this case because the dispute precedes Brexit – the High Court found that Sky had deliberately registered trade marks for goods and services they had no intention of using their rights for, citing its “deliberate strategy” of seeking broad trade mark protection without any commercial justification and intention of using the marks as a “legal weapon”. Despite partially invalidating those marks that had been infected by bad faith registration, the judge held that SkyKick’s activities still infringed the trade marks in their restricted form and awarded Sky an injunction and damages.

The High Court’s decision was challenged by both companies before the Court of Appeal. In 2021, the Court of Appeal overturned the High Court’s findings of bad faith registration against Sky, determining among other things that merely applying for a mark to cover a very broad range of goods and services is not evidence of bad faith, as well as that it will not automatically be bad faith if the applicant does not intend to use the marks for all of those goods and services.

The Court of Appeal considered that while SkyKick was responsible for infringing Sky’s trade mark rights in respect of its cloud storage product and service, it was not responsible for infringing Sky’s trade mark rights in respect of its email migration product and service.

The Supreme Court has now said the Court of Appeal was wrong to overturn the High Court’s findings of bad faith registration by Sky. It has, however, upheld its findings in relation to SkyKick’s infringement.

In the process, the Supreme Court also confirmed that disputes over trade mark rights in the UK initiated before the UK courts prior to Brexit taking effect are governed by EU trade mark law. Ruling in the opposite “would have serious consequences in terms of uncertainty and cost for traders and the authorities administering the relevant trade mark systems in the United Kingdom and the European Union”, it said. Post-Brexit, the Supreme Court and Court of Appeal have discretion to depart from EU law when ruling in cases that pre-date Brexit where EU law governs the dispute at issue. In this case, the Supreme Court, with the agreement of Sky and SkyKick, determined that this was 'not a case in which it is appropriate to depart from EU law'."

In reaching its conclusions in relation to Sky’s bad faith registrations, the Supreme Court offered some clarity to businesses as to the factors relevant to determining whether trade mark applications are, or were, made in bad faith.

The court listed a set of principles established in EU and UK case law relevant in this regard – endorsing the CJEU’s case law on the matter that it developed during an earlier stage of the dispute between Sky and SkyKick.

The court highlighted how the use of “general terms” by trade mark applicants to describe the goods and services they wish their trade marks to cover could be problematic.

It even appeared to suggest that businesses that mimic terms used to describe categories of goods and services in the Nice classification system, an international classification system for trade mark applications, within their own trade mark applications, might be said to have sought too broad coverage if they did not intend to use the mark at the time of application for distinct sub-categories of goods or services within that description.

The court said: “An applicant does not have to have a commercial strategy to use a mark for every possible species of goods or services falling within the specification. Nor is it an objection that the applicant has applied for a wide range of goods and services using class headings or other general terms.”

“Where, however, the broad description includes distinct categories or subcategories of goods or services … then … the proprietor may be found to have acted in bad faith in relation to one or more of those, and it would be manifestly unjust if it escaped that consequence simply because it had framed its specification using general terminology,” it added.

Among other things, the court also rejected the notion that a “general rule” applies, the effect of which would be to give brand owners scope to specify a wider list of goods and services to which their trade marks should apply the broader the nature of their business. If such a rule applied, it would “leave the system open to abuse”, it said.

Whether the presumption that trade mark applicants have filed their application in good faith is be rebutted, and registered rights to be invalidated in whole or in part if so, will depend on the matter of degree to which there is a discord between “the width and size of the specification of goods and services and their nature, as compared to the size and nature of the applicant’s business (or lack of it)”.

The court said: “It would in my view be anomalous for traders who use broad terminology to describe the goods and services for which they seek protection to find themselves in a more favourable position than those who use appropriate sub-categories to describe the same goods and services, and I would reject any interpretation of the legislation that necessarily leads to that conclusion,” the court said.

“I see no reason why a person should be permitted to apply to register a mark or retain a registration in respect of distinct categories of goods or services in relation to which it never had any intention to use the mark, simply because it chose to use a broad description of those goods and services which meant they were encompassed together with goods or services about which no complaint is made,” it added.

The court said that where a bad faith trade mark registration is inferred, it “may be displaced by an explanation of an appropriate commercial rationale for making [the application]”, adding that “a failure to provide any satisfactory explanation may reinforce the inference and provide further support for a finding of bad faith”.