UK Supreme Court Ruling: Sky Falls in Pivotal Trade Mark Battle with SkyKick

The wait is over! The UK Supreme Court has handed down its judgment in the closely followed and long-running litigation between Sky, the well-known television and broadband company, and SkyKick, a lesser-known cloud computing business. 

The case has been awaited with interest by brand owners and the trade mark community, as it addresses significant issues regarding trade mark validity and bad faith in the context of broad trade mark registrations. In particular, the case has a potentially significant impact on the ability of trade mark owners to rely on terms such as “computer software”, which have historically been permissible registered terms in the UK (and EU), in contrast to other jurisdictions such as the United States, where the type of computer software must be specified. Long story short, the Supreme Court has found that Sky’s trade marks were filed partly in bad faith, which means its trade marks containing broad terms—such as “computer software”—have been narrowed. 

Interestingly, the parties agreed to a settlement not long before the judgment was handed down, and SkyKick requested permission to withdraw the appeal on that basis. The application was supported by Sky, and the parties asked the Supreme Court not to give judgment. The Supreme Court refused this application due to (amongst other matters) the public importance of the case.

As a fallback position, SkyKick and Sky asked the Court to limit its judgment to what would be, in effect, an advisory opinion, but the Supreme Court declined this application as well, concerned that it would lead to “uncertainty and confer no significant benefit”. 

The fact that the Court has proceeded to give judgment notwithstanding the parties had reached a settlement tells you everything you need to know about the importance of this case.

What’s the background to the case?

In 2016, Sky issued proceedings against SkyKick for trade mark infringement and passing off in relation to the use of SKYKICK for email migration and cloud storage services. All of the trade marks relied upon by Sky were still in their “grace period”, i.e., they could not be revoked on the grounds of non-use at the time the claim was issued because they had been registered for less than five years. They were also enormously broad, some of them covering 22 different classes, and included terms such as “bleaching preparations” and “whips”, alongside general terms such as “computer software” and “telecommunications/telecommunications services”. 

The central issue in the litigation was whether a trade mark can be invalidated in whole or in part on the basis that the application to register the mark was made in bad faith because the applicant did not, at the time the application was made, have a genuine intention to use the mark in relation to some or all of the goods or services for which it sought protection. SkyKick had alleged that Sky’s marks were filed in bad faith, due to the very wide breadth of the registrations. 

What was decided in the decisions of the lower courts?

In February 2018, Mr. Justice Arnold held that Sky’s marks had been infringed by SkyKick, if they were valid. He found there was no passing off. 

However, he referred a number of questions to the Court of Justice of the European Union (“CJEU”), before the UK left the EU, which gave the following rulings (in basic terms):

• If a trade mark specification lacks clarity and precision, that is not grounds for it to be invalidated.
• It is bad faith if there is no intention to use the mark for the relevant goods and services, but if there is a finding of bad faith, it will only affect the goods and services found to be filed in bad faith (as opposed to all goods and services). This means a trade mark is not vulnerable to being totally invalidated due to one term filed in bad faith (this was a big relief for trade mark owners given the customary practice of filing marks including broad terms in the UK and EU).
• The requirement that applicants for UK trade marks must state that the mark is in use, or that there is a bona fide intention to use, is compatible with the EU law (notwithstanding that there is not such a requirement in EU law). If there is no bona fide intention to use, that may be a ground for claiming bad faith, but it is not a stand-alone basis for invalidity. 

The case then returned to Mr. Justice Arnold, who found that Sky’s trade marks had been applied for partly in bad faith, and he narrowed Sky’s trade mark specifications to limit terms such as “computer software” to the specific type of computer software supplied by Sky. However, this was ultimately of limited use for SkyKick, as Sky retained enough terms in its trade mark specification for there to be a finding of infringement.

Both parties appealed to the Court of Appeal. The Court of Appeal overturned the finding of bad faith in relation to Sky’s trade marks (reinstating its broad terms such as “computer software”), and it rejected SkyKick’s appeal in relation to the infringement claim, as well as its assertion that Sky’s marks should be restricted even more extensively than they had been at the High Court stage.

What has the Supreme Court decided?

In summary, the Supreme Court has ruled that bad faith can be inferred from the width and size of the trade mark specification, allowing SkyKick’s appeal in part.  Whether bad faith can be inferred depends on all the circumstances of the case. 

Lord Kitchin’s judgment recognises the need for the trade mark registry to accommodate applicants whose intentions to use their marks may not be fully developed when they made their applications. However, if an applicant does not have a reasonable explanation and justification for the filing, then it is open to the tribunal to find that the application was indeed made in bad faith. The judgment refers to an example given by counsel for the Comptroller-General of a person who applies for every good and service within every class. Given the width and size of that specification, absent a satisfactory explanation, that would plainly justify a finding of abuse (and such a mark could not be allowed to remain on the register for five years before being open to challenge). 

Lord Kitchin explains that, in his view, the relevant question is whether “absent an explanation and rationale consistent with the functions of a trade mark, it is reasonable to infer from the size and nature of the list of goods and services the subject of the application and all of the circumstances, including the size and nature of the applicant’s business, that the application constituted, in whole or in part, an abuse of the system and was for that reason made in bad faith”.   

He additionally confirmed that a business having a reputation does not justify applying to register a mark in respect of goods and services which the applicant never had any intention to provide. 

The judgment makes it clear that whether or not a mark has been filed in bad faith will be dependent on the context. In this case, the Supreme Court considered it significant that Sky originally relied upon the full range of the goods and services in its marks, which was very broad, and did not narrow the terms relied upon until shortly before trial. That was found to be “powerful support” for the general case advanced by SkyKick that the marks were intended be used as a weapon—“Sky had applied for and secured these registrations across a great range of goods and services which they never had any intention to sell or provide, and yet they were prepared to deploy the full armoury presented by these SKY marks against a trader whose activities were not likely to cause confusion and did not amount to passing off”. 

In relation to terms such as “computer software”, the Supreme Court found that “an applicant does not have to have a commercial strategy to use a mark for every possible species of goods and services falling within the specification . . . where, however, the broad description includes distinct categories or subcategories of goods or services, as ‘computer programs’ and ‘computer services’ undoubtedly do, 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 unfair if it escaped that consequence simply because it had framed its specification using general terminology”. 

In view of the above, the Supreme Court overturned this part of the Court of Appeal’s decision, supporting the High Court’s original ruling in relation to Sky’s trade marks. Consequently, Sky’s marks containing broad terms such as “computer software” are to be pared back.

The Supreme Court agreed with the Court of Appeal’s ruling that SkyKick’s “cloud migration” service had not infringed Sky’s marks, as it was not sufficiently closely related to Sky’s registered goods and services. However, SkyKick was found to have infringed Sky’s marks in relation to its cloud backup services, as these fall into Sky’s (amended) registration for “computer services for accessing and retrieving audio, visual and/or audiovisual content and documents via a computer or a computer network”.

What was said about Brexit?

The Supreme Court confirmed that, as the proceedings were pending prior to the end of Brexit and the transition period on 31 December 2020, it continues to act as an EU trade mark court in relation to this case, and the decision therefore impacts not only Sky’s UK marks, but also its EU marks relied upon when this claim was issued.

What are the takeaways?

Historically, trade mark owners in the UK have enjoyed a stress free and generous five-year period in which they were able to rely on broad terms such as “computer software” without fear of the mark being challenged. 

Following this judgment, marks containing such terms are likely to be vulnerable to attack on the grounds of bad faith, and it is now highly likely that this will be raised by defendants if claimants seek to rely on such terms.  

Sky is probably one of the UK’s most famous businesses, providing a broad array of goods and services under its marks. If it was not able to retain the general term for software, it seems likely that other companies will not be able to either. The good news is that if a broad term is challenged, it will not be cancelled altogether, but rather will be narrowed to the good/service that the applicant had an intention to use.

The importance of this case is such that numerous UK IPO cases have been stayed pending the judgment; it will be interesting, therefore, to see if the UK IPO issues any guidance relating to filing practices as a result. We expect that the UK IPO is likely to be far tougher now on applicants who wish to file applications containing broad terms and long specifications.

In the meantime, trade mark owners (and their representatives) will have to carefully consider not only their trade mark filing strategy going forward, but also their existing marks and whether they should be pared back now to avoid costly arguments relating to this issue later (and possibly even a court deciding the extent to which the mark should be narrowed for them).