SkyKick UK Ltd v Sky Ltd: The sky might not be the limit

SkyKick UK Ltd v Sky Ltd provides a cautionary tale – the sky might not be the limit. Learn about the potential consequences of applying for a trade mark with an excessively broad specification of goods/ services.

Summary

On the 13 November 2024 the Supreme Court issued its judgment in the latest instalment of the very long running trade mark dispute between Sky (the well-known broadcaster and telecoms company) and SkyKick, in which Sky had claimed infringement of a number of their trade mark registrations for ‘SKY’ by the use of the mark ‘SkyKick’ on email migration and cloud storage products and services.

The Supreme Court has upheld SkyKick’s appeal on the issue of bad faith filings and confirmed that the High Court was entitled to find that the ‘SKY’ marks were applied for in bad faith to the extent that it did, and that the Court of Appeal was wrong to reverse that finding.

This decision has implications for the filing and enforcement of trade marks. The Supreme Court ruled that applying for a trade mark without a genuine intent to use it for all of the products and services listed in the specification may constitute bad faith. In particular, the decision clarifies that terms such as “computer software” without additional precise description can affect the function of a trade mark as an identifier of origin. The decision is a strong reminder of the benefits of drafting the specification of goods and services with clarity and specificity when applying for trade mark protection and therefore ensure that it does not turn into a barrier to competitors.

Details

Subject matter of the dispute in SkyKick UK Ltd v Sky Ltd

The case concerns the circumstances in which a trade mark registration may be declared invalid (or partially invalid) because it was filed with no intention to use the mark across all of the products and services for which it was registered, and therefore when it can be stated that such registration was applied for in bad faith.

The Supreme Court has now clarified what circumstances must exist for a trade mark owner to have filed an application in bad faith when the trademark was filed or granted for a broad category of goods/ services in its specification but the applicant/ registered owner does not intend to use the mark on all items listed.

The Supreme Court decision has been one of the most eagerly awaited decisions for brand owners in the last few years, because it provides answers to the following questions:

1. What is the test for determining “bad faith” in section 3(6) of the Trade Marks Act 1994?
2. If such bad faith is found, what is the correct approach to determining the specification that the proprietor of the trademark should be permitted to retain?

Background

Sky brought actions against SkyKick for infringement of its trade marks across a range of goods and services, while SkyKick challenged those trade marks’ validity. At this stage in the proceedings, the parties’ arguments were focused on whether Sky applied for its trademark in “bad faith” within the meaning of section 3(6) of the Trade Marks Act 1994, which would render Sky’s trade mark registrations partially invalid. 
SkyKick alleged that Sky employed a strategy of applying to register trade marks for overly broad lists of goods and services which it does not deal in, and for which it had no conceivable commercial rationale. The judge found that Sky had acted in bad faith and that its trade marks were partially invalid, but nevertheless found that SkyKick’s email migration and cloud storage services infringed Sky’s trade marks. The Court of Appeal allowed Sky’s appeal and held that it had not acted in bad faith and dismissed SkyKick’s cross-appeal on infringement.

SkyKick appealed to the Supreme Court on the issue of bad faith.

History of the dispute

In 2018, Sky brought proceedings for trade mark infringement and passing off against SkyKick in relation to its cloud migration, cloud backup and cloud management services. SkyKick denied infringement and counterclaimed for a declaration that Sky’s trade marks were invalid due to:

• the specifications of goods and services lacking clarity and precision; and/ or
• the applications being made in bad faith.

Mr Justice Arnold (as he then was) heard the case in the High Court. He delivered a detailed judgment and referred some key points to the CJEU.

In January 2020, the CJEU confirmed that:

• lack of clarity and precision in a specification was not grounds for a declaration of invalidity; and
• a trade mark may be wholly/ partially invalidated for bad faith if there was no reasonable commercial rationale for the application.

The High Court ruled on the basis of the CJEU decision in June 2020, finding Sky successful in its claim for trade mark infringement. Sky’s passing off claim was dismissed, and the court also found that Sky had applied for some of its trade marks in bad faith, as they had no intention to use their trade marks for all of the specifications applied for.

Both parties were granted permission to appeal and did so:

• Sky appealed against the finding of partial invalidity and consequent restriction on the specification of their trade marks, and the dismissal of the passing off action; and
• SkyKick cross-appealed against the findings of infringement; and argued for a further restriction of Sky’s specifications.

On the 26 July 2021 the Court of Appeal reversed the finding of partial invalidity on the basis of bad faith against Sky. The court found that Sky’s trade mark applications were made in relation to goods and services for which Sky had a “substantial present trade and a future expectation of trade”, and not with the sole intention of obtaining an exclusive right to stop third party use. Sky’s “particularly prolific” expansion and extensive brand recognition could justify broad protection.

The court examined the core reasoning of the first instance judgment in relation to bad faith, which relied on two principal conclusions:

1. in relation to “some goods and services covered by the specifications” Sky did not intend to use the trade marks at the application dates and there was no foreseeable prospect that they would ever do so (“the no prospect of use conclusion”); and
2. the marks were applied for pursuant to a deliberate strategy of seeking very broad protection, regardless of whether it was commercially justified (“the broad strategy/ no justification conclusion”).

In relation to the first conclusion, the court found that having no prospect of using a mark in relation to every conceivable sub-division of a category (such as computer software) was not necessarily a relevant or objective indication of bad faith. It would be different if Sky had no intention to use the marks for a specific category at all.

In relation to the second conclusion, the court found that an applicant for a trade mark does not have to formulate a commercial strategy for using the mark in relation to every species of goods or services falling within a general description to avoid an accusation of bad faith. An applicant is entitled to say “I am using the mark for specific goods falling within description X. I have no idea precisely where my business in goods of that description will develop in the next five years, but there will undoubtedly be more such goods than there are now.” i.e. an applicant with one item of computer software can apply in good faith for computer software as a whole.

Sky’s appeal against the dismissal of the passing off action was refused. SkyKick’s cross-appeal on partial validity was dismissed, and its cross-appeal on infringement was rendered moot by the result of Sky’s appeal.

An appeal to the UK Supreme Court was filed.

The 13 November 2024 decision issued by UK Supreme Court

Firstly, it must be noted that the Supreme Court opted to deliver this judgment (with the support of the UKIPO) in order to clarify issues which they believed to be in the public interest, despite the appeal having been withdrawn by SkyKick following the conclusion of a settlement between the two parties.

The Supreme Court’s decision was therefore issued as a matter of public policy interest.

The issues reviewed by the Supreme Court in this decision are:

1. When can a registration of a trade mark 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 intend to use the mark for the goods or services for which it sought protection?
   • The Supreme Court confirms that Sky had applied for some of its trade marks in bad faith, as they had no intention to use their trade marks for all of the specifications applied for.
2. What approach should be adopted when filing a trade mark using class headings or other general descriptions for the goods or services?
   • The Supreme Court recognises that an applicant does not need to have a firm or settled intention to use the sign as a trade mark in relation to the goods or services for which it seeks protection.
   • However, the Supreme Court states that the application for the SKY trade mark was made with the intention of securing an exclusive right for purposes other than those falling within the exclusive functions of a trade mark. In other words, it constituted an abuse in so far as the applications had been made to register the SKY marks in respect of goods and services which Sky had no intention to supply and where there was no realistic prospect of them ever doing so.
3. How allegations of invalidity and infringement should be assessed.
   • Sky’s claims of infringement of the SKY marks focused on two “packages”, primarily of services, offered by SkyKick to their actual and potential customers. One was called Cloud Migration and the other was called Cloud Backup.
   • The Supreme Court confirms SkyKick had NOT infringed the particular SKY marks to the extent that were offering services to supply and supplying Cloud Migration.
   • The Supreme Court confirms SkyKick had infringed the particular SKY marks to the extent that were offering services to supply and supplying Cloud Backup.
4. The impact on invalidity and infringement proceedings arising from the withdrawal of the UK from the EU.
   • The Supreme Court confirms that The European Union Withdrawal Act 2018 as amended provides that any remedies or procedures provided under the Withdrawal Agreement are to be given legal effect or used in the UK without further enactment. Therefore, as expressly provided under Article 67(1) of the Withdrawal Agreement, the provisions regarding jurisdiction of the EU Trade Mark Regulation are to continue to apply to proceedings that were instituted before the end of the transition period. For such proceedings, the UK court retains its jurisdiction as an EU trade mark court, and can continue to determine the validity or invalidity of an EU trade mark including outside the UK.

What does the decision mean for trademark owners?

This decision seems to confirm that applying to register a trade mark in relation to broad specifications of goods and services, which up to now has been a relatively conventional feature of United Kingdom trade mark practice, has the potential to leave trade mark rights vulnerable to attack on the ground of bad faith.

Accordingly, this decision may lead trade mark applicants to adopt a more circumspect approach to the drafting of trade mark specifications for the United Kingdom in order to deprive third parties of the opportunity to raise bad faith as a credible ground of opposition or invalidity. In addition, according to current UKIPO practice set out in PAN 1/23, it appears that bad faith may now be raised during ex-parte examination in the event that the examiner considers there to be a sufficiently clear lack of commercial justification for covering any of the goods or services that are included in an application. We expect the UKIPO to issue an updated Practice Amendment Notice in the near future to clarify whether and to what extent this will be the case in view of this decision.

It may also be advisable to consider whether existing trade mark registrations may be vulnerable to a bad faith attack on this basis before attempting to enforce them or relying on them as a basis for an opposition or cancellation action.

It would also be advisable for trade mark applicants to ensure that the commercial rational for covering all goods and services that are included in a trade mark application, and especially those that fall outside their core commercial activities, is properly recorded as potentially useful evidence for defending against a bad faith attack.