SkyKick: What should trade mark owners do now?

You can tell a trade mark dispute is more significant than average when it reaches the Supreme Court (after more than eight years of litigation, including four High Court judgments, a CJEU reference and a Court of Appeal judgment), and the Supreme Court hands down judgment despite the parties reaching a settlement and asking the court not to do so. 

The Supreme Court gave judgment in SkyKick in those circumstances, in large part because it recognised (and was persuaded by the Comptroller-General, on behalf of the UKIPO “as gatekeeper of the United Kingdom register”) that the issues in dispute between the parties were important to trade mark owners, and the practice of trade mark law more generally in the UK. 

In this article we consider the Supreme Court’s judgment to the extent it relates to bad faith, which is the main focus of the court’s 145 page judgment.  We address what the judgment really means for trade mark owners, trade mark lawyers, and the thousands of businesses who find themselves each year involved in some kind of trade mark dispute. 

A brief summary of the dispute and the Supreme Court’s findings on bad faith  

Many will be familiar with the background to this dispute so we do not try to summarise it here. In short, Sky commenced trade mark infringement proceedings in 2016 in which it alleged that SkyKick had infringed its UK and EU trade marks (for the word SKY or stylised versions of it), by offering and supplying email migration and cloud backup products under the mark SkyKick. 

Sky relied on a number of its UK and EU trade mark registrations. The specification of goods and services  varied between the SKY marks but, as the court put it: “The range of goods and services for which…the SKY marks - were registered is enormous and, as SkyKick have pointed out, included goods and services in many of the 45 classes of the Nice Classification.” 

SkyKick denied infringement and as part of its counterclaim it attacked the validity of Sky’s trade marks, including on the basis that they had been applied for in bad faith because Sky had no genuine intention of using them in relation to all of the goods and services for which they were registered.  

Sky continued to rely on the full extent of its trade mark registrations until near the conclusion of the High Court trial. At that point, it narrowed the goods and services it relied on to what became known as the “Selected Goods and Services”. This was a list of eight goods and services which was narrower than the full specifications of the SKY marks but which the Supreme Court noted were “still framed in very general terms [and] still cover an enormously wide range of goods and services”.  They included, for example, “computer software” in Class 9 and “telecommunication services” in Class 38. 

The High Court judgments – SKY marks pared back to reflect findings of bad faith 

Arnold J. (as he was at the start of the proceedings) gave four High Court judgments including two which applied the CJEU’s judgment in response to the reference he made to it, concluded[1] that the SKY marks were partially invalid because:

• Sky had not intended to use the SKY marks in relation to some goods and services covered by the specifications and there was no foreseeable prospect that they would ever intend to use the SKY marks in relation to those goods and services. 
• Instead, Sky had made the applications pursuant to a deliberate strategy of seeking very broad protection for the SKY marks regardless of whether it was commercially justified. 
• Sky had applied for the SKY marks with the intention of obtaining an exclusive right for purposes other than those falling within the functions of a trade mark, namely purely as a legal weapon against third parties, whether in threats of infringement claims or actual infringement claims or oppositions to third party applications for registration. 

Accordingly, he cut down the specifications of SKY’s trade marks to reflect the extent to which he considered they had been validly registered. He only did so in respect of the Selected Goods and Services because Sky (on the judge’s invitation) formally withdrew their infringement claims in respect of the remaining goods and services. In doing so he sought to “devise a specification which reflected the extent of the bad faith proved, but no more, and which gave to Sky what he described as fair protection.”   

By way of example, “Computer software” was pared back to “Computer software supplied as part of or in connection with any television, video recording or home entertainment apparatus or service; computer software supplied as part of or in connection with any telecommunications apparatus or service; electronic calendar software; application software for accessing audio, visual and/or audio-visual content via mobile telephones and/or tablet computers; games software.”

(As an aside – albeit an important one - there was a dispute before the Supreme Court about the procedure adopted to identify this pared back specification.  Sky complained about the process by which Arnold approached this process because he formulated a middle ground of his own which Sky had no opportunity to respond to. 

The Supreme Court was not sympathetic to Sky in this regard. It considered that Sky must have known the case advanced against it. Each side had put forward narrower specifications which they contended were appropriate, and the judge had made clear that if he were to find himself dissatisfied by the position taken by either side then he would have to decide for himself where in the middle the line should be drawn. No further fall back was put forward and so that’s what the judge did. 

It is clear that the Supreme Court had limited sympathy for Sky in circumstances where it was they who had advanced an infringement case based on very broad trade marks and only belatedly narrowed its claim after the cross-examination process at trial was over.  The court emphasizes the “importance in proceedings such as these of requiring the parties to set out clearly and precisely the allegations they are making, and the basis for them, and that the other side is given a proper opportunity to address them.” 

That fundamental principle should be borne in mind in trade mark disputes where it is all too common for parties to rely on the full breadth of their trade mark portfolio even though it is quite clear which marks and which goods/services will provide the strongest claim and which will be focused on at trial.)

Court of Appeal overturns High Court and restores Sky’s marks 

The Court of Appeal subsequently overturned the High Court findings on bad faith.  It was critical of the High Court’s approach, both in terms of substance and procedure. 

The Court of Appeal judgment struck a far more lenient approach towards trade mark applicants and provided more leeway to apply for a broad range of goods and services. It held, for example, that applying for registrations without thinking about the commercial justification for taking that course was legitimate and not bad faith, provided the applicant already had an active business. In the case of ‘computer software’ for example, Sky had an active business and was not required to confine itself to those particular types of computer software they did or soon would offer.  

The Court of Appeal’s approach is perhaps best summarized by the conclusion that a trade mark 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 5 years, but there will undoubtedly be more such goods than there are now.””

The Supreme Court sides with Arnold’s High Court judgments 

In its judgment, the Supreme Court has adopted a stricter approach, and restored the findings of bad faith made by the High Court.  

Its view was that the Court of Appeal’s approach meant that it would “in practice, be very difficult if not impossible for a third party to make out a case of bad faith filing on the ground that the applicant had no intention of using the mark in relation to some or all of the goods or services the subject of the application.” 

The Supreme Court draws together the case law on bad faith, much of which comes from EU cases and in particular the recent CJEU and General Court decisions including in SkyKick, Koton, and Hasbro. 

In relation to cases such as SkyKick where the argument put forward is that the applicant had no intention to use the mark, across the full breadth of the specification, the Supreme Court says that the “the 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 the other circumstances, including the size and nature of the applicant’s business, that the application constituted, in whole or part, an abuse of the system and was for that reason made in bad faith.” 

In relation to Sky’s trade mark applications, it was therefore legitimate for the court to consider the overall width and size of the specifications. Whether or not it can be inferred from the breadth of the specification that an application was made in bad faith will depend on all of the circumstances.  In Sky’s case, those circumstances included the following, which all counted against Sky: 

• Sky’s trade mark specifications were very, very large – covering a huge number of classes and at times framed using class headings and capturing all goods within that class.  
• Sky had not disclosed any contemporaneous documents setting out, let alone explaining or justifying, their filing strategy, and in particular their reasons for seeking such broad protection.  Nor did any witness give first hand evidence as to why Sky had filed so broadly. 
• Sky originally relied, in the claim against SkyKick, upon the full range of goods and services for which each of the SKY marks was registered. 
• Sky maintained that position in the face of the bad faith objection until around five weeks before trial. 
• Sky narrowed the basis of the claim further in closing submissions. 

Together, these matters supported the argument that Sky had applied to register the marks in respect of a great range of goods and services they did not intend to sell or provide, and yet were prepared to deploy the full armoury of their trade mark rights against another trader. 

That was evidence that the SKY marks had been applied for, in part, in bad faith. 

The Supreme Court judgment also comments on the enforcement action which had been taken by Sky in the years leading up the SkyKick litigation. 

Sky gave evidence that it had enforced its marks aggressively.  Before the High Court, Sky gave evidence of a list of in excess of 800 “positive” decisions around the world in which it had been wholly or partially successful.  The Supreme Court noted that some of those positive decisions included cases in which Sky had successfully opposed applications for marks containing the word SKY in relation to goods and services in which Sky did not trade and had never traded. Examples at the EUIPO included “SKYTRON” (for automatic vending machines, cash registers and fire-extinguishing apparatus), and “LittleSky” for animal skins and footwear.  You sense from reading the Supreme Court’s judgment that this wide-ranging effort to keep the register clear of any mark containing SKY was evidence of the real reason Sky applied for such broad trade mark specifications.  In other words, the marks were useful to Sky for use in opposition proceedings and litigation, rather than to use as a badge of origin for its own goods and services. 

The Supreme Court’s finding that Sky’s marks were applied for in bad faith was also applicable in relation to the use of class headings and other general terms, such as “computer software”.  Where these include distinct categories or subcategories of goods or services, the trade mark owner may be found to have acted in bad faith in relation to one or more of those, and it cannot escape the consequences of that finding simply because it had framed its specification using general terminology. 

The Supreme Court therefore held that the High Court was entitled to find that the SKY marks were applied for in bad faith to the extent that Arnold had done so, and to declare them partially invalid. 

So what does this mean for trade mark owners and the practices of trade mark lawyers? 

The impact of SkyKick on trade mark practices in the UK will become clearer in the coming years. 

The extent to which the Supreme Court’s findings permeate through the system will depend on the extent to which trade mark owners and those advising them modify their behaviour, and the extent to which first instance courts and the UKIPO are willing to make findings of bad faith. We set out our thoughts on those points below. 

Trade mark applicants and their filing strategies  

Let’s take trade mark applicants first. 

One school of thought is that, despite Sky’s defeat, SkyKick does not justify any change in trade mark applicants’ behaviour for two reasons. 

First, Sky’s filing strategy was incredibly broad and so it is possible to see the outcome as somewhat of an outlier.  Perhaps no other trade mark owner will hold trade mark rights spanning so many goods and services, across so many of the 45 Nice classes.  That means very few trade marks will be quite so vulnerable to a bad faith attack as the SKY marks. 

Second, the consequences of a successful bad faith attack are not particularly severe. Following a finding of bad faith, the trade mark specification is simply pruned back to those goods/services which were applied for in good faith.  SkyKick had originally argued that a finding of bad faith should lead to total invalidation of the trade mark registration which would have created a huge deterrent to overly broad filings. But the CJEU’s judgment in 2020 ended that possibility.[2] 

The result is that a trade mark owner is left in no worse a position than had they applied for a more restrictive specification in the first place. With no real punishment for over-reaching when making the filing, trade mark applicants might legitimately take the position that it is better to overreach and be pared back once attacked, than to take an overly restrictive approach at the filing stage. 

Overall, we would expect to see trade mark applicants modify their filing strategy to some degree, by ensuring they are focused only on those goods/services which they already sell or have a realistic prospect of selling (or are exploring the possibility of selling) within the five year grace period before the trade mark becomes vulnerable to a non-use attack.   Sky’s trade marks, for example, covered “whips” and “bleaching preparations” – we think it’s very unlikely that they will do in the future unless Sky’s business model radically changes. 

Trade mark litigation practice 

The other development which we should expect to see is for bad faith attacks to become even more common in proceedings before the UKIPO and the courts. 

Where a trade mark is asserted which is less than 5 years old (and so not vulnerable to a non-use attack), a bad faith attack is clearly a useful tool for both strategic and substantive reasons.  Although a bad faith allegation is a serious one to make, we expect it is one which parties will feel justified in making where a trade mark specification is broad and contains goods/services which the owner has not used. 

This has a number of consequences. 

First, trade mark owners should give careful thought to which goods/services within their trade mark specifications they rely on in any proceedings.  Relying on all goods and services in the SkyKick proceedings was damaging for Sky, as was its reluctance to narrow down the asserted trade marks until the final stages of the proceedings. 

Second, trade mark owners should be prepared to defend bad faith attacks whenever they assert their trade marks.  That means having available to deploy, if needed: (1) contemporaneous documents which record the trade mark filing strategy; and (2) first hand evidence which justifies it.  Sky could not provide either of those, and it counted against them. 

Trade mark owners should also be prepared to offer realistic fall-back positions, either before or at trial. That will enable the other party to know the case they have to meet, and will reduce the likelihood of a judge making a finding on bad faith which the trade mark owner has not had an opportunity to respond to. 

Finally, trade mark owners may also choose to become more discerning and targeted in the enforcement of their trade mark portfolios.  As mentioned above, Sky could point to 800 “positive” decision in action it had taken to stop the registration or use of trade marks containing the word ‘sky’.  While actively enforcing your trade mark rights is crucial, and particularly so in demonstrating that the mark remains distinctive, that needs to be balanced against with the risk that being overly aggressive in asserting a trade mark might be seen by a court as evidence that you have applied for it to use as a legal weapon only, and therefore in bad faith.  

How will the UKIPO and courts apply the SkyKick principles? 

Given we expect to see defendants (and respondents to oppositions and cancellations) raise bad faith counter-attacks more often, we will also no doubt see a steady stream of decisions which apply the SkyKick principles.   

It will be interesting to see where courts draw the line, particularly as they will no doubt be presented – more often than not - with facts which will be less extreme (in terms of breadth of specification) than those presented by the SKY marks.  

Finally, it needs to be kept firmly in mind that a bad faith counter-attack will only be part of a wider dispute. 

Whatever the tribunal decides in relation to bad faith and however it pares back a trade mark specification, the real question is whether what is left of that trade mark registration has or has not been infringed by the third party (or whether it is enough to prevent a third party’s application proceeding to registration in an opposition or cancellation context). 

It is clear from the Supreme Court’s judgment that sections 10(2) and (3) (and sections 5(2) and (3) in an opposition or cancellation context) provide trade mark owners with more than sufficient leeway to enforce their rights against those offering goods and services which the trade mark owner does not, because they entitle the owner to protection even where the other party is offering different goods to those which are covered by the registration. The Supreme Court clearly felt that those provisions of trade mark law should be relied on in order to obtain a penumbra of protection beyond the specific goods and services which a trade mark owner uses their marks for – instead of adopting a practice of applying for goods/services which you have no intention of using. 

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[1] As summarised by the Supreme Court at [103-112]. 

[2] We covered the CJEU judgment here: https://www.bristows.com/viewpoint/articles/cjeu-decision-in-sky-v-skykick/