Furry thoughts on Sky v. Skykick – Part 2: trade marks registered with no intention to use

Last week, this Kat published a post on the issue of trade mark registrations suffering from a lack of clarity [here] following the Court of Justice of the European Union (CJEU)'s decision in C-371/18 Sky v. SkyKick [rapid announcement post here]. This post concerns the issue of bad faith registrations in the absence of an intention to use. 

The CJEU decision

Sky applied for large numbers of trade marks for a very broad range of products, including products far removed from its core business, such as whips, furs or fire extinguishers. This practice made Arnold J (as he then was) conclude that "the reason for including such goods and services was that Sky had a strategy of seeking very broad protection of the Trade Marks regardless of whether it was commercially justified" [par. 250 of the referring decision], and he wanted to know the limits set to such strategies by EU law.

The CJEU called to mind its recent decision in C-104/18 Koton and reiterated that the concept of bad faith "presupposes the presence of a dishonest state of mind". In Koton, the CJEU held that a finding of bad faith is not limited to situations where the applicant had knowledge of use of a similar or identical trade mark by a third party [par. 55]. Rather, bad faith must be established in light of "all the relevant factual circumstances as they appeared at the time that the application was filed" [par. 59], including the "commercial logic" of the registration [par. 62].

Building on this in Sky, the CJEU held that a trade mark application "without any intention to use it in relation to the goods and services covered by that registration may constitute bad faith, where there is no rationale for the application for registration" in light of the aims of trade mark law [par. 77]. However, the mere absence of an intention to use is not enough. Rather, to establish that an unused trade mark was registered in bad faith, it must be shown that there existed (a) a dishonest intention of undermining the interests of third parties, or (b) an intention to obtain an exclusive rights for purposes falling outside the functions of the trade mark [par 75].

Where such a finding is made, bad faith will arise only for the goods concerned, so that a partial finding of bad faith is possible [see also Koton at par. 61].

Lastly, the CJEU held that Section 32(3) of the UK Trade Marks Act 1994 is, in principle, compatible with EU trade mark law. This provision requires applicants to state that the trade mark is being used, or that the applicant has a bona fide intention to use the trade mark. The CJEU held that if this is a "mere procedural requirement relating to the registration" of a mark, it is acceptable [par. 86].

But what can be the effect of this statement? It seems that, under English law, a finding of bad faith is likely where the statement turns out to have been falsely made [see the discussion of the case law in the referring decision, pars. 209-233]. But the CJEU seems to reject this possibility: Member States are precluded from introducing grounds of refusal or invalidity not mentioned in the EU Trade Mark Directive or Regulation. Thus, while the infringement of an obligation to make the use statement "may constitute evidence for the purposes of establishing bad faith", the infringement in and of itself cannot "constitute a ground for invalidity of the trade mark concerned" [par. 86].

Lucrezia has no intention to use her study materials according to their function

Bad faith as a safety valve for the trade mark system…

Insofar as it concerns the issue of bad faith, the CJEU's decision in Sky came as no surprise to this Kat. Since Koton, we have known that bad faith must be given a broad application, in the sense that it can potentially cover any trade mark registration made with a "dishonest state of mind". The decisions in Koton and Sky pave the way for increased use of bad faith arguments in case of abuse of the trade mark system, regardless of the form it takes.Thus, in my post on the opinion of Advocate General (AG) Tanchev, I suggested that his approach to bad faith was sensitive to the issue of deliberately abusive filings. The so-called "Gleissner Files" offer a notorious example: they describe in detail the various practices of a Mr. Michael Gleissner, which include filing hundreds of trade mark applications covering popular names and terms as part of a massive blocking strategy. This is apparently a viable business proposition, probably because, whilst in theory there are no limits to signs that can constitute trade marks, in practice there is a finite supply of signs that are in actual fact suitable and attractive for use as a trade mark [an argument developed in more detail in a recent study by Professors Beebe and Fromer].

Courts have been able to adequately deal with these kinds of abusive practices by weaponizing the bad faith requirement. For instance, in T-82/14 Copernicus, the General Court (GC) confirmed that utilizing a "priority trap" – whereby trade marks are filed, withdrawn prior to having to pay fees, and then re-filed until a later applicant registers a similar sign – constituted bad faith [par. 148]. Likewise, the United Kingdom Intellectual Property Office (UKIPO) held repeatedly that comparable strategies could constitute bad faith [e.g. here, here and here].

The requirements for bad faith formulated by the CJEU in Sky fit these types of situations like a glove: indeed, "obtaining an exclusive right for purposes other than those falling within the functions of a trade mark" concisely but aptly describes the business models of the likes of Mr. Gleissner. It is hoped that European courts will now make short shrift of such practices.

… but how far does it go?

Sky, however, was about trade mark registrations by a company that holds a widely reputed trade mark – Sky – and holds a strong position on the market in respect for a number of services, mostly related to television broadcasting.

The real question is what kinds of limitations these kinds of parties face in registering their trade mark also for other goods, no doubt with a view of keeping the trade mark register clear of other Sky-registrations and to thus help protect the distinctiveness of its core mark. This is not an uncommon strategy, though Sky perhaps went a bit overboard: the referring decision noted that two of the registrations invoked by Sky were over 8 000 words long.

In my view, it will be much more difficult to prove bad faith for these kinds of parties. Perhaps Sky did not intend to ever use its mark for whips, furs or fire extinguishers. But that is not enough, the CJEU tells us. In addition, the applicant must aim to undermine the interests of third parties or seek to obtain exclusive rights not justified by the functions of the trade mark system.

My feeling is that it will not be very easy to establish this in cases where the trade mark is used and has a strong reputation for a wide range of goods, since it will often be legitimate for these kinds of parties to protect their brand also in ancillary markets. Then again, invoking several 8 000+ word trade mark registrations against a company that offers services quite far removed from Sky's core business won't win much sympathy from most courts, and it certainly did not in the referring court. Those courts certainly can read in the CJEU's decision encouragement to severely trim down such registrations.

Will a statement as required by Section 32(3) UK Trade Marks Act 1994 help? Most likely, no. If a trade mark is not used after five years, it is clear that no intention to use existed or was lived up to. In that case, it is unclear what the added value is of a statement that such an intention existed at the time of registration if that cannot by itself establish bad faith. After the Brexit transition period, UK courts may become effectively free to disregard the decision in Sky so they may attach more severe consequences to falsely stated intentions to use. But in the rest of Europe, this Kat expects comparable restrictions will do little to reign in applicants like Sky.

All in all, Sky does not really seem to empower courts to deal with the important issues the case raised. As noted last week, the CJEU's solution to the lack of clarity issue is not really satisfactory. The bad faith issue is left sufficiently open for courts to potentially act against overbroad trade mark applications like Sky's; but it will not be easy to determine a clear boundary. The good part is that Sky seems to be just the beginning, so that exciting developments on these issues no doubt await us.