UK Supreme Court finally issues ruling on "bad faith" trade mark applications in Sky v SkyKick

Just when this Kat thought she'd have to wait for her ninth life to see an end to the SkyKick saga, the UK Supreme Court finally handed down its judgment in SkyKick UK Ltd v Sky Ltd on Wednesday ([2024] UKSC 36). The Supreme Court unanimously allowed the appeal in part. Lord Kitchin gave the judgment (with which the Justices agreed) and Lord Reed gave a concurring judgment. 

The sky's the limit? Not for the breadth of a
trade mark specification!

The Supreme Court had several issues to address, but the main concern among the IP community has been the meaning of "bad faith" under trade mark law. The Court also tackled infringement and some questions about its jurisdiction after Brexit.

The Road to the Supreme Court

Sky v SkyKick has been a long saga, and readers would be forgiven for forgetting a few details.

The claimants, the Sky Group of companies, provide a range of "SKY"-branded broadcasting entertainment, digital internet telecommunications and software services, including the well-known Sky TV satellite channels. The defendants are a start-up enterprise providing cloud-based information technology migration, backup, and management services to Microsoft partners. The defendants adopted the name SkyKick in November 2011.

As Sky is wont to do, they began proceedings for trade mark infringement in 2016, based on four of their EU trade marks and one UK trade mark. SkyKick counter-claimed for partial invalidity. They argued that Sky's specification of goods and services lacked precision and clarity, due to overclaiming (e.g. broad terms like "computer software"). SkyKick also argued that the trade marks were filed in bad faith due to a lack of intention to use the trade marks in relation to certain goods or services (such as "insulation materials" and "whips"). In the High Court ([2018] EWHC 155 (Ch)), Arnold J (as he then was) found that the SKY trade marks had been infringed, but referred five questions to the CJEU about the validity arguments ([2018] EWHC 943). 

The CJEU delivered its judgment in January 2020 (Case C-371/18). There had been some excitement about the Advocate-General's opinion (discussed by Katfriend Léon Dijkman here), but by comparison, the CJEU's decision was rather disappointing. It ruled that the public policy grounds for invalidity would not be triggered by a lack of clarity and precision in the specification. The Court noted that it may be bad faith where "there is no rationale for the application" but that there was a need for "objective, relevant consistent indicia tending to show" bad faith. Where an application is made in bad faith only in respect of some goods or services, this does not taint the whole registration: the CJEU confirmed that the registration may be held invalid only for those goods or services.

The matter returned to the High Court ([2020] EWHC 990). Arnold LJ found the application was made partly in bad faith where Sky had "no foreseeable prospect that they would ever intend to use the Trade Marks in relation to such goods and services" and had sought this broad protection purely for the purposes of using the trade marks as a "legal weapon" against third parties, and redrafted Sky's specifications accordingly. Nevertheless, SkyKick had still infringed the trade marks in their restricted form. The Court of Appeal ([2021] EWCA Civ 1121) disagreed with Arnold LJ's findings on bad faith and restored the specifications, holding that Sky did not need to have a commercial justification for every item in the category to have applied in good faith for computer software as a whole. SkyKick was granted permission to appeal to the UK Supreme Court in July 2021, and the hearings were conducted in June 2023.

Bad Faith

The Court of Appeal had been very critical of the High Court judgments on both procedural and substantive grounds. The Court of Appeal found that where Sky had substantial present trade and a future expectation of trade in relation to part of a category of goods or services, "there could be good and bad reasons for applying to register the marks, and the sole aim of the applications could not be inconsistent with the function of a trade mark, namely to indicate origin." Therefore, Sky's lack of intention to use in relation to all software was not a plausible basis for finding that any part of the application was made in bad faith.

The Supreme Court disagreed and found that Arnold LJ was entitled to require the further modification of eight categories of goods or services on the grounds of bad faith: [321]. For instance, the Court of Appeal had failed to take into account Sky's behaviour in the lead-up to the trial, which supported the view that Sky had "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": [318]. 

The Supreme Court also disagreed with Sky's characterisation of the EU case law about claiming goods or services where there is no prospect of use. Lord Kitchin stated that "I do not accept that these [General Court] decisions justify any general rule that the contrast between the size of the list of goods and services for which the applicant sought protection, on the one hand, and the nature of the business of the applicant, on the other, can never justify a finding that the application was made in bad faith. That would leave the system open to abuse and, in my view, it is not a reasonable or correct interpretation of the legislation": [255].

As for Sky's use of general terms, the objection based on clarity and precision was no longer available after the CJEU judgment. The Supreme Court affirmed that 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". However, Lord Kitchin noted at [323]:

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 unjust if it escaped that consequence simply because it had framed its specification using general terminology.

Infringement

The Supreme Court upheld the judgment of the Court of Appeal on infringement. The infringement claim focused on confusing similarity (article 9(2)(b) EUTMR), which meant that at least some of SkyKick's goods or services needed to be identical to those for which the SKY marks were registered. Arnold LJ found that SkyKick actually marketed two packages that were adjuncts to Microsoft Office 365, which fell within the modified SKY specifications and gave rise to a likelihood of confusion:

• "Cloud Migration" was the email migration product ("SkyKick Outlook Assistant") that provided a service involving the wholesale migration of data from one platform to another;
• "Cloud Backup" provided cloud-based wholesale backups of customers’ Office 365 data, a service involving the storage and potential retrieval of the customer’s data.

Arnold LJ found that SkyKick was not supplying software as goods, but did fall within some of Sky's modified specifications for services. Arnold LJ considered "Cloud Backup" to be a service that fell within the narrowed category of "computer services for accessing and retrieving audio, visual, and/or audiovisual content and documents via a computer or a computer network" (Class 38), and the Court of Appeal agreed (on the basis of the earlier specification). Whilst SkyKick "mounted a vigorous challenge to this conclusion", the Supreme Court held that the lower courts were entitled to make these findings of infringement.

As for "Cloud Migration", Arnold LJ found this to be a service that fell within "electronic mail services" (Class 38), but both the Court of Appeal and Supreme Court disagreed. The expression "electronic mail services" does not include "all services related to electronic mail", and Arnold LJ's finding was contrary to principle, as explained by Lord Kitchin at [365]:

if a specification of goods is defined by terms which are ambiguous, then it should be confined to those goods which are clearly covered. These principles are consistent with first, the requirement that the specifications of goods and services must be clear and precise so that others know what they can and cannot do; and secondly, general fairness because any ambiguity is the responsibility of the owner of the mark.

Therefore, SkyKick's "Cloud Migration" product did not infringe any of the registered SKY marks. The Supreme Court declined to undertake any additional evaluation in relation to dilution: [380]. Consequently, only one finding of infringement survived.

Impact of Brexit

All the parties agreed that this was not a case in which it was appropriate to depart from EU case law. However, Sky raised new arguments before the Supreme Court about its jurisdiction to decide matters concerning EU trade marks after Brexit. This was the subject of Lord Reed's concurring judgment.

To summarise, the Court held that the combined effect of article 4(1) of the Withdrawal Agreement and section 7A of the Withdrawal Act 2018 was to ensure that certain laws, including the EU Trade Mark Regulation, would continue to have direct effect in respect of proceedings instituted before the end of the transition period (i.e. before IP completion day, 31 December 2020), as in this case. For such pending proceedings, the UK courts continue to act as EU trade mark courts ([497]), and can determine validity of EU trade marks protected in the territory of the EU, not just for the UK ([500]). The Supreme Court therefore agreed with the decisions in EasyGroup v Beauty Perfectionists and EasyGroup v Nuclei (though not necessarily their reasoning).

Sky had argued that the "guillotine has come down" and the UK courts no longer have jurisdiction over registrations in the remaining EU member states. The Supreme Court considered that these submissions were, in some instances, "based on a mistaken understanding of the law" ([510]) and were, more broadly, incompatible with the basic principles of legal certainty and non-retroactivity ([511]) and the express intentions of the Withdrawal Agreement ([512]).

Final Thoughts

The latest information from the UKIPO is that seven actions, which opposed the registration or challenged the validity of a UK trade mark registration, had their proceedings suspended pending the Supreme Court’s judgment. These proceedings, which include a dispute over rights to the 'Banksy' trade mark, will finally be able to resume after yesterday's ruling.

This certainly won't be the last word on the matter: this Kat is looking forward to all the clear and precise commentary and, perhaps, some good faith criticism once the IPKat community has had time to examine the Supreme Court's judgment more closely.