Sky kicks up another gear

Background 

This is the latest judgment in a long fight between Sky and IT services provider Skykick, which has already been several times around the High Court, up to the CJEU,  and back down again — all before the partial appeal which has been decided and handed down this week. We have previously reported on the outcome of the CJEU Reference and the High Court decision now under appeal

In the High Court before Mr Justice Arnold, the outcome was already, broadly, against Skykick. Various of Sky’s trade mark rights were pruned back from a very broad base, to a much tighter scope of services. However, that made little difference. Sky retained the broad term “Electronic mail services”, which had not been attacked, and so SkyKick’s provision of IT services for migration of email to the cloud was found to infringe. The other arm of SkyKick’s business (backing up data to the cloud) also infringed Sky’s marks, because Sky held on to registration of the similar term “computer services for accessing … documents via a computer”.  Overall, although SkyKick’s counterattack was partly successful on paper, it had no commercial effect to the outcome of the case against them. 

Even though it was the commercial winner, Sky had been somewhat bruised by having its trade marks partly cancelled, and it appealed against the pruning-back of its registrations. The appeal was determined by the leading judgment of, Sir Christopher Floyd, another leading IP judge (with whom Newey and Nugee LJJ agreed), as [2021] EWCA Civ 112. Since the case began, Mr Justice Arnold (as he was) has become a Lord Justice of Appeal, meaning that the same case has now been determined differently by two different leading IP judges. 

The crux of the appeal is the extent to which rather broad specification terms in trade marks may be held to be invalid due to bad faith, or a lack of intention to use the mark across the breadth of those terms. (There were other points on appeal: by Sky in relation to passing off; and by Skykick in relation to infringement — but neither of those required much commentary to dismiss).

The Court of Appeal’s assessment of the law

The Court first directed itself as to the legal principles on bad faith in trade mark law, originating from both the jurisprudence of the CJEU, and the UK Courts and tribunals. Identifying 13 key principles from the CJEU, the decision went on to approve of earlier decisions in various lower courts, drawing out principles of general application for  future cases. The law had also been reviewed by Arnold J at first instance, at customary length. But the Appeal decision focused on two specific English authorities, which though cited below, were not emphasised at first instance in the same way.

• The Court drew out the fine detail of the distinction identified by Nugee J in an earlier case concerning the Land Rover “DEFENDER” trade mark, showing that the idea of a ‘lack of intention to intention to use’ a trade mark for a specification was a potentially misleading shorthand. A broad specification term did not indicate bad faith on its own. It was possible for broad terms to be appropriate to describe the applicant’s intentions as at the application date. 
  
  
• Second, the Court of Appeal cited with approval the decision of Mr Daniel Alexander QC in HTC Corp v One Max Ltd. Mr Alexander in that case discussed not just the legal principles of bad faith, but also how the court should apply those principles. He noted that “it is necessary to give an applicant for a trade mark very considerable latitude” before making a finding of bad faith. He also said that trade mark attorneys drafting a trade mark specification should not have to interrogate their client in meticulous detail to come up with a workable trade mark specification, the object being to put forward a specification that bears a reasonable relationship to the applicant’s business. This might be the business the applicant is already in, or that it has some prospect of entering in the future. The court therefore needed to look at all the circumstances, asking whether the applicant had commercial reason to make the application it did, rather than unpicking the rationale further. 

The Court of Appeal’s interpretation of the CJEU reference

As mentioned above, in the course of this long running case, several questions had to be referred to the CJEU for determination because they raised new points of law which had not previously been considered at that level. When the CJEU's decision came down, the answers they gave to the various questions did not address the referral squarely, and were quite difficult to interpret. In fact, at the time, it was variously reported (by some) as being good for Sky, as well as (by others) as being good for SkyKick. 

One of the main questions referred had been whether it can constitute bad faith simply to apply to register a trade mark without any intention to use it. The Court of Appeal noted the lack of express answer to this question, and helpfully interpreted the CJEU’s implicit response, in the context of the other answers that were given. The court found that the answer implicitly given was that it was not bad faith simply to apply to register a trade mark without an intention to use. Such bad faith would only arise when those circumstances are coupled with objective, relevant and consistent indicia of an additional positive intention which was inconsistent with the functions of a trade mark.

The outcome of the case

It was clear, said the court, that Sky's application was supported by both good and bad reasons, and this was not a case such as others, where the sole objective in applying for the marks was unlawful. The CJEU having confirmed that it was possible for an application to be applied for partly in good faith and partly in bad faith, it was necessary to examine each part of the trade mark registration according to the intentions behind each part. Each category needed to be considered in its own right and it was necessary to do so with particular caution, because a broad specification was not enough to lead to an adverse finding.

In the earlier judgment, the judge had questioned, against each of the described specification terms, (a) whether there was a foreseeable prospect that Sky would use the mark for those goods; and (b) whether they were applied for pursuant to a strategy of seeking very broad protection, irrespective of the commercial rationale. 

However, the Court of Appeal preferred to examine broad categories from the starting point that a broad term could be a fair way of describing an applicant’s business, even if it did not capture every nuance of that business. For example, the fact that a term such as ‘computer services’ was broad did not mean it was applied for in bad faith. Since there was obvious commercial justification for applying for computer software which Sky's business did cover, that term was justified. Since the first judge’s reasoning had been applied in the same way across the entire scope of the goods and services in issue, the same reversal applied not just for that example term but for the rest of them as well.  

What to the future? 

This is unlikely to be the last word on the question of this sort of bad faith in trade mark law. There is still a difficult tension, between (on one hand) an applicant being allowed to register its mark before knowing how its business will evolve; and (on the other hand) the very broad spillover rights that can be used to restrain others — even those operating in very different businesses — in some cases based on a fallacy of language rather than real commercial motivation. 

It is still possible that this will go on to the Supreme Court for a final analysis and determination — which would be useful given the very different approaches now taken by two leading IP judges to the same set of facts. It is also possible that some legislative reform might address the question, perhaps to bring the UK’s practice closer to that of the USA, where trade mark specifications tend to be narrower and more concise in scope. 

Either way, Sky v Skykick will be studied closely by IP lawyers for years to come as a landmark case on the approach to bad faith in trade mark law.