The UK Court of Appeal has partially overturned the ruling of the High Court in the important Sky v SkyKick case, which has implications for the filing and enforcement of trade marks. The decision – if final – will be welcome news for many brand owners. 

What happened?

• The case concerns the circumstances in which a registration may be declared invalid for bad faith. It centres on whether an applicant can be said to have filed an application in bad faith where the applicant includes a broad category of goods/services in its specification but does not intend to use the mark on all items within that category.
• Over-turning the decision of the High Court, the Court of Appeal said that an applicant is not required to have an intention to use its mark on every conceivable sub-division of a broad category. The decision will be welcome news for brand owners since it suggests that an intention to use on some – and potentially even one – item within a broad category can justify inclusion of the broad term. The risk of counterattacks for bad faith might therefore reduce. 
• Some will argue that the decision is too lenient to brand owners and fails to consider that certain terms (like computer software, telecommunications services and pharmaceuticals) are very broad. Others will argue that a finding of bad faith is a serious one, akin to dishonesty, and that the bar should be set high. Since SkyKick has applied for permission to appeal the decision to the Supreme Court, this might not be the last ruling in this long-running case. 

Want to know more?

The background

This is the fifth decision in this dispute, coming after four first instance decisions and a (pre-Brexit) preliminary ruling from the EU Court of Justice (ECJ). 

In its preliminary ruling, the ECJ held that a trade mark registration can be declared invalid for bad faith for lack of intention to use in certain circumstances. However, it cautioned that a mere lack of intention to use of itself does not equate to bad faith; something more is required. The applicant must have filed the mark with the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark. Importantly, the ECJ held that only the goods/services applied for in bad faith would be deleted or narrowed; the whole registration would not fall. 

Applying this decision, the High Court held several of Sky's registrations partially invalid for bad faith on the ground that Sky was trying to obtain an exclusive right for purposes other than those falling within the functions of a trade mark. This was because either:

• Sky had no foreseeable prospect of using the marks on some of the goods and services covered ("no prospect of use"), or 
• the applications were filed by Sky under a deliberate strategy of seeking very broad protection regardless of whether it was commercially justified ("no commercial justification for use"). 

In its registrations, Sky had covered terms such as "bleaching preparations", "insulation materials", and "whips". The above criteria (no prospect of use and no commercial justification for use) clearly applied to these items and they were deleted completely from the specifications. However, Sky's registrations also covered the term "computer software" – and Sky used its marks on some items of computer software. The High Court deemed that Sky had no prospect of using and no commercial justification for use of its mark for the full range of items falling within the term computer software. It therefore limited Sky's specifications to certain types of computer software (for which Sky had use/an intention to use plus what was fair and reasonable around the edges). 

This was an important aspect of the decision for brand owners, many of whom apply to register their marks for broad terms (such as computer software, telecommunications services, and pharmaceuticals) in circumstances where they intend to use the mark on some (but not all) items within that term. It opened a potential line of attack for defendants of trade mark claims – that the registration asserted is overly broad and so invalid for bad faith. 

If a bad faith claim succeeded, it would not necessarily mean that a brand owner would lose any infringement claim. Indeed, Sky still succeeded in its claim of infringement against SkyKick. Nonetheless, an allegation of bad faith can be difficult and expensive to defend, and a finding of bad faith is a serious one that brand owners wish to avoid. Brand owners were therefore advised to be careful when applying for – and asserting – broad terms in their specifications to try to minimise the risk of allegations of bad faith.

The Court of Appeal's ruling

The Court of Appeal has now partially overturned the High Court's ruling. It held as follows:

• The conclusion of "no prospect of use" cannot apply to computer software, where the trade mark owner has extensive use and expectations of further use in that category.
• There is no requirement for trade mark owners to formulate a commercial strategy for using the mark regarding every species of goods/services falling within a general description.
• Section 32(3) of the UK Trade Marks Act (which requires applicants to state that they are using or have a bona fide intention to use the mark on the goods/services applied for) needs to be interpreted narrowly – the applicant is not required to say that it has used, or intends to use, the mark for all the possible types of goods which fall within the category for which it has applied to register it.
• When filing an application for invalidity where it is accepted that the proprietor had a legitimate reason for registering the trade mark concerning some of the goods/services, the invalidity applicant must set out the narrowed specification to which they contend the trade mark registration should be restricted.

As a result of the above, the Court allowed the term "computer software" to remain in Sky's specifications. There was no appeal regarding terms such as "bleaching preparations", "insulation materials", and "whips", for which Sky clearly had no commercial rationale trying to protect.

What does the decision mean for you?

• The decision will be welcome news for many brand owners since it should reduce the risk of defendants to trade mark claims counterattacking for bad faith where broad terms are asserted against them. 
• However, whether the decision will be interpreted to mean that there can be no bad faith if there is actual use/an intention to use on at least "one" item within a broad category remains to be seen. The Court of Appeal said (obiter) that a small computer software company marketing only one computer software programme "can apply in good faith for computer software as a whole…", but it did not say whether this would always be so or whether it would depend on all the facts of the case. In Sky's case, it had use on several items of computer software and expectations of further use. It also had a significant reputation and brand recognition, which could justify applying for broader protection.
• Clearly, the Court of Appeal had firmly in mind that a finding of bad faith is a serious one, akin to dishonesty. It also appears keen not to impose too much of a burden on brand owners. For example, it says that a trade mark owner whose business is solely in household detergents, with no intention to ever branch out into industrial detergents, should be entitled to file for registration related to a general category of "detergents". A declaration that it is using the mark related to detergents in general would not be false or even partially false in those circumstances. Any other interpretation would create an increasingly impossible burden on applicants. 
• While these are clearly relevant factors, some will argue that the decision fails to take account of the fact that the term computer software is very broad (see eg the recent decision in the Zoom KK v Facetec, Inc. on the breadth of this term). Computer software is not the same as detergents (despite the parallels drawn by the Court of Appeal). A registration for computer software could potentially prevent others using the same/similar marks on software very different to that of interest to the applicant.
• Since permission to appeal to the Supreme Court has been requested, this might not be the last instalment in this long-running and important case.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Brands & Advertising team.