SkyKick: CJEU delivers its much anticipated ruling

Snapshot

The CJEU has delivered its ruling in the high-profile Sky v SkyKick case (C‑371/18), which concerns the implications of an overly broad specification of goods and services for trade marks. The decision does not have the far-reaching consequences that it could have had. However, trade mark owners will need to consider the now-increased risk of a finding of bad faith when seeking to enforce their marks for goods and services for which they have no reasonable commercial rationale for trying to monopolise.

The CJEU held that:

• A EUTM or national trade mark cannot be declared wholly or partially invalid on the ground that the specification of goods and services in respect of which that trade mark was registered lacks clarity and precision. Lack of clarity and precision should be assessed at the application stage. This differs significantly from the position of the Advocate General (AG) who opined that lack of clarity and precision could be a basis of invalidity (as being contrary to public policy).
• An application for an EUTM or national trade mark made without any intention to use the mark in relation to the goods and services covered by the registration constitutes bad faith if the applicant for registration of that mark had 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.
• When the absence of an intention to use the mark concerns only certain goods or services covered by the application for registration, that application constitutes bad faith only in so far as it relates to those goods or services. The registration would therefore only be invalidated for the goods and services for which there was no intention to use.
• The requirement in the UK for trade mark applicants to state that the mark applied for is being used, or that the applicant has a bona fide intention to use it, in relation to the goods and services applied for is not inconsistent with EU law (provided that any infringement of such an obligation does not constitute, in itself, a ground for invalidity of a trade mark already registered).

Implications of the decision

Trade mark owners will need to be careful when enforcing their marks in respect of goods and services for which they have no reasonable commercial rationale for trying to monopolise. Defendants will be alive to the opportunity to counter-attack for invalidity on the basis that the application was filed in bad faith.

Trade marks owners need not necessarily change their standard specifications, but should ensure that they cover specific (as well as general) terms. This is because:

• While the CJEU has held that lack of clarity and precision is not a ground for invalidity, the EUIPO and other tribunals have for some time shown reluctance to give broad protection to unclear and imprecise terms. Lack of clarity and precision might therefore affect scope of protection even if not validity.
• It is possible that national trade mark registries and the EUIPO will now be more rigorous in examining specifications for clarity and precision at the application stage. It is also possible that guidance will be issued by the EUIPO in due course on whether terms such as 'computer software' are sufficiently clear and precise. The AG was clear that such terms were too wide, but the CJEU did not need to consider the point.

Since the decision has been issued before the end of the Brexit transition period, it will become binding retained case law in the UK.

Background

The ruling is in response to a request for a preliminary ruling from the UK High Court in trade mark infringement proceedings brought by Sky plc against SkyKick Inc. Sky plc claimed that SkyKick infringe various EUTMs and UK marks consisting of the word SKY by using the sign SkyKick in relation to cloud migration IT services – services which Sky plc does not offer or intend to offer in the immediate future.

SkyKick counterclaimed for a declaration that the SKY marks relied upon are partially or wholly invalid on the grounds that:

• the specifications of goods and services lack clarity and precision since they cover broad terms such 'computer software', and/or
• the applications were made in bad faith since Sky plc did not intend to use them for all goods and services covered, particularly for 'bleaching preparations', 'insulation materials' and 'whips'.

The High Court referred a number of questions to the CJEU. The CJEU's answers to each question are discussed in detail below.

Can a trade mark registration be declared invalid on the ground that the specification lacks clarity and precision? If yes, is a term such as 'computer software' sufficiently clear and precise?

The CJEU answered the first question in the negative. It explained that there is no express ground of invalidity covering lack of clarity and precision and that the grounds of invalidity are exhaustive. More specifically, lack of clarity and precision is not a ground for invalidity on the basis that such a deficiency is "contrary to public policy". This is not what the "contrary to public policy" ground is seeking to prevent. This differs significantly from the opinion of the AG who viewed lack of clarity and precision as potentially falling within the "contrary to public policy" ground.

Given that it answered the first question in the negative, the CJEU did not go on to consider whether the term 'computer software' does or does not lack clarity and precision. This is unlike the AG who opined that this term was "unjustified and contrary to the public interest" because it confers "a monopoly of immense breadth".

Although the CJEU did not consider the point, it is possible that guidance will be issued by the EUIPO in due course on whether terms such as 'computer software', 'telecommunications services' and 'financial services' are sufficiently clear and precise. The EUIPO has previously issued guidance in response to issues raised in cases (such as that on class headings following the IP Translator case).

While not being a ground for invalidity, the CJEU has confirmed that clarity and precision is a relevant factor for the competent authority to consider at the application stage (Chartered Institute of Patent Attorneys, C-307/10) and in the context of revocation actions. In the former, the authority could ask for further clarification or refuse the application and we might expect greater scrutiny of applications going forwards. In the latter, unclear and imprecise specifications can be cut back and re-worded to cover the actual scope of use.

In fact, we are also seeing the EUIPO and other tribunals (certainly in oppositions) showing reluctance to give broad protection to unclear and imprecise terms. This all weighs in favour of careful drafting of specifications and covering specific, as well as broad, terms.

Can it constitute bad faith to apply to register a trade mark without any intention to use it in relation to the specified goods and services? If yes, is it possible to conclude that the application was made partly in good faith and partly in bad faith?

The CJEU held that applying for registration of a trade mark without any intention to use it in connection with the specified goods or services may constitute bad faith. However, such bad faith may be established only if there is objective, relevant and consistent indicia showing that the applicant for registration had the intention of either:

• undermining, in a manner inconsistent with honest practices, the interests of third parties, or
• obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.

This is all largely consistent with the opinion of the AG, although the CJEU's decision is somewhat clearer.

Presumably, bad faith could arise where the sole objective of the applicant is to prevent a third party from entering the market or where the applicant had no reasonable commercial rationale for trying to monopolise the goods and services in question. However, the CJEU commented that bad faith cannot be presumed on the basis of the mere finding that, at the time of filing its application, the applicant had no economic activity corresponding to the goods and services in question.

The CJEU went on to agree with the AG that, where there is a finding of bad faith, the registration would be invalidated only in respect of those goods and services for which there was no intention to use the mark.

In view of this, trade mark owners will want to be careful when seeking to enforce their registrations for non-core goods and services given the risk that defendants will argue that such goods and services are invalid for lack of intention to use. Previous practices of enforcing a registration across the full width of the specification until the registration is 5 years old (and so potentially revocable for non-use) might not always be appropriate going forwards.

Is section 32(3) of the UK Trade Marks Act 1994 compatible with EU law?

The requirement in section 32(3) for a UK trade mark applicant to state that the mark applied for is being used, or that the applicant has a bona fide intention to use it, in relation to the goods and services applied for is not inconsistent with EU law. However, the CJEU held that infringement of such an obligation cannot constitute, in itself, a ground for invalidity of a registration. The relevant bad faith (as outlined above) would need to be found.