UK: Form Clouds for Software Vendor After Court of Appeal Decision on Trademarks
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A much-anticipated decision was recently handed down by the UK Court of Appeal in what has become a high-profile trademark infringement case between broadcasting and telecommunications giant Sky and its rival SkyKick, a global provider of cloud management software.
The ruling overturned the High Court’s previous ruling which found Sky had applied for its marks in bad faith with no real intention to use those marks in all goods and services specified in the records.
It started in 2016, when Sky brought proceedings against SkyKick over its figurative signs (the “SkyKick Signs”). Sky claimed that the SkyKick panels infringed four of its EU registered trade marks and a UK trade mark for ‘Sky’ (the ‘Sky marks’). Not surprisingly, Sky Marks are registered in classes 9 and 38 for goods and services, including and in relation to computer software and telecommunications services. In 2018, the UK High Court found that the SkyKick signs did indeed breach the Sky Marks provided the Sky Marks are valid.
The next development in the Sky saga has caught the attention of many brand owners nationwide; Skykick counterclaimed that the Sky Marks were invalid on the grounds that they were not clear and specific (i.e. the goods and services were too broad) and that the Sky Marks were improperly requested. faith (i.e. Sky never intended to use Sky Marks for some of the goods and services shown in the registration).
Court of Justice of the European Union (CJEU)
Referred to the case by the High Court, the CJEU ruled in January 2020 that:
- a lack of clarity and precision in a specification was not grounds for a declaration of invalidity; and
- if there is no reasonable business justification behind filing a trademark application, the trademark may be partially or totally invalidated on the basis of bad faith.
In light of this, the High Court found in June 2020 that SkyKick breached the Sky Marks (although Sky failed to convince the court that the fraudulent marketing had taken place) but that some of the Sky Marks had been requested in bad faith, because they were never intended to be used for all the products and services they designate. Additionally, the High Court also ruled that the Sky Marks were deliberately deposited in extremely broad terms to achieve maximum protection and to deter other third parties from using or depositing anything similar. The fact that this might have been commercially justified was irrelevant.
This decision was a pivotal moment in terms of successful bad faith findings, as it was notoriously difficult to rely on this elusive ground previously. The ruling served as a warning to trademark owners that the old-fashioned tactic of filing a broad specification (in order to expand protection) could be successfully challenged.
Court of Appeal
However, the battle was not over. Both parties appealed the High Court’s decision: Sky appealed the finding of partial invalidity, bad faith and the dismissal of the misleading marketing claim; and SkyKick attempted to further restrict Sky Marks, while cross-appealing the infringement claim.
The recent Court of Appeal decision has favored Sky in almost every way. It upheld Sky’s original argument that an infringement had taken place (although it did not reverse the High Court’s rejection of passing off). He also rejected SkyKick’s request to further restrict Sky Marks.
More interestingly, the Court of Appeal overturned the High Court’s decision that bad faith had been found. The Court of Appeal concluded that Sky has a “substantial present trade and a future expectation of trade”. In other words, since Sky is so well known and likely to extend to goods and services currently covered by Sky Marks, bad faith cannot be justified.
The Court of Appeal looked closely at the reasons given by the High Court for finding bad faith and rejected them on the following grounds:
- The use of a trademark for only some of the goods and services that may be included in such a broad category (such as computer software), and not all, is not a ground for bad faith. A trademark owner is not required to use its mark for every conceivable subcategory of goods or services in such a broad industry.
- A trademark applicant does not need to have a business strategy from the outset for every possible product and/or service covered by the trademark. Even if a subcategory of computer software, for example, was intended to be used, this is acceptable.
The High Court ruling in 2020 was an inconvenient outcome for trademark owners with broad specifications listed under their trademarks, as it opened up the possibility for third parties to be able to claim invalidation on grounds of bad faith . The Court of Appeal’s reversal just recently has made it more difficult for third parties to refile such invalidation claims, which is a welcome outcome for forward-thinking brand owners who want to be able to grow in new markets. ‘other sectors specified under the mark(s), but did not do so at the time of application. On the other hand, many would argue that such a finding is anti-competitive and only helps strengthen those firms that already have a dominant position in the market (as only those with substantial current trade and an expectation of future trade do). , a priori, able to benefit from this defence). However, it was specified that bad faith is likely to be found when there is no intention to use a mark in a given sector.
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