The background of the EWCA decision is well known: Sky Ltd. (“Sky”), a renowned satellite TV broadcaster filed a claim for trademark infringement against SkyKick UK Ltd. (“Sky Kick”), who in turn filed for cancellation of the SKY trademark of Sky. Two grounds for cancellation were raised: (i) the fact that the specifications for goods and services were very broad and lacked clarity and (ii) the fact that there was no intention to use the trademark for all goods and services for which registration was sought.
Judgement of the European Court of Justice
During a first set of proceedings before the English courts, the case was referred to the European Court of Justice (ECJ) for determination on points of law. In its judgement of 29 January 2020, the ECJ ruled that a Community trademark or a national trademark cannot be declared wholly or partially invalid on the ground that terms used to designate the goods and services in respect of which that trademark was registered lack clarity and precision.
On the other hand, the ECJ ruled that a
“trademark application made without any intention to use the trade mark in relation to the goods and services covered by the registration constitutes bad faith, within the meaning of those provisions, 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 trademark. When the absence of the intention to use the trademark in accordance with the essential functions of a trademark concerns only certain goods or services referred to in the application for registration, that application constitutes bad faith only in so far as it relates to those goods or services.”
In short, the ECJ has held that lack of intention to use could, in some circumstances, be relevant to and evidence of bad faith and this would only affect the goods or services which were not intended to be used.
The decision of the English High Court
After the ECJ judgement, the English High Court decided that Sky registered the SKY trademark in bad faith in part, as it did not intend to use the trademark for all goods and services for which registration was sought.
The Court held that Sky not only did not intend to use the trademarks in relation to some goods and services covered by the specifications at the application dates, but there was “no foreseeable prospect that they would ever intend to use the trademarks in relation to such goods and services. Moreover, Sky made the applications pursuant to a deliberate strategy of seeking very broad protection of the trademarks regardless of whether it was commercially justified.” [para 21]
As to the first ground for cancellation, the Court held that, following the ECJ ruling, the trademarks cannot be declared wholly or partly invalid on the ground that their specifications are lacking in clarity or precision.
The decision of the EWCA
In appeal, the EWCA allowed Sky’s appeal on the issue of bad faith. It held that Sky’s trademark applications were made, at least in part, with the intention of protecting the use of the mark in relation to goods and services in which Sky had a substantial present trade or future expectation of trade. The sole objective was not to provide an exclusive right to stop third party use with a trademark which would not be used at all, or to pursue other exclusive purpose which was not in accordance with honest practices. Sky’s extensive brand recognition was also a reason, as it justified a broad registration.
As such, the Court held that lack of intention to use, on its own, does not amount to bad faith. Lack of intention to use is a factor which may be relevant to bad faith where there is no rationale for the application in accordance with the aims of the trademark laws, and there are objective, consistent and relevant indicia of bad faith.
The EWCA held that Sky has extensive use and expectations of further use in what concerns the “computer software” for which there was commercial justification for applying.
The decision of the EWCA is consistent with the ECJ judgement. Bad faith is determined by considering all the relevant factors specific to the particular case at the date of trademark registration. Bad faith registration of a trademark must be understood in the context of trademark law, which is that of the course of trade.
Also, the rules on trademarks are aimed, in particular, at contributing to the system of undistorted competition. In this context, registration of a trademark without any intention to use the trademark might be in bad faith if the circumstances of the case also point to the fact that the trademark owner’s intentions were solely ones which were inconsistent with the essential functions of a trademark or designed to promote unfair competition.
This decision is also in line with the General Court judgement in the Monopoly case, where it was held that the applicant had acted in bad faith as it intentionally sought to circumvent a fundamental rule of EU trademark law, namely that relating to proof of use, in order to derive an advantage therefrom.
As explained in a previous post, bad faith is a concept that is not confined to few limited situations found in the existing case-law; rather, it is a notion that will be flexibly and rather broadly assessed, to include for example, re-filing of identical trademarks if the intention was to circumvent requirements of proving genuine use, or lack of any intention to use the trademark in connection with the goods and services covered by that registration.
Brand owners may still register trademarks in broad terms, if there might be a commercial rationale behind and if there is no intention to restrain others in commerce. A circumstance that might be considered in the overall assessment is the reputation of the trademark, that might justify seeking a wider legal protection, as guided by the Lindt decision [para. 51, 52].