The Sky’s the limit – the Supreme Court provides guidance on bad faith filings

In its decision in SkyKick UK Ltd v Sky Ltd [2024] UKSC 36, the Supreme Court has provided guidance on the question of whether it is an act of bad faith to include broad lists/categories of goods and services in a trade mark application.

In summary, it can be bad faith to overclaim the goods and services covered by a trade mark, but it can also be hard to prove. Bad faith is a ground of invalidity for a trade mark, but – as various courts in this saga have said – only in relation to the specific goods and services which were sought in bad faith.

Of interest, the Supreme Court gave its judgment notwithstanding that the parties in this case had settled their dispute following the hearing. This appears largely to be because the Comptroller-General of the UK IPO (as intervener) indicated that guidance would be useful to the UK IPO. So, why did the UK IPO consider the decision to be so important and what are the lessons to be learned? In particular, what impact will this decision have on (i) filing strategies, (ii) portfolio management, and (iii) litigation.

The background

Historically, UK trade mark applications have tended to cover the goods and services of current commercial interest to an applicant as well as some reasonable broadening of the terms to allow for product extension.  This is occasionally taken to extremes by applicants filing for extremely broad lists of goods and services, particularly when protecting house marks, and then enforcing the resulting registrations against companies with whom they had limited or no commercial overlap. Under UK and EU law, a registration can be removed from the register after five years if the mark has not been put to use, but this leaves rights owners with the ability to enforce registrations which are not yet over five years old without risk of a non-use challenge (the ‘grace period’) to their own registration.

In the UK IPO, but not in the EU IPO, there is a requirement that an applicant explicitly declare when filing their application their use or bona fide intention to use the trade mark.  One of the queries raised in this dispute is whether a lack of intention can give rise to a new ground of invalidity, the CJEU confirmed it cannot, but this does not prevent a lack of intention from being a factor giving rise to an inference that the application may have been filed in bad faith.

Sky Ltd (“Sky”) had originally claimed for trade mark infringement in the mark SKY by the use of the sign “SkyKick” for email migration and cloud storage services, and SkyKick UK Ltd (“SkyKick”) had counterclaimed for invalidity of Sky’s trade marks on the basis of bad faith (the trade marks were in the grace period and, so, could not be challenged for non-use). Sky’s trade marks were for very broad specifications of goods and services, including, for example, ‘whips’ and ‘bleaching preparations’. Sky’s business being mainly in telecommunications and broadcasting, it was doubted that Sky had any intention to use its trade marks on such goods. Sky also had broad categories of protection for, e.g., ‘computer software’.

The High Court (having made a reference to the CJEU) held that Sky’s marks were partially invalid for bad faith, but that, nevertheless, SkyKick infringed part of the narrower specification of the trade marks that survived. The Court narrowed the specifications by reference to a reasonable selection of goods and services not affected by bad faith.

The Court of Appeal overturned the High Court, finding that Sky was entitled to broader specifications than the narrowed specifications on the basis that it did not need to have an intention to use across the full breadth of an appropriately broad category. It seemed to suggest that having no intention to use could not equate to bad faith.

The Supreme Court decision

Largely, the Supreme Court agreed with the judgment of the first instance judge (at the High Court), about which much has already been written, and overturned the Court of Appeal.

The breadth of the specifications of Sky’s trade marks created an inference of bad faith which put the burden of proof on Sky to show why there was not bad faith. Sky could not do so for all goods/services and, therefore, the registrations were only partially valid. For broad terms, such as ‘computer software’, it was found Sky had no intention (and could not feasibly have an intention) to use across the full breadth of the specification. The Supreme Court upheld the High Court’s finding that these terms should be limited to specific subcategories of software which it was reasonable for Sky to have commercial interests in.

Infringement was upheld only for use for cloud storage services on the basis that such use did fall into the narrowed specification of “computer services for accessing and retrieving audio, visual and/or audio-visual content and documents via a computer or a computer network” in class 38.

What this means more widely

From a disputes perspective, we observe that there is no apparent sanction for over-claiming broad specifications, other than perhaps in legal costs. The over-claimed parts might be vulnerable to a bad faith attack, but that is a situation most likely to arise if those parts are sought to be enforced against a third party, which is something that is within the proprietor’s control. Whether an inference arises might depend on the specifics of the case and how the proprietor’s business is perceived. So, on the one hand there might be no reason not to seek broad protection, on the understanding that registrations might later be vulnerable. On the other hand, it might be that broad specifications are scrutinised more closely by, e.g., the UK IPO prior to grant.

Advice to proprietors is to think carefully before enforcing trade marks against parties where there is a risk that the alleged infringer is doing activities covered only by the vulnerable part of a mark. As has always been the case, careful thought should also be given to the scope of rights relied on in infringement proceedings. In this case, not only did Sky pursue a filing programme over a number of years covering a broad range of goods/services which it clearly had no intention to offer, but it also enforced those registrations broadly and left it until a very late stage in the proceedings to introduce a focused and relevant case based on a limited specification. This behaviour was a factor in the ultimate findings against Sky. The risk of facing similar invalidity proceedings might be mitigated by pursuing a commercially focused enforcement strategy and enforcing rights only in so far as they need to be enforced to deal with the infringing activity. By contrast, and in passing, it is to be noted that Sky in any event retained sufficient of its specification to succeed in part of its infringement case against SkyKick. Had a limited specification of goods/services been relied upon by Sky from the outset, this saga might never have unfolded in the way it did.

Our recommendation for new applications

For new filing programs and for new trade marks, we recommend continuing to file for the goods and services of interest along with reasonable product extension.

In the UK IPO bad faith is a ground of objection which can be taken into account by the Examiner during examination of the application as well as during opposition and invalidity proceedings (whereas in the EU IPO it can only be raised in invalidity proceedings once a trade mark is registered). In theory, we could see the UK IPO raising objections on the ground of bad faith against applications with very broad specifications. However, in the absence of any evidence about the applicant’s business, it would seem difficult for the UK IPO to be in a position to raise such an objection except in the most extreme cases.

We would encourage applicants to take seriously the declaration on the UK IPO form that they use or have a bona fide intention to use the mark for the goods and services applied for. This is despite the CJEU confirming that such a declaration cannot introduce a new ground of invalidity by reason of its falsity.

For terms such as ‘computer software’ and  ‘telecommunications/telecommunications services’ it is unclear how these terms will be treated going forwards. The High Court (endorsed by the Supreme Court) seemed to suggest that no company could intend to use a trade mark across the breadth of those categories, whilst simultaneously confirming that the use of broad terms is not in itself objectionable.  We wait to see how the UK IPO interprets the decision and whether it changes its current practice on the acceptance of term such as “computer software”.

The position for long established brands where a variation of the trade mark needs to be protected, for example following a brand refresh, is more nuanced.  With a brand refresh, it may be the case that the company has a better understanding of the scope of its current and future commercial interests than it did when it first protected its brand. Care should be given to review old specifications and ensure they remain relevant. Thought should also be given to the commercial reasons for new filings to avoid accusations of ‘evergreening’, which has already been criticised by the European Courts.

Applicants would also be well advised to keep comprehensive records of their business and marketing plans in case they later need to justify and evidence their intentions related to applications, even if those business plans later did not come to pass.

Is any action needed for existing registrations?

It seems unlikely that the UK IPO would force rights holders to review their entire portfolio and surrender those parts of their registrations which are overly broad under current law and practice.  Therefore, we are not expecting that any change will be required to existing registrations.  However, for those registrations where infringement proceedings are being contemplated and which are to be relied upon, it would be prudent, prior to bringing infringement proceedings, to review the lists of goods and services and check that none of them are overly broad and therefore subject to a potential allegation of bad faith.  It could be that a partial surrender of the registration could be appropriate prior to bringing any infringement proceedings or that the infringement proceedings should be suitably constrained.

For cases  where a mark is outside of the grace period for non-use and has not been used it is worth noting that a defendant would have the option of revoking the trade mark for non-use, but that would not declare the registration void ab initio. This might still mean it could be asserted for historic infringement. In such a case it would make sense for the defendant to also allege bad faith in order to achieve ab initio invalidation and it might be that the fact of non-use itself after five years could also give rise to an inference of bad faith such as to shift the burden of proof onto the proprietor .

This decision appears to be a clear indication that certain factors may influence the courts to find bad faith in the absence of any reasonable explanations or evidence from the proprietor.  The main challenge (particularly given that others will also be following the Supreme Court decision and modifying their behaviour) will be raising an inference of bad faith in the first place (more so in the first five years of registration). However, this might be seen as encouraging restraint from proprietors in the future in a way that provides more certainty for all.

For more guidance on the concept of bad faith and its history in case law, see our previous article here.