29 Jan
2020

Sky v SkyKick: “sigh of relief” or “sting in the tail”? Legal experts react to CJEU’s long-awaited decision

  • CJEU rules that unclear specifications are not grounds for whole or partial invalidity
  • EUTMs can be ruled invalid on bad faith, but only with clear illegitimate purposes
  • Legal expert declares it a “clear win for Sky” as status quo of trademark system maintained

The Court of Justice of the European Union (CJEU) has handed down its long-awaited decision in the Sky v SkyKick case. WTR speaks with multiple industry experts to get their take on this important decision.

 The original trademark dispute between British communications company Sky and cloud management software provider SkyKick led the UK High Court to refer five questions to the CJEU centred on bad faith applications, insufficiently clarified goods and service specifications, and whether grounds to invalidate part of a trademark would invalidate the whole.

The questions referred were as follows:

  1. Can an EU trademark or a national trademark registered in a Member State be declared wholly or partially invalid on the ground that some or all of the terms in the specification of goods and services are lacking in sufficient clarity and precision?
  2. If the answer is yes, is a term such as “computer software” too general and [does it cover] goods which are too variable to be compatible with the trademark’s function as an indication of origin for that term?
  3. Can it constitute bad faith simply to apply to register a trademark without any intention to use it in relation to the specified goods or services?
  4. If yes, is it possible to conclude that the application was made partly in good faith and partly in bad faith if and to the extent that the applicant had an intention to use the trademark in relation to some of the specified goods or services?
  5. Is section 32(3) of the UK Trademarks Act 1994 compatible with [Directive (EU) 2015/2436] and its predecessors?

The CJEU has answered the first two questions in the negative, following the Attorney General (AG) opinion released last October (which deemed a lack of clarity in specifications not grounds for invalidity). In answer to the second question, the AG had found that the classification ‘computer software’ was “unjustified and contrary to the public interest”. However, the CJEU differs, finding that “it does not necessarily follow that the term ‘computer software is lacking in clarity and precision.” As the CJEU found that a community trademark or 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”, it also did not make comment on whether ‘computer software was insufficiently precise.

On the third and fourth questions, the CJEU ruled that “a trademark application made without any intention to use the trademark in relation to the goods and services covered by the registration constitutes bad faith”. It was also noted that such bad faith can only be established if there is objective evidence that the applicant intended to undermine the practices of third parties. In agreement with the AG opinion, the CJEU also ruled that if bad faith grounds for invalidity do occur for certain goods or services registered, the application “constitutes bad faith only in so far as it relates to those goods or services”.

Finally, in answer to the fifth question, the CJEU states that EU law does not preclude a provision of national law that the trademark applicant must state their trademark is being used in relation to the goods and services registered, or that they have a bona fide intention to do so.

Legal experts react

“A clear win for Sky”

The outcome is very favourable to existing trademark proprietors – it is a clear win for Sky. It is surprisingly clear and succinct and favours the existing status quo of the trademark system. Critics will say that it fails to address or regulate the ever-increasing thicket of wide registrations and leaves the burden on third parties to contest. The case is important as big brands (and all businesses) risked their trademarks being found invalid across the EU, if they were filed with overly wide specifications or deliberately to monopolise good/services for which they never intended to use the trademarks at some point.

[The court ruled that] finding a trademark invalid entirely would only be in the exceptional circumstances if it could be demonstrated that the applicant sought to monopolise classes of goods/services deliberately to block or undermine the interests of other businesses. The court should look at the motives of the trademark owner, when they filed them and whether they intended to abuse the system by blocking a competitor. That is a very high evidential burden to meet and would only rarely be found. The court chose not to focus upon whether it was possible to claim trademark protection for broad undefined terms like ‘computer software’ for their brand, that did not exactly specify for what they used (or intended to use) the trademark. This ignores the reality that all businesses are now technology companies of a sort and people often seek exclusive rights for undefined classes of technology, like software or telecommunications, without being granular. The same would be true of broad services, such as "financial services".

The concern was that this decision may have had a chilling effect on companies willing to enforce their key trademarks in the EU through litigation, in case they expose these trademarks to the risk of being cancelled for invalidity. However, that concern has been lifted and it is pretty much business as usual, full steam ahead for any litigation stayed or business decisions to enforce placed on hold.

In the present case, the UK High Court will now need to apply the EU Court's guidance and reach a final decision on the earlier factual findings made in Sky v SkyKick, in the next few months. This decision will continue to impact businesses in the UK despite the UK leaving the EU. It is in fact a reference from the UK High Court that is being ruled upon. In this case, the UK Government itself made detailed submissions to the court upon its interpretation of the legislation. After the UK leaves the EU, that will no longer be possible, yet in reality the UK courts are likely to continue to apply EU case law in this area, given our laws are already so closely aligned in this area. The UK will, however, lose the ability to influence the outcome, plus it will no longer have a judge representative on the EU Court.

Joel Smith, partner at Herbert Smith Freehills

“We’re none the wiser on ‘computer software’

The CJEU has not said whether Sky's "computer software" specification lacks clarity and precision. In contrast, the AG didn't pull his punches. He said a registration covering "computer software" is "unjustified and contrary to the public interest" because it confers "a monopoly of immense breadth".

We're none the wiser on whether "computer software" does or does not lack clarity and precision. However, the CJEU has clarified that such specification queries are an issue for the application stage or in response to a revocation action. In the first scenario, the registry can require greater clarity or refuse the application. In the second scenario, if there has been no use during the 5-year grace period across the full breadth of the allegedly unclear and imprecise specification, then it can be cut back and re-worded to cover the actual scope of use. In fact, the EUIPO and other tribunals (certainly in oppositions) are already showing reluctance to give broad protection to unclear and imprecise terms. So, in practice, it's not just a question of the validity of registrations but the scope of their protection. That latter issue wasn't the subject of this CJEU reference and could, perhaps, be the subject of another one.

This decision may have less of an impact than the Monopoly one (case R 1849/2017-2) by the EUIPO's Second Board of Appeal in July last year (especially if upheld on appeal by the Court of First Instance and/or the CJEU itself). That addressed the filing strategy of 'ever-greening' to perpetuate the non-use grace period. This decision is unlikely to lead to a material change in filing strategies, but is likely to alter defence and enforcement strategies.

Roland Mallinson, partner at Taylor Wessing

“There’s a sting in the tail”

This is widely regarded as the most important EU trademark case of the last decade. After two years (and in an exciting departure from the Advocate General's opinion) we have some direction from the CJEU, and the headline is that EU trademarks cannot be invalidated on grounds that the goods and services cited are unclear. The CJEU reached that conclusion on very technical grounds though, so they didn't need to consider the underlying principles in much detail.

While that seems to favour Sky, there's a sting in the tail as the Court went on to consider bad faith. That required taking a more holistic view, and in doing so the Court confirmed that an EUTM can indeed be (wholly or partly) invalid for bad faith — but only where the applicant either has the intention to undermine a third party's interests, or intends to get a trademark monopoly for reasons outside the core purposes of a trademark.

There will be debate to come about how to apply this new subjective test. It's new and untested, having come from the discussion in a recent ruling (Koton Mağazacilik Tekstil, September 2019) concerning the EUIPO's procedures. But now the national courts will also need to consider what it means for them and the individual circumstances of each case.

Tristan Sherliker, associate at Bird & Bird

“Trademark owners will be breathing a sigh of relief”

trademark owners will be breathing a sigh of relief at today’s decision, which essentially confirms the status quo and does not introduce a new route for potentially disruptive challenges to trademarks with broad specifications.

However, the increased focus on breadth of specifications may suggest a trend where applications containing terms that are potentially too broad or lacking precision, such as ‘computer software’, may begin to receive greater scrutiny. Where broad terms are justified, it is good practice to retain records explaining the filing strategy.

The decision is also a reminder of the ability to challenge on the grounds of bad faith. Whilst applicants are not required to indicate or know precisely the use that will be made of the mark at time of filing, a registration may be open to challenge on the grounds of bad faith if the application was madewithout any intention to use it in relation to the goods and services covered and, when the application for a trademark was filed, “the trademark applicant 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”.

Charlotte Duly, head of brand protection at Charles Russell Speechlys

“Challenges to specifications will be more difficult”

The CJEU gave short shrift to arguments that a term within a specification that was lacking clarity and precision (or was overly broad) was a grounds of invalidity in its own right or could be shoehorned into any of the listed grounds. The court rejected the AG’s innovation of considering marks which included such items as “contrary to public policy”. The public policy grounds relate to the characteristics of the sign applied for not the intentions behind the application.

The threshold the Court set for establishing bad faith is high. The court didn’t see a problem with an applicant not knowing “precisely” what he intends to use his mark for when applying for it. Furthermore, bad faith can’t be presumedon the basis of a “mere finding” that the applicant had no economic activity in that space at the time. What is needed is “objective, relevant and consistent indicia” of, in essence, a positive intention to obtain a registration for illegitimate purposes.

Challenges to wide and long specifications will be more difficult than they would have been had the AG’s opinion been more closely followed. Everything will now turn on the evidence available for a positive lack of intention to use. As the evidential regimes differ from EU member state to member state, where there is cross state infringement and an invalidity counterclaim anticipated, this may be a factor to be considered when selecting a forum.

The finding that a mark can be invalid for lack of intention “in part” will be very important to many. It is possible that some may be less incentivised to be cautious when preparing specifications, than they would have been if this had not been the case.

Bonita Trimmer, legal director at Browne Jacobson

 “It bucks the recent trend of judgements”

The judgment will be welcomed by the proprietors of trademarks with wide specifications, or the swathes of proprietors of trademarks specifying computer software, financial services, or other broad terms considered under threat. However, it bucks the recent trend of judgments and IPO decisions, particularly in the UK, which had indicated the need to reduce clutter in the trademark registry. It will be interesting, particularly with Brexit looming, to see whether judges attempt to distinguish the CJEU’s decision and whether, following Brexit, UK case law may diverge with that of the CJEU altogether.

Mark Nichols, associate at Harbottle & Lewis

“The status quo has been maintained”

The AG's opinion was quite left field and in some ways anti-brand owner. This judgment is rather the opposite and the status quo has been maintained. The practice of filing broad terms like 'computer software' continues to be completely acceptable and, for the first five years of a registration, a brand owner will enjoy a broad monopoly. There will be a huge sigh of relief from Sky and other major brand owners. The move towards a US-style system of trademark registration looks to have failed, which means there's no need to spend time and money amending registrations or thinking about tailored specifications for new filings.

Richard May, associate director at Osborne Clarke

“The practice of ever-greening is out-lawed”

The real importance of the judgment is the decision on overly broad trademark specifications and bad faith. The decision makes clear that “a trademark application made without any intention to use the trademark 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.” This means that all trademark applications should only cover goods and services where there is a genuine intention to use the mark and the practice of “ever-greening” is out-lawed.

Iain Connor, partner at Pinsent Masons

“Common sense”

This is a common sense decision which provides clarity on what constitutes ‘bad faith’ in relation to trademark rights in the EU and UK. When drafting trademark applications, it has always been best practice to consider how the brand owner’s commercial intentions might evolve over time and to draft specifications accordingly to incorporate the brands envisaged growth and future development in other market segments.

This remains our advice and the decision of the CJEU in this case emphasises the need for brand owners to be sincere about their intentions to pursue the sale of goods or services for which registered EU or national protection is sought. Brand owners should avoid seeking trademark rights in respect of goods and/or services that they have no intention of actually using, especially if they are only seeking protection in order to block the activities of a rival business or to secure an exclusive right.

Tania Clark, partner at Withers & Rogers and president of The Chartered Institute of Trade Mark Attorneys (CITMA)

“We have perhaps been left with a bigger problem down the road”

UK and EU trademark holders are breathing a sigh of relief as the CJEU’s decision in Sky v SkyKick has on the whole maintained the status quo meaning no immediate action on their part needs to be taken.  However in not following the opinion of the Advocate General, the CJEU has missed an opportunity to change the way in which trade mark specifications are drafted in the EU to align itself with US practice and to avoid clutter of the trade mark register. The judgement has also failed to signal an end to defensive trade mark strategies that involve broad specifications. While the decision does not signal an increase in invalidity challenges to existing trade marks covering general terms – therefore avoiding an immediate headache for trademark holders – we have perhaps been left with a bigger problem down the road.

David Stone, global head of IP at Allen & Overy 

Jonathan Walfisz

Author | Reporter

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Jonathan Walfisz