The article below was first published on Issue 120 of the Intellectual Property Forum, Journal of The Intellectual Property Society of Australia and New Zealand Inc.

At the beginning of this year, the Court of Justice of the European Union (“CJEU”) delivered  a very important trade mark decision, Sky v SkyKick (C-371/18). In its keenly awaited judgment, the CJEU confirmed that applying to register a trade mark without any intention to use it in relation to the specified goods or services can constitute bad faith, which is an absolute ground of invalidity. One small comfort for trade mark applicants, however: where a finding of no intention to use is made in relation to some goods or services only, the finding of bad faith applies only to those goods or services – such that the rest of the registration remains valid. This decision will be a sharp warning to trade mark applicants to ensure that they have an honest rationale for applying for all the specified goods and services, and not to be tempted to file too broadly.

The dispute first arose when Sky, the well-known media and telecommunications giant, issued trade mark infringement proceedings in the High Court of England & Wales against SkyKick, a software provider. Sky relied on four Community (European Union (“EU”)) marks and one national United Kingdom (“UK”) mark which all included the word “Sky” . Those trade marks were registered in respect of a very large number of goods and services, some of which fairly represented the goods and services that Sky offers under the marks, but some which did not.

SkyKick filed a counterclaim for invalidity, arguing: (i) the trade marks were registered for goods or services that are not specified with sufficient clarity and precision; and (ii) the trade marks were filed in bad faith. In particular, SkyKick relied upon the very large list of goods and services covered by the trade marks, some of which Sky clearly had no intention to use at all (such as “bleaching preparations”, “insulation materials” and “whips”).

The High Court of England & Wales decided to stay the proceedings and referred the following questions to the CJEU for a preliminary ruling:

(1)Can an EU trade mark or a national trade mark 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 to enable the competent authorities and third parties to determine on the basis of those terms alone the extent of the protection conferred by the trade mark?

(2)If the answer to question (1) is yes, is a term such as “computer software” too general and covers goods which are too variable to be compatible with the trade mark’s function as an indication of origin for that term to be sufficiently clear and precise to enable the competent authorities and third parties to determine on the basis of that term alone the extent of the protection conferred by the trade mark?

(3)Can it constitute bad faith simply to apply to register a trade mark without any intention to use it in relation to the specified goods or services?

(4)If the answer to question (3) is yes, is it possible to conclude that the applicant made the application partly in good faith and partly in bad faith if and to the extent that the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use the trade mark in relation to other specified goods or services?

(5)Is section 32(3) of the UK Trade Marks Act 1994 compatible with Parliament and Council Directive 2015/2436/EU and its predecessors?

Despite the wording of the last question, the questions must be understood as relating to Regulation 40/94 and First Council Directive 89/104, which were the relevant Regulation and Directive in force at the date the trade marks were filed. Nevertheless, the CJEU’s judgment will still have a direct bearing on the interpretation of the current law.

A substantial part of the judgment concerned the bad faith questions, 3 and 4, so this update  will tackle those first.

Questions 3 and 4 – bad faith

Questions 3 and 4, taken together, essentially ask two things. First, whether a trade mark application made without any intention to use the mark in relation to the goods and services applied for constitutes “bad faith”. And secondly, if it does, whether it is possible for an application to be made partially in bad faith (in relation to the goods and services the applicant has no intention to use) and partially in good faith (in relation to the other goods and services). This was an important issue since a finding that even a small part of a specification was made in bad faith could have resulted in the entire application being invalid.

The CJEU commented that although neither Regulation 40/94 nor Directive 89/104 define “bad faith”, it is an autonomous concept of EU law that must be interpreted consistently. The meaning of bad faith in everyday language suggests a dishonest state of mind or intention. Applying this within the trade mark context, one must look at the aims of trade marks within the EU, which are to contribute to a system of undistorted competition, in which each undertaking must be able to register trade marks which enable a customer to distinguish goods or services from those with a different origin.

Referring to the previous CJEU decision of Koton Magazacilik Tekstil Sanayi ve Ticaret v EUIPO, C-104/18, the CJEU held that bad faith as a ground for invalidity applies

where it is apparent from relevant and consistent indicia that the proprietor of a trade mark has filed the application … not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of the trade mark (paragraph 75 of the SkyKick judgment).

An applicant is not required to know precisely the use he or she will make of the mark at the time of filing the application. And bad faith cannot be presumed purely on the basis that the applicant had no economic activity corresponding to the applied-for goods and services at the time of filing the application. However, if the applicant has no intention to use the mark for the goods and services, and there is no rationale for the application, then this may constitute bad faith.

The CJEU went on to explain that it follows from the relevant provisions of Regulation 40/94 and Directive 89/104 that where a ground of invalidity exists in relation to certain goods and services only, the trade mark is to be declared invalid in relation to those goods and services only. Applying this in the context of bad faith, when the absence of the intention to use the trade mark in accordance with the essential functions of the trade mark concerns only certain goods or services, the application constitutes bad faith only in so far as it relates to those goods or services. This means that trade marks with over-broad specifications may be found partially invalid in respect of the goods and services an applicant has no intention of using, but valid in relation to the remaining goods.

Questions 1 and 2 – lacking in sufficient clarity and precision

Taking questions 1 and 2 together, the CJEU looked at Article 3 of Directive 89/104. Article 3 provides a list of the grounds for invalidity which recital (7) of the Directive 89/104 describes as exhaustive. That list does not include the lack of clarity and precision of the terms used to describe the goods and services covered by the mark. The provisions of Regulation 40/94 mirror Directive 89/104. Note that although the grounds for invalidity contained in the current EU Trade Mark Regulation 2017/1001 and Directive 2015/2436 differ slightly from those in Directive 89/104 and Regulation 40/94, they also do not include a lack of clarity and precision.

This means, the CJEU held, that the lack of clarity and precision in the terms used to describe the goods and services covered by a national or Community trade mark cannot be considered a ground of invalidity. The CJEU was also not convinced that the lack of clarity and precision fell within one of the existing absolute grounds. Taking all this into account, the CJEU concluded that a national or Community trade mark cannot be declared wholly or partially invalid on the basis of lack of clarity and precision.

Question 5

The final question referred to the CJEU concerned a provision of the UK Trade Marks Act 1994, which provides that a trade mark application must state that the trade mark is being used (by the applicant or with his consent) in relation to the applied-for goods and services, or that the applicant has a bona fide intention that it be so used (s.32(3) Trade Marks Act 1994). This provision does not appear in the corresponding EU legislation, and therefore the High Court of England & Wales sought confirmation from the CJEU that it remained compatible with EU law.

As explained above, the absolute grounds for invalidity set out in Directive 89/104 are an exhaustive list and a Member State is prohibited from introducing new grounds of invalidity into national legislation. However, Member States are free to make provisions regarding the procedure of registration, revocation and invalidity of trade marks. Subsection 32(3) introduced a procedural requirement. Although the infringement of the requirement may constitute evidence for the purposes of establishing possible bad faith, it does not constitute a separate ground for invalidity.

For these reasons, the CJEU held that s.32(3) was compatible with EU law.

Postscript – the High Court of England and Wales decision on 29 April 2020

On 29 April 2020, the High Court of England and Wales handed down its judgment in the national litigation in the SkyKick case in the light of the CJEU decision. Lord Justice Arnold held as follows (at paragraph 37):

As Sky point out, the combined effect of (i) the CJEU’s ruling that trade marks cannot be declared invalid on the ground that the specification of goods and services lacks clarity and precision, (ii) the CJEU’s ruling that trade marks cannot be declared wholly invalid where bad faith only affects part of the specification and (iii) SkyKick not having attacked the validity of the Trade Marks in so far as they are registered in respect of “telecommunications services” and “electronic mail services” on bad faith grounds is that the Trade Marks are validly registered in relation to those services whatever the position may or may not be with regard to other goods and services.

Prior to the CJEU reference, the High Court of England and Wales had found that SkyKick’s email migration service was identical to “electronic mail services” covered by the trade marks, and that there was a likelihood of confusion. Therefore, unfortunately for SkyKick, Sky’s trade marks were valid for “electronic mail services”, and infringed by SkyKick.

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Simon Clark and Lucie Fortune, ‘Current Developments – Europe – United Kingdom: The CJEU finds that no intention to use goods and services covered by a trade mark registration may constitute bad faith‘ (2020) 120 Intellectual Property Forum 96.