You gotta have faith: Supreme Court bad faith ruling is a game changer for overly broad trade mark filing strategies

The Supreme Court has issued a very important judgement on trade marks in the SkyKick v Sky case [2024] UKSC 36 (the Case) – the result being that overly broad trade mark filings are now likely to be vulnerable to successful bad faith attacks that restrict the scope of the mark.

• The Supreme Court has reminded traders that the purpose of a trade mark is to help consumers recognise the origin of their goods and services and make an assessment of their likely quality (based on that origin). The trade mark system is not there to hinder fair competition by granting traders “abusive” on-paper monopolies.
• Traders may now think twice before applying for (or defending) marks as a “keep-off-my-patch” weapon where that patch is unrealistically broad and extends to goods and services that the trader has no prospect of using the marks for. To date this has been policed under the “non-use” regime, but in SkyKick the issue was viewed as a matter of bad faith.
• Be prepared to explain the rationale behind your goods and services. Ideally, keep records of meetings where commercial strategies were discussed in relation to trade mark applications: these records might provide helpful evidence of an intention to use if challenged on bad faith grounds (although such evidence may not be determinative of the result of a challenge).
• Trade mark specifications will need to be drafted carefully using clear, specific and realistic sub-categories of goods and services rather than broad and general categories. Learning from Sky’s example: instead of registering a mark for “data storage” (a broad and general category), a trader might consider registering their mark for “storage of audio, visual and/or audio-visual content and documents” if that is a more accurate, specific reflection of what the mark is likely to be used for.
• We await the Intellectual Property Office’s (IPO) updated statutory guidance following the Case. A Practice Amendment Notice (PAN 1/23) was issued after the Court of Appeal’s decision in the Case which will now need to be updated following the Supreme Court’s ruling. The IPO will be limited in both capacity and adequate information at the examination stage of a trade mark application, hence even after the Supreme Court ruling it may still be reluctant to raise bad faith objections at examination – but this will be watched with interest.
• Regardless of the IPO’s approach, we expect to see a change of approach at filing stage (ie greater specificity and precision). In a sense this will align the UK approach with the more exacting standards expected by the US PTO, which may make for smoother international applications based on UK trade marks.
• We also anticipate a sharp uptick in third party attacks on trade marks on bad faith grounds both at opposition stage and post-grant stage by way of invalidity actions, including for many existing marks.

Legislative context – it knows all the games that traders play…

As a quick reminder, and for context, a registered trade mark provides the owner with a monopoly protection against unauthorised use of the trade mark. The "monopoly" is limited to the goods and services on which the mark is to be used. These are set out in a specification when a trade mark application is filed.

The Trade Marks Act 1994 (the Act) says that a trade mark shall not be registered if or to the extent that the application is made in bad faith. The Act also requires the trade mark applicant to confirm, on making an application, that it intends to use the trade mark in relation to the goods and services set out in the specification or otherwise that they have a bona fide intention to do so. A trade mark can be declared invalid (in whole or part) on the grounds that the trade mark application was registered in breach of the obligation not to be made in bad faith.

Case history – just waitin’ for something more… from The Supreme Court

Sky is the broadcaster, telecoms and broadband provider. SkyKick is a provider of email migration and cloud storage services. The Case has concerned various issues including trade mark infringement and passing off but this article focuses on the bad faith element of the dispute.

The Case is long-running, working its way through the courts since 2016, with various points of law being sent to the Court of Justice of the European Union (CJEU) along the way.

In the first instance, by an order of July 2020, Lord Justice Arnold found that Sky had acted in bad faith in applying for excessively broad trade marks and that its trade marks were therefore partially invalid. He narrowed Sky’s broadly drafted goods and services so that they had a direct connection to Sky’s established businesses.

In simple terms, Lord Justice Arnold found that using a broad descriptive category for goods or services such as “computer software” was bad faith unless the trade mark applicant intended to use the mark for all types of goods/services falling within the broad category – ie in the computer software example, every type of computer software available. Lord Justice Arnold said that you should instead limit your goods and services to the sub-divisions within the category that are strictly relevant, eg “Computer software supplied as part of or in connection with any television, video recording or home entertainment apparatus or service; computer software supplied as part of or in connection with any telecommunications apparatus or service; electronic calendar software; application software for accessing audio, visual and/or audio-visual content via mobile telephones and/or tablet computers; games software”.

In July 2021, the Court of Appeal then allowed Sky's appeal on the bad faith issue and held that Sky had not acted in bad faith. Sir Christopher Floyd said, in relation to computer software, for example, that it is true that Sky had no prospect of using the mark in relation to every conceivable sub-division of computer software, but that fact is not a relevant or objective indication of bad faith. He said that an applicant for a trade mark does not have to formulate a commercial strategy in relation to every species of goods or services falling within a general description. He said that it would be bad faith, however, to include a category in which you have no plan at all to use the mark.

After the Court of Appeal judgement, brand owners understood that they could refer to reasonably broad categories of goods/services in a trade mark specification – rather than every relevant sub-division within that category – if they did or intended to use the mark in relation to at least one sub-division of the category. That has now changed following the Supreme Court’s recent judgement.

Supreme Court ruling – showin’ overly broad specifications the door

The Supreme Court has now held that Sky trade marks were indeed filed in bad faith and that its trade mark specifications should be restricted in line with Lord Justice Arnold’s original first instance Order.

SkyKick appealed to The Supreme Court on the issue of bad faith (as well as infringement and the impact of Brexit). SkyKick continued to allege that Sky employs a strategy of applying for overly broad trade marks for goods and services which it does not deal in, and for which it had no conceivable commercial rationale.

The issues on bad faith that were to be decided upon were

1. What is the test for determining "bad faith" in s.3(6) of the Trade Marks Act 1994?
2. If such bad faith is found, what is the correct approach to determining the specification that the proprietor of the trade mark should be permitted to retain?

In response to the first question, The Supreme Court said that bad faith will be made out where the trade mark application was made, not with the aim of engaging fairly in competition but either:

• 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 a trade mark, and in particular the essential function of indicating origin.

This all goes to the concept of undistorted competition.

• In respect of test A, The Supreme Court said that this category of case is generally concerned with conduct by an applicant which was intended to undermine the interests of one or more third parties, although the circumstances which may justify a finding that the application was made in bad faith may vary a great deal from case to case.

The applicant may, for example, have taken the mark of another trader; or made the application in breach of an agreement or fiduciary duty; or even sought to secure by registration a right to prevent third parties from using a mark in relation to particular goods or services despite those third parties having an earlier right to use the mark in that way. These circumstances do not necessarily involve any suggestion that the applicant has not used, or does not intend to use, the mark itself.

• In respect of test B, The Supreme Court said that it is concerned with cases and circumstances where the application for registration constitutes, in respect of all or some of the goods or services, an abuse of the trade mark system.

To establish “abuse”, the applicant must have adopted a strategy which meant that the purpose of the trade mark rules was not met because the applicant intended to obtain an advantage from the rules, such as making the application to obtain an exclusive right for purposes other than those falling within the functions of a trade mark (the origin function and the quality function). If the applicant has no genuine intention to use the five-year grace period to try to establish or even reasonably to explore the viability of a business under the mark, but nevertheless intends vigorously to enforce the registration across the full range of the goods and services in respect of which it is registered this is likely to be an abuse of the system. In other words, an abuse is where the applicant is manipulating the trade mark system for its own unfair advantage and using overly broad trade marks as a weapon against other traders.

Note that the bad faith test is an either/or test.

In response to the second question – what the correct approach is when determining the specification that the proprietor of the trade mark should be permitted to retain – the Supreme Court made various comments. We would distil these down to the approach including an assessment of whether:

• There is a prospect of the mark being used for the goods/services.
• There is a direct connection between the goods/services and the established business.
• It is implausible that the applicant would ever use the trade mark for the goods/services.
• The application is consistent with the functions of a trade mark (origin and quality).
• The application is a weapon against other traders.

Can’t help but think of yesterday…

This Supreme Court ruling is a game changer for overly broad trade mark filing strategies – both going forwards, and for those on the IPO registry already (although there seems to be little point in traders going back to “rectify” old filings, unless and until they are challenged).

In summary: brands with particularly broad trade marks may face attacks on their registrations on grounds of bad faith, and (depending on the facts) may be well advised to compromise in disputes. Going forwards, brands would be advised to make more focused trade mark applications using specific subcategories of goods and services, and be prepared to explain (and evidence) the rationale behind them.

*with apologies to those who are baffled by the George Michael references.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, December 2024