Sky v SkyKick: Unclear or broad specification of goods/services is not a new ground for trademark invalidity, but may increase the risk of bad faith invalidation arguments
On 29 January 2020 the Court of Justice of the European Union (CJEU) gave its ruling in the long-awaited case C‑371/18 Sky v SkyKick. The judgment provides for two key findings. First, it confirms that a trademark cannot be declared invalid on the grounds that the terms used to designate the goods/services lack clarity and precision. Second, the judgment clarifies that a trademark registration may be declared partially invalid due to bad faith in respect of the goods/services for which the applicant had no intention to use the trademark.
Background of the case
The case originates from the UK where Sky companies, active in the fields of satellite and digital television broadcasting, initiated trademark infringement proceedings against SkyKick, a start-up supplying cloud migration information technology services. The SKY trademarks of Sky companies were registered to cover over 20 classes of goods/services, including "computer software" and "telecommunication services".
SkyKick denied the trademark infringement and made a counterclaim that the SKY trademarks were invalidly registered on the grounds that (i) the specification of goods/services lacked clarity and precision, and (ii) Sky companies had acted in bad faith, since Sky companies did not intend to use them for all of the goods/services covered by the registrations. The High Court of Justice (England and Wales) referred questions regarding this to the CJEU.
The judgment of the CJEU
The CJEU examined first the question whether a trademark could be declared invalid on the ground that the terms in the specification of goods and services are lacking in sufficient clarity and precision. The CJEU tackled this straightforwardly by noting that the absolute grounds for invalidity are exhaustively listed in EU Regulation No 40/94 and Directive 89/104, where the lack of clarity and precision of the terms used to designate the goods and services is not included. Therefore, the lack of clarity and precision of trademark specifications cannot be considered grounds for invalidity. However, the CJEU noted also that a trademark registered for a range of goods and services designated in a manner which lacks clarity and precision is, in any event, capable of being protected only in respect of the goods and services for which it has been put to genuine use.
The CJEU also examined the question whether it can constitute bad faith simply to apply to register a trademark without any intention to use it in relation to the specified goods or services. The CJEU noted first that the concept of bad faith presupposes the presence of a dishonest state of mind or intention. Secondly, the CJEU stated that EU trademark rules are aimed at protecting undistorted competition in the EU by ensuring that consumers can distinguish the products of different undertakings (the so-called origin function of a trademark).
Therefore, the CJEU concluded that bad faith could exist if a trademark was applied (i) with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or (ii) 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 trademark. The CJEU also confirmed that such circumstances may concern only certain goods/services of a trademark registration which the applicant had no intention to use, and in such case the trademark application can constitute bad faith only in so far as it relates to those goods/services.
The judgment of Sky v SkyKick brings mostly good news for trademark owners.
First, it confirms that right holders can continue relying on high-level specifications without the risk of losing the trademark registration by virtue of invalidation due to lack of clarity and precision. This question has been relevant since the case C‑307/10 IP TRANSLATOR, where the CJEU ruled that an applicant for a trademark must specify the goods/services with sufficient clarity and precision to enable determining the extent of protection. After the judgment in IP TRANSLATOR, it has been unclear whether the lack of precision and clarity would also serve as a basis to invalidate a trademark registration.
Second, the judgment provides additional guidance as regards invalidation of trademarks based on the applicant's bad faith. The CJEU ruled that a trademark application may constitute bad faith if the applicant had no intention to use the trademark. In this regard, the CJEU confirmed that the question of bad faith needs to be assessed based on the individual goods/services of a trademark application: if the applicant was acting in bad faith with respect to certain goods/services, only those goods/services may be invalidated.
Additionally, regarding the burden of proof the CJEU confirmed that there has to be objective, relevant and consistent indicia to show that the applicant was acting in bad faith when the application for trademark was filed. In this regard, the CJEU noted that bad faith cannot be presumed on the basis that at the time of filing the applicant had no economic activity corresponding to the goods/services referred to in that application, which means that fulfilling the burden of proof may not be an easy task for those challenging trademarks based on bad faith.
Nonetheless, the judgment serves as a good reminder to trademark holders that unclear or broad specification of goods/services may increase the risk of invalidation applications, if the trademark is registered. This means that right holders should pay close attention when specifying the goods/services of their trademark applications.