Bad faith under spotlight as UK considers Sky v SkyKick

After seven years of winding its way through the UK courts—and no fewer than eight judgments—the UK Supreme Court will finally hear arguments related to the trademark dispute between Sky and SkyKick.

Described by lawyers as “one of the most important UK trademark cases in years”, it is anticipated that the outcome may ultimately define the UK’s post-Brexit position on ‘bad faith’—generally defined as a lack of genuine intention on the part of the trademark owner to use the registered mark.

The dispute first emerged when Sky sought to block the cloud management company from using the sign ‘SkyKick’ in relation to “email migration and cloud storage services”, triggering an international feud between the two companies.

In the most recent decision in the long-running case, the UK broadcast giant prevailed against SkyKick at the English Court of Appeal in 2019.

Sky persuaded that court to reverse an earlier ruling handed down by the English High Court, where Justice Richard Arnold found that it had acted in bad faith and “abused” the European trademark system in applying for its own marks.

SkyKick went on to appeal the decision at the Supreme Court, and this week’s much-anticipated hearings will follow hard on the heels of another high-profile case this month—Tesco v Lidl—which also grappled with ‘bad faith’ questions.

Raising the stakes

As Hogan Lovells partner Joel Smith points out, such “high-octane battles” in recent years have raised the stakes in trademark enforcement actions.

“Defendants have been keen to claim that brand owners are ‘evergreening’ by adopting deliberate blocking strategies or are trademark bullies through abusive enforcement.”

In this particular case, SkyKick argues that registering over-broad marks encourages cluttering and damages fair competition between businesses.

It also alleges that such practices encourage abusive behaviour by those who register widely as a legal weapon to pressure others through threats of claims and litigation.

The legal wrangle, adds Smith, draws attention to the importance of ensuring that the trademarks register conveys “accurate information” about owners of legitimate marks so that third parties are able to clear or register their own brands “without risk of opposition”.

Further, the Court of Appeal’s earlier decision, he says, had come as a relief to many brand owners as it “seemed to preserve the status quo”—leaving them with the option of “filing lawfully broad trademark specifications” as part of their legitimate filing strategies.

A soothing approach

“The Court of Appeal had adopted a soothing, ‘business as usual’ approach, although it still left the door open to a challenge based upon bad faith—but only in very exceptional circumstances,” adds Smith.

Now, this sense of calm could be ruptured. As Pinsent Masons partner Florian Traub notes, the outcome of the case before the Supreme Court is “very difficult” to predict.

“Most practitioners will probably expect the Supreme Court to adopt a position somewhere between the more restrictive approach of the High Court and the perhaps more lenient position of the Court of Appeal,” he adds.

As his colleague, IP lawyer  Gill Dennis, explains: “The central question the Supreme Court will consider is what constitutes a ‘bad faith’ trade mark registration. The UK Trade Marks Act 1994 provides that a trademark shall not be registered if or to the extent that the application is made in bad faith.

“The Supreme Court is expected to clarify how precise businesses must be when specifying the goods and services they want their UK trademarks to cover, and the degree to which they must intend to use the marks,” explains Dennis.

Brexit ramifications

That’s not all. Critically, the Supreme Court’s decision could herald the first significant divergence from EU trademark law in the UK since Brexit—changing how trademarks are prosecuted and how the concept of ‘bad faith’ registrations is treated.

Indeed, the Court of Justice for the European Union ( CJEU) already heard this case in 2020 which, according to Bird & Bird partner Tristan Sherliker, means that the “Supreme Court is going to be looking at CJEU decisions and the practice of the EU over the last 30 years”.

He goes on to observe wryly: “The Supreme Court never has an easy job, but this could be a particularly difficult case for a couple of reasons. In one sense, this case is about a narrow point of trademark law, but that narrow point resounds loudly.”

Essentially, while the court “may indeed stick very closely” to the EU principles, in theory it now has the jurisdictional option to diverge sharply.

For his part, Sherliker cautiously predicts that the court will aim to harmonise with the EU, for “sensible” reasons such as promoting international trade and promoting a harmonised system.

But, he concedes, there is “a real chance that the decision, or the way it is expressed, might lead to the law in the UK being different to the EU law”.

The devil will of course be in the detail, concludes Traub.

“While the question of bad faith will remain very fact-specific to each case, practitioners and brand owners will read every line of the Supreme Court’s ruling very carefully to make out any notable divergence from EU trademark law in the UK since Brexit.

“Whatever the outcome, we can expect ‘bad faith’ more regularly pleaded both in registry and court proceedings going forward,” he predicts.

Contrasting case law

Another potential hurdle for the court, continues Sherliker, is that there are currently two precedents from the Court of Appeal that are “very different in their effect”.

The first is the ruling handed down by Sir Christopher Floyd in Skykick at the Court of Appeal), holding 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, in my judgment, a relevant or objective indication of bad faith.”

Essentially, Floyd's judgment overturned the previous decision of Mr Justice Arnold’s earlier stance in SkyKick—and his later, similar, finding in Tesco v Lidl, in which he asserted that: “It is clear that an applicant seeking unjustifiably broad protection may amount to an abuse of the trademark system, which could constitute bad faith”.

“So we see a potential difference in opinion between the former Court of Appeal judges, and the current judges which will need to be resolved,” notes Sherliker.

“The case is likely to inform businesses and lawyers, in trademark practice and in the courts for years or decades to come, and could lead to some important practical changes depending on the outcome.”

Smith agrees on the critical nature of the outcome, pointing out that one thing is certain in this most unpredictable of cases—the proceedings are unlikely to be dull.

“The trademark community is set to look on in fascination as the Supreme Court navigates the case—and, of course, we will have the opportunity to hear one last time from IP maestro Lord James Kitchin in his final case before retirement from the full bench."

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