The UK Supreme Court's judgment in SkyKick v Sky [2024] UKSC 36 is a landmark decision, both on the bad faith ground of invalidity in trademark law, and on the interpretation of Brexit legislation.

This article explains:

  1. the law on bad faith as it now stands in the UK in light of Lord Kitchin's judgment;
  2. the impact of lack of 'clarity and precision' on the assessment of trademark infringement;
  3. how Lords Kitchin and Reed explained that remedies and procedures under the 2020 Withdrawal Agreement are to be recognised and available in domestic law notwithstanding any contrary enactment;
  4. the outcome of the SkyKick v Sky appeal itself; and
  5. several key takeaways for trademark filing and enforcement strategies.

What is the bad faith ground of invalidity in trademark law and how is it established?

It is rare for cases to reach the UK's highest court, the Supreme Court. When they do, the judgments provide useful guidance on areas of law for years to come. For this reason, the judgment of Lord Kitchin provides an essential overview of the UK's law on trademark invalidity for bad faith It captures the principles set out by the Court of Justice of the European Union (CJEU) and further clarifies those principles in view of existing CJEU authorities. (Neither Sky nor SkyKick sought to persuade the court to depart from the CJEU's principles.)

The law of bad faith in the UK may now be summarised as follows:

  1. Bad faith is an absolute ground of invalidity

    It is an absolute ground of invalidity of an EU or UK trademark that the application for that registered mark was made in bad faith, as at the date of the application for registration.

  2. Bad faith is an autonomous concept of trademark law.

    Bad faith, in the context of the modern trademark legislation, has been explained by the CJEU as an autonomous concept of EU law. It must be understood in the context of, and having regard to, the objectives of the EU law of trademarks, namely the establishment and functioning of the internal market and a system of undistorted competition. This means that undertakings must be able to register trademarks which enable customers to distinguish without confusion the goods and services of one undertaking from those of another.

  3. There must be motive or intention for bad faith.

    The bad faith ground for invalidity will be made out where the application for the registered trademark was made, not with the aim of engaging fairly in competition but either;

    1. with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties; or
    2. 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, and in particular the essential function of indicating origin.

    Lord Kitchin in fact said "…motive or intention…". While (motive or) intention is a subjective matter, it must be capable of being established objectively by the competent authority having regard to the objective circumstances of the case.

    We explain more about the intention requirement below:

  4. Burden of proof.

    The burden of proving that an application for a registered mark was made in bad faith lies on the party making the allegation. There is a presumption of good faith, but the objective circumstances may lead to a rebuttal of that presumption. The assessment is a matter of degree. If the presumption of good faith is rebutted, then it is for the proprietor of the mark to explain and provide a plausible explanation of the objectives and commercial logic pursued by the application for registration. Absent the provision of a reasonable explanation and justification, bad faith may be found.

We will now look more closely at the intention requirement, under (c) above.

  1. First limb- When considering whether there was intention under the first limb, namely the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, then a presumption of knowledge by the applicant of particular and relevant circumstances may arise from general knowledge of the sector concerned. The more long-standing the use by another undertaking of a particular sign, the more probable it is that the applicant will, when filing its application, have had knowledge of it.
  2. Second limb- When considering whether there was intention under the second limb namely 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 court is concerned with circumstances amounting to an abuse of the trademark system.For this limb to be met, the applicant for registration must have adopted a strategy which meant that (despite formal observance with the rules) the purpose of the rules was not met; and the applicant must have intended to obtain an advantage from the rules by artificially creating the conditions laid down for securing the registration. Of particular importance here may be whether the application was made with the intention of obtaining an exclusive right for purposes other than those falling within the functions of a trademark.

Lord Kitchin emphasised that the CJEU has explained the essential function of a trademark as being to denote the origin of the goods and services to which it is applied or in relation to which it is used (the 'origin function'). It is inherent in the origin function that the mark is or will be used for that purpose by the proprietor of the mark. To register a mark for goods and services for some purpose which is not contemplated by the legislation, and in relation to which the applicant for registration has no intention (conditional or otherwise) to use the mark as a badge of origin, constitutes an abuse – that is to say a misuse of the registered trademark system.

Lord Kitchin explained that it is permissible for an applicant for registration to file a list of goods and services exceeding the scope of their business and then to try to expand the business later. The applicant for a trademark is not required to indicate or to know precisely, when the application is filed or examined, the use that will be made of it. The grace period is important in giving genuine applicants time to invest in fledgeling businesses. But this is different from a situation in which registration is sought for goods or services distant from anything the applicant might provide.

Objective circumstances in the form of the width and size of the specification of goods and services for which registration is sought and their nature compared to the size and nature of the applicant's business (or lack of), may be such as to rebut the presumption of good faith and justify a conclusion that the application was filed, at least in part, for a purpose other than in connection with the proper function of a trademark (i.e. to denote the origin of the goods or services to which it is applied).

Where no rationale is then established by the proprietor of the mark for the application, in the light of the aims referred to in the trademark legislation, the court may conclude that the application was made without intention to use it in relation to the goods and services covered by the registration, and that this amounts to bad faith. However, when determining whether the applicant was acting in bad faith, an overall assessment is required, taking into account all of the factors relevant to the particular case. There must be 'objective, relevant and consistent indicia' tending to show one or other of the limbs of intention referred to above.

When a lack of intention to use a mark in accordance with the essential functions of a trademark concerns only certain goods or services referred to in the application for registration, that constitutes making the application in bad faith only in so far as it relates to those goods or services. The fact an applicant has used general terms contained in the Nice Classification does not preclude the application of either limb of the bad faith objection in respect of some or all the goods or services for which protection was sought.

Partial findings of bad faith: when a partial finding of bad faith is reached, the procedure then employed, to reach a specification reflecting the extent of the finding of invalidity for bad faith, must be fair to each side. Each party must have an appropriate opportunity to be heard and to answer the case made.

Effect of reputation on bad faith: having a reputation does not make it permissible to apply to register a mark in respect of categories or sub-categories of goods or service which the applicant has no intention (even conditionally) to sell or supply.

Serial filing or evergreening: while serial filing in order to avoid the consequences of the non-use of earlier registrations may be commonplace, that does not prevent it also amounting to bad faith. There must be rationale for the application, in the light of the aims of the trademark legislation.

What did the Supreme Court address on infringement?

The issue in the Supreme Court on infringement concerned findings of likelihood of confusion. The Supreme Court did not address the full conventional principles governing that type of infringement. However, importantly, the Supreme Court agreed with the Court of Appeal that, as a matter of principle, when considering a specification of services which is defined by terms which are not clear or precise, the correct approach is to confine the terms used to the substance or core of their possible meanings.

What did the Supreme Court address on Brexit?

Lord Kitchin explained the treaty and legislative process by which the UK left the European Union, with specific consideration in respect of trademarks. The arrangements included the making of the Trade Marks (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/269), among other things to secure the position in the event of a no deal Brexit.

Lord Kitchin accepted that the 2019 Regulations repealed (as of 'IP Completion Day' 31 December 2020) section 52 of the Trade Marks Act 1994 and enabling legislation, which designated particular courts as EU Trade Mark Courts, subject to the saving provision in paragraph 7(2) of Schedule 5 to the 2019 Regulations. Paragraph 7(2) of schedule 5 did two things: first, it maintained the designation of certain courts as EU trademark courts in the context of pending proceedings; but secondly, it limited their jurisdiction to the territory of the UK.

Sky's position was that, as the UK legislation stood, the courts in the UK no longer had jurisdiction in the actions concerning any of the EU trademarks protected in the territory of the EU. (The SkyKick v Sky case is a transitional one, in that Sky's claims for infringement of its EU trademarks were made before 31 December 2020). SkyKick did not dispute the court's jurisdiction in respect of the extracted comparable trademarks now existing as UK rights.

However, Lord Kitchin explained that since the making of the 2019 Regulations, the 2020 Withdrawal Agreement had been reached. By article 67(1)(b) of the Withdrawal Agreement, a court in the UK which had jurisdiction based on the EU Trade Mark Regulation in respect of acts of infringement of an EU Trade Mark still had jurisdiction. Importantly, by virtue of the European Union (Withdrawal) Act 2018 (as amended) section 7A, the relevant provisions of the EU Trade Marks Regulation had direct effect in the UK. Therefore, necessarily and notwithstanding any domestic legislation which might purport to suggest otherwise, article 67(1)(b) maintained the necessary jurisdiction of the courts in these proceedings.

Lord Reed, with whom Lord Kitchin and the other members of the Supreme Court's bench agreed, gave a further judgment on the issue of the impact of Brexit on the court's jurisdiction. He said that he had reached the same conclusion as Lord Kitchin, for essentially the same reasons, but he added some further thoughts in respect of Brexit legislation beyond the provisions specific to the SkyKick v Sky case.

Lord Reed emphasised the critical importance of section 7A of the EU Withdrawal Act 2018. Subsections (1) and (2) are modelled on the European Communities Act 1972 section 2(1), and like that provision, they give effect in domestic law to the EU principles of direct applicability and direct effect. Specifically, this applies (among other things) to "such remedies and procedures…provided for by or under the withdrawal agreement … are without further enactment to be given legal effect or used in the United Kingdom". Subsection (3) (modelled on s.2(4) of the 1972 Act) gives primacy to the directly applicable and directly effective rights, remedies, procedures and so forth referred to in s.7A(1) over incompatible domestic legislation.

If follows that remedies and procedures which are provided for, by or under the Withdrawal Agreement, and which are in accordance with the Withdrawal Agreement to be given legal effect or used in the UK without further enactment, are to be recognised and available in domestic law notwithstanding any contrary enactment.

This is a ruling with applicability well beyond trademark law. It also meant that the express wording of paragraph 7(2) of Schedule 5 of the 2019 Regulations did not matter: the court's continued jurisdiction in respect of the EU trademarks remaining in the case.

What was the outcome of the SkyKick v Sky dispute following the Supreme Court's judgment?

Could the appeal be withdrawn following settlement?

The case settled before the judgment was handed down. Lord Kitchin refused an application made by SkyKick, supported by Sky, for permission to withdraw the appeal. Lord Kitchin also declined the parties' request not to proceed to give judgment. Noting the existing authorities as to the court's discretion, he applied them to conclude that compelling reasons to refuse the requests included: the late stage of the request; the general importance of the issues before the court; and the Comptroller's view that judgment was desirable. Lord Kitchin also refused the parties' fallback request of issuing an advisory opinion rather than a judgment, saying he saw no advantage in such a course, which would create legal uncertainty and confer no significant benefit.

On SkyKick's allegation that Sky's marks were invalid for bad faith, the judge at first instance (Arnold J) had concluded that Sky had applied for its trademarks with the intention of obtaining an exclusive right for purposes other than those falling within the functions of a trademark. Namely, purely for use as a legal weapon against third parties, whether in threats of infringement claims, actual infringement claims or oppositions to third party applications for registration. Focusing in, for example, on the "computer software" part of Sky's specification, commercial justification for a specification of this breadth had not been provided. Arnold J thought SkyKick's suggestion for amendment went too far, but Sky did not provide a more limited suggestion, and in the absence of a proposal from Sky, Arnold J reached his own view of the modification needed.

The Court of Appeal disagreed with the judge's conclusion of bad faith in respect of "computer software", holding that given Sky's business, extensive use and expectations of further use, there was commercial justification for a specification of this breadth. But in the Supreme Court, Lord Kitchin said that the reasons the Court of Appeal gave for reversing the judgement were not sustainable. The judge had not made any material error in his reasoning and had been entitled to reach the conclusion that he had. The Court of Appeal, on the other hand, had failed properly to appreciate the scope and component elements of the bad faith objection. Moreover, its reasoning had related to the approach to be adopted by the tribunal, but the judge had made clear that if he were to find himself dissatisfied by the approach taken by either side then he would have to decide for himself where the middle line should be drawn. Hence there was no surprise as to the approach he took and neither side had been materially disadvantaged.

Lord Kitchin emphasised that having been found to have acted in bad faith, it would be manifestly unjust for Sky to escape the consequences of its action simply because it had framed its specification using general terminology, in circumstances where it had brought and pursued infringement claims based on all the goods and services for which its marks were registered until a relatively late stage.

Consequently Arnold J's modification of "Computer software" to "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" was reinstated by the Supreme Court.

On infringement, Arnold J had found likelihood of confusion infringement in respect of:

  • Sky's specification for "electronic mail services" and SkyKick's cloud migration service; and
  • Sky's specification (as modified) for "computer services for accessing and retrieving audio, visual and/or audio-visual content and documents" via a computer or computer network and SkyKick's cloud backup service.

However, the Court of Appeal overturned the finding that SkyKick's cloud migration service infringed, and the Supreme Court agreed with the Court of Appeal on this point. Lord Kitchin explained that the effect of confining Sky's specification for "electronic mail services" to the substance or core of its possible meanings (in view of the lack of clarity and precision of the term) was that SkyKick's cloud migration service was not an 'electronic mail service', nor an aspect or feature of an electronic mail service, but a different service.

On the other hand, the second finding of infringement reached by the judge, in respect of SkyKick's cloud backup service, was confirmed by both the Court of Appeal and the Supreme Court. The judge had been entitled to find the services concerned were the same or at least very similar.

Key takeaways for filing and enforcement strategies

In view of the Supreme Court's reasoning, key factors to keep in mind when forming and implementing a trademark filing strategy are:

  1. It is a misuse of the trademark system to register a mark for goods and services for which you have no intention to use the mark as a badge of origin.
  2. It is permissible to seek fair protection for goods and services for which the mark is used as a badge of origin.
  3. It is permissible to file a list of goods and services exceeding the scope of your business's activities and then to try and expand the business later. However, take care to keep a record of the rationale for the application, specifically for putting the contested mark into use as a badge of origin (or otherwise falling within the functions of a trademark).
  4. For all goods and services for which registration is sought, there must be reasonable explanation and justification for the scope of protection sought, both in terms of the breadth of the definitions employed and the number of goods and services identified – again, keep a record.
  5. Having a reputation does not make it permissible to apply to register a mark in respect of categories or sub-categories of goods or service for which there is no intention (or conditional intention) to use.
  6. Serial filing, to avoid the consequences of the non-use of earlier registrations, may be commonplace, but that does not prevent it also amounting to bad faith.

Key factors to keep in mind when forming and implementing a trademark enforcement strategy, considering the Supreme Court's judgment, are:

  1. Making threats of infringement, and bringing and pursuing claims for infringement and oppositions, based on trademark registrations in respect of goods and services that you as the applicant/proprietor have never used and have no intention of using, may provide support for a challenge that the registration was sought in bad faith;
  2. Prior to taking enforcement steps, review each specification and consider whether there is reasonable explanation and justification for its scope; if necessary, amend the specification down to the goods and services for which there is reasonable explanation and justification; and
  3. When asserting or claiming for infringement, ensure that the goods and services relied upon (i.e. as specified in the registration for the mark) are used in respect of the mark or meet the reasonable explanation and justification standard.

If you have any questions about the points discussed in this article, please get in touch with John Coldham, Hannah Barnett and Ailsa Carter.