29 Apr 2020

High Court applies CJEU guidance on precise specifications and bad faith in trade mark applications

Following a reference from the High Court of Justice in England & Wales ("High Court"), the Court of Justice of the European Union ("CJEU") has confirmed that a lack of clarity and precision in the terms used to designate the goods and services is not an independent ground for declaring a trade mark registration to be invalid. Whilst the CJEU ruling has been criticised subsequently for avoiding some of the key issues, it did rule that an application made without any intention to use that trade mark in relation to the goods and services specified, can constitute bad faith.

Upon the case being returned to the High Court, although the judge determined it was appropriate to limit some of Sky's specifications, SkyKick was still found to have infringed Sky's trade marks.

High Court proceedings

In the main proceedings before the High Court, "Sky" (collectively Sky plc, Sky International AG and Sky UK Ltd) brought an action for infringement of four EU trade marks and one UK trade mark against "SkyKick" (together SkyKick UK Ltd and SkyKick Inc). SkyKick counterclaimed for invalidation of Sky's trade marks on two grounds:

  • Firstly, the goods and services in classes 9 and 38 of Sky's registrations - including "computer software" and other similar terms - were not defined with sufficient clarity or precision
  • Secondly, the applications had been made in bad faith, as Sky never intended to use the mark in relation to all of the goods/services applied for.

SkyKick's counterclaim raised further considerations for the High Court regarding the compatibility of UK and EU law. It was thought that EU law provided an exhaustive list of grounds for invalidity, none of which encapsulate a lack of intention to use the trade mark. However, UK practice imposes an additional obligation on applicants – arguably at odds with the EU regime – that they must declare at the point of making the application that they have used the mark, or have a bona fide intention to use it.

Reference to the CJEU

Consequently, the High Court sought a preliminary ruling from the CJEU[1] to clarify the law. In total five questions were asked of the CJEU which can be distilled as follows.

1. Can an EU or Member State national trade mark be declared (wholly or partially) invalid on the ground that the goods and services contained within the specification are not defined with sufficient clarity and precision?

Firstly, the CJEU began by confirming that the applicable law is that in force at the time of the original trade mark application, irrespective of whether such law is now outdated. As such, the applicable law to Sky's trade mark registrations was Regulation No 40/94 (for the EU marks) ("Regulation") and First Directive 89/104 (for the UK mark) ("Directive").

The CJEU acknowledged that a lack of clarity and precision in the goods and/or services contained in the specification is not amongst the exhaustive list of invalidity grounds, as expressly stipulated by the relevant law. The requirement for clarity and precision is a requirement for the sign or mark, and not the goods and services to which the sign or mark was to be applied. Therefore, the CJEU ruled that a lack of clarity and precision with regard to the specified goods and services, was not a ground for invalidity in itself.

Further, assertions by SkyKick that a lack of clarity and precision in the goods/services could indirectly constitute a ground for invalidation – pursuant to (a) the requirement for graphical representation of a trade mark or (b) the mark being contrary to public policy – were both dismissed. Whilst the CJEU accepted that the sign itself must be represented clearly and precisely, such a requirement does not extend to the specification of goods and services. Similarly, the CJEU ruled that the concept of public policy applies to the sign itself, as opposed to the content or characteristics of the specification.

2. Can it constitute bad faith to apply to register a trade mark with no intention to use it in relation to some (or all) of the goods and services?

The CJEU ruled that an application made without the intention of using the trade mark in relation to the goods and services covered will constitute bad faith where there is "relevant and constant indicia" that the application was made 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".

However, the CJEU proceeded to comment that an applicant cannot be expected to know precisely their intended future use of a trade mark. As a result, a lack of economic activity in the specific goods and services at the time of the application is not conclusive of bad faith.

In any event, under this ground, trade marks would only be invalidated in respect of the goods/services for which an intention to use was absent. The ground would not cause the entire trade mark to be declared invalid. In this regard, the CJEU appeared to believe that the provisions which allow for revocation of a trade mark on grounds of more than five years' non-use, were an adequate remedy. 

3. Are provisions of Member State national law that require a trade mark applicant to state that they are using the mark, or have a bonafide intention to use the mark, compatible with EU law?

Lastly, the CJEU emphasised that the UK provision requiring an applicant to declare use, or intended use, of the mark was not unlawful as being at variance with EU law because it is merely a procedural requirement to registration, as opposed to constituting an absolute ground for invalidity. As Member States are permitted to prescribe their own registration procedures, such provisions are not incompatible with EU stipulations that Member States cannot create additional invalidity grounds.

As an aside, it was noted that, despite not constituting a ground for invalidity, failing to comply with the UK provision of declaring use or intended use may be indicative of bad faith.

Application by the High Court

When the case returned to the High Court[2], following the CJEU's ruling, SkyKick's counterclaim seeking to invalidate Sky's trade marks on the ground that their specifications lacked clarity or precision was swiftly dismissed by the judge, as no such ground of invalidity exists.

In relation to bad faith, SkyKick accepted that Sky's trade marks would be invalidated only to the extent the High Court found, on the basis of fact, that Sky had filed the applications in bad faith, and that the registration would not be invalid in its entirety as a result.

Interestingly, the High Court had already made certain findings of fact prior to its reference to the CJEU. In particular, the High Court found that Sky did not intend to use the trade marks for the goods and services in three different ways:

  • where it had no intention to use the trade marks at all (e.g. 'bleaching preparations' and 'whips')
  • where the category was so broad that Sky could not, and did not, intend to use the trade mark across the full breadth of the category
  • where the specifications were intended to cover all the goods or services in a relevant class.

Using these facts and applying the CJEU's guidance, the High Court held that Sky's actions demonstrated bad faith in each of the three ways identified. Further, the judge noted that Sky had adopted a "deliberate strategy of seeking very broad protection", regardless of whether it was commercially justified and found that Sky intended to obtain an exclusive right for purposes other than those falling within the function of a trade mark, "purely as a legal weapon against this parties".

The High Court then had to determine the extent to which this finding applied to the terms within Sky's specification of goods and services on which it relied to allege trade mark infringement by SkyKick.

Sky had relied on eight categories, namely, in class 9: computer software; computer software supplied from the internet; computer software and telecoms apparatus to enable connection to databases and the internet; data storage; and, in class 38: telecommunications services; electronic mail services; internet portal services; and computer services for accessing and retrieving information/data via a computer or computer network (the "Selected G&S").[3]

Of these eight Selected G&S, all specifications in class 9 were limited by the High Court. Particularly, whilst the CJEU's judgment did not address whether the term 'computer software' is by its very nature lacking in clarity and precision (something for which it has received criticism), the High Court determined that – in these precise circumstances (thereby not necessarily providing any broader guidance) – Sky's specifications for the term should be limited. The High Court also determined that it was appropriate to limit "computer services for accessing and retrieving information/data via a computer or computer network" in class 38.

In spite of the limitations ordered by the High Court to five categories of the Selected G&S, SkyKick was found to have infringed Sky's trade marks in relation to "electronic mail services", a conclusion which the High Court had (conditionally) reached before reference to the CJEU on these other aspects of the case.

What can we learn?

(A) The statutory invalidity grounds are exhaustive, and do not include a lack of clarity and precision of the goods/ services

This CJEU decision will be greeted with a sigh of relief from trade mark owners, who are now safe in the knowledge that their existing, arguably unclear or imprecise specifications will not face invalidation on such a ground. The exhaustive nature of the legislative invalidity grounds affords minimal discretion to the court or registries in this regard. As such, this element of the decision seemed almost inevitable. The CJEU – in honouring the evident legislative intention – has reassured proprietors that they will not face unexpected invalidity grounds beyond those specified in the legislation.

In accepting the separation of powers between the legislature and the judiciary, it seems appropriate that the creation of additional invalidity grounds will only be possible with legislative intervention.  If or until this happens, a greater burden is bestowed on examiners – who will ideally receive clearer guidance and extensive training to standardise decisions and improve consistency – to redefine (or rather seek clarification upon) unclear and imprecise specifications before such marks make their way onto the register.

(B) The comfort provided by non-use revocation actions is limited

Although unclear and imprecise specifications can be narrowed by revocation actions for non-use, this provides limited consolation for challengers of such registrations. A five-year grace period is still afforded to proprietors to enforce their excessively wide rights and monopolise the relevant markets of goods/services. This reinforces the necessity for examiners to be vigilant against these speculative specifications at the examination stage.

Additionally, even a successful revocation will only apply to the goods/services absent of use, raising concerns as to whether this constitutes an effective deterrent to an initial unclear and imprecise filing. Practitioners will continue (in their clients' interests) to draft specifications as widely as possible (normally, with more specific examples included in addition), with the worst case scenario being the revocation of the wider, unclear and imprecise elements at a later date.

(C) The bad faith ground is clarified (perhaps extended), but the evidential burden of proving a lack of intent to use may be difficult to reach

The CJEU's confirmation that a lack of intention to use the mark in relation to the goods/services will constitute bad faith, at least theoretically, represents a welcome movement in preventing the deliberate blocking of markets and nurturing a system of undistorted competition. However, in reality, the proof of this dishonest state of mind may often be illusive.

On one hand, vast diversification could occur in the (generous) five year period before the non-use attack is potentially triggered, and applicants are widely encouraged to look beyond current business operations when deciding the extent of protection they require – given the initial ten years of protection. As such, the CJEU is warranted in affording a degree of leeway to applications for goods/services in which the applicant may expand into – even if this expansion never manifests – without the trade mark being invalidated for bad faith.

Conversely, in requiring "relevant and constant indicia" of this bad faith, the CJEU risks setting the evidential bar too high, arguably affording trade mark applicants a 'get-out-of-jail-free card' by claiming that their intended expansion simply did not materialise as envisaged. Indeed, it could be extremely difficult to prove that the proprietor never even contemplated expansion into the goods/services specified (unless, possibly, they are completely unrelated to the applicant's core offering). It remains to be seen what extent of evidence will prove necessary to invalidate a registration (or part thereof) on these grounds, but the likelihood is that only the most blatant cases of foul play will be caught.

As a practical tip, applicants should be encouraged to preserve all internal evidence of future plans in order to defeat potential bad faith claims should such plans never transpire (including evidence of why the expansion or extension did not come to fruition). Similarly, practitioners must consider each specification carefully to nullify the increasing risk of bad faith claims. 

Ultimately, the registries and the courts will be faced with the unenviable task of distinguishing instances where legitimate potential diversifications never occurred, from cases where excessively wide specifications were implemented to block entry to such markets.

(D) The approach on bad faith may favour larger entities

In practice, this approach risks disproportionally advantaging large entities (such as Sky), as the scope and scale of their potential expansion is arguably far wider than that as could be envisaged of smaller entities. Due to the resources at their disposal, it is more conceivable that these large entities could expand into goods/services further from their current practices, such as Uber's expansion into the food and drink sector through the emergence of 'Uber Eats'. As such, larger entities may indirectly be afforded extra protection against bad faith claims as the scope of their conceivable expansion is wider, irrespective of whether such expansion was ever genuinely contemplated.

This responsibility will seemingly fall on the registries and the courts to ensure that bad faith claims are treated consistently and fairly, whilst smaller entities must be encouraged to maintain evidence of their future plans.

Overall lessons

Whilst this judgment should not be perceived as a green light to specify goods/services with a lack of clarity or precision, it fails to provide a meaningful deterrent against doing so. Practitioners can continue to employ existing (potentially vague) drafting practices, and proprietors can rest assured that no surprise invalidations are around the corner – at least on this non-existent invalidity ground.

There is also persuasive commentary that the CJEU is plainly incorrect in part of its reasoning, in that the wording (in both the Regulation and Directive) refers specifically to "trade marks which are contrary to public policy…" and therefore consideration must be given not only to the sign, but to the 'trade mark' application as a whole, inclusive of the specification.

The High Court's application of the CJEU guidance is helpful to the extent that it has clearly identified three particular behaviours of Sky which constituted bad faith at the time it filed its applications. However, the decision is fact-specific, and only over more time (and cases) can we expect a better understanding to develop regarding where the line will be drawn between legitimate filings envisaging diversification, and tactical blocking of markets in goods/services where the applicant has no foreseeable commercial interest.

Includes contribution by Lewis Sanderson, Trainee Solicitor.  

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[1] C-371/18 (29 January 2020)

[2] [2020] EWHC 990 (29 April 2020)

[3] For various reasons, telecommunications services and electronic mail services were not considered further