The Court of Justice of the European Union (CJEU) has just released its judgment in Sky v SkyKick (Case C-371/18).

This case, which covers fundamental issues of trade mark law – clarity and precision of the specification, intention to use and bad faith – is arguably the most important trade mark case since the IP Translator judgment in 2012 (which overhauled practice in relation to the use of Nice class headings in trade mark specifications).

The CJEU’s judgment strikes a fair balance between the interests of current trade mark owners and prospective trade mark owners or users. Current trade mark owners will likely be relieved, however, because the judgment retreats from some of the more strident positions taken by Advocate-General (AG) Tanchev in his preceding Opinion. Yes, filing an overbroad specification can be in bad faith but, no, insufficient clarity and precision is not itself a ground for invalidity.

Background to the judgment

The wording of a trade mark specification is crucial. It governs the scope of the trade mark owner’s protection, and whether a third party’s goods or services are similar to the trade mark owner’s will be judged by reference to the specification. This cuts both ways. The broader the specification, the better protected the proprietor will be, but allowing trade mark owners to obtain broad monopolies will – over time – clog the register and (arguably unduly) restrict the commercial freedom of third parties.

This case arose from a dispute in the UK between SkyKick, a US-based cloud computing services provider which sought to expand into the UK and EU, and Sky, the well-known UK-headquartered telecommunications company. Sky sued SkyKick for trade mark infringement (based on, among other things, computer software in class 9 and telecommunications services in class 38). SkyKick counterclaimed, not on the basis of non-use (because the trade marks were within the five-year grace period) but for invalidity due to (i) lack of clarity and precision; and (ii) bad faith.

Sky is well known for its broad trade mark specifications, which contain a number of items in which Sky would seem to have no commercial interest (such as “bleaching preparations”, “insulation materials” and “whips”). Given this, Sky would seem to have no intention to use its trade marks across their specifications, which raised the question of whether they were applied for in bad faith (and, if so, whether this bad faith would invalidate the whole trade mark or only the relevant parts of a specification). SkyKick also ran an argument that terms such as “computer software” are overbroad and lack clarity and precision (for there are many types of and applications for computer software), which might render such terms invalid, whether through bad faith or otherwise.

It is perhaps ironic that a case with such important implications for trade mark law and practice across the EU should be a referral from the English High Court and the decision should come in the week in which the UK will officially (if not substantively) leave the EU. We do not anticipate that English law will depart significantly from the CJEU’s approach in this case, at least not for a number of years from now.

Five key points

In our view, the key points to take from the CJEU’s judgment are:

Unlike AG Tanchev, the CJEU does not consider that lack of clarity and precision of terms to describe goods/services is a ground of invalidity (whether total or partial). The AG tried to squeeze a requirement for clarity and precision of terms into one of the express grounds for invalidity (being contrary to public policy), but the CJEU did not follow this route. In the CJEU’s opinion, the concept of public policy does not stretch this far, and the list of grounds of invalidity in the EU Trade Marks Regulation and Trade Marks Directive are exhaustive.
Therefore, trade marks that are already registered with potentially overbroad terms (such as “computer software”, “telecommunications services” and “financial services”) are likely to be safe. Things may change in future, however. The implication of the AG’s Opinion and CJEU’s judgment, read together, is that it is the job of the trade mark registries to inspect applications for unclear/imprecise terms before an application is registered. The registries do not have infinite resources, but given the high profile of the SkyKick judgment we expect to see renewed attention on the precise wording of specifications. This is especially true where there is no obvious commercial rationale for applying for a particular term (see below).
The inclusion in a trade mark specification of goods/services for which the trade mark owner has no good faith intention to use the trade mark may, depending on the circumstances, fall within the invalidity ground of bad faith. The test is: did the owner, at the time of applying for the trade mark, have the “intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or 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”. In other words: does it all seem a bit suspect and inexplicable? A lack of a commercial rationale to register a trade mark for particular goods/services is neither a necessary nor sufficient basis for bad faith, but it is certainly an important indicator. The CJEU’s test is, in our view, sensible: it is sufficiently flexible to allow the invalidation of obviously bad faith filings, while recognising that sometimes a trade mark application will need to be made where there is not an immediately obvious commercial rationale (for example, before a new product launch).
The good news for owners of existing trade marks is that if a trade mark is invalid for bad faith on this basis, it is only invalid in relation to the goods/services for which there was a lack of good faith intention to use. Therefore, the CJEU has avoided the draconian outcome that SkyKick wanted: that Sky’s trade marks would be completely invalid because of its (arguably) sharp practice of filing very broad specifications. The bad news is that the CJEU’s judgment gives potential infringers a tactical weapon which, if deployed correctly, can create significant doubt and litigation risk for a trade mark owner.
The precise implications of applying for goods/services in bad faith may depend on the place of application. The UK Trade Marks Act 1994 provides that an application may be refused if it is in bad faith (and requires an applicant to declare their intention to use the trade mark across its scope), whereas under the EU Trade Marks Regulation, a trade mark can only be invalidated for bad faith after it is already on the register. This needs to be taken into account in formulating a filing strategy.