Trade marks: do broad specs mean bad faith?

Bad faith? Good question

An important concept in trade mark law is that of “bad faith” application – when a company registers a trade mark with the intention to undermine third parties, rather than to identify the origin of its goods and/or services.

When bad faith is established, this effectively cancels a trade mark, or reduces the goods and services it covers, opening the way for competitors to take advantage. So, it’s really not something you want to happen.

But here’s the issue: securing appropriate trade mark protection is very much a balancing act. If the specification is too narrow, it may not provide sufficient protection. If it’s too broad, the trade mark could be challenged on the grounds of bad faith.

This question, of whether an application with a broad specification is made in bad faith or not, is central to the high-profile dispute between Rupert Murdoch’s Sky and SkyKick (a cloud software provider).

Sky v SkyKick: a silver lining for brand owners?

It all started when Sky brought a claim against SkyKick for trade mark infringement and passing off. SkyKick denied these allegations, and counterclaimed that Sky’s marks were partially invalid because they had been applied for in bad faith.

Last year, the High Court found that Sky had no intention to use their marks for all the broad categories applied for (including ‘computer software’, ‘telecommunications services’ and ‘internet portal services’) and that the marks were applied for as part of a deliberate strategy of seeking very broad protection, regardless of whether it was commercially justified. In that respect, it ruled in favour of SkyKick. However, it also found that SkyKick had infringed Sky’s trade marks on a limited basis. One-one, it’s a draw.

Both parties were then granted permission to appeal against the High Court’s decision. Sky appealed against the finding of partial validity and the restriction on its marks (as well as their failed passing off claim), while SkyKick appealed against the limited finding of infringement, requesting Sky’s marks be further restricted.

Interestingly, in July this year the Court of Appeal refuted the two main arguments behind the previous decision to find bad faith:

1. Although SkyKick argued that there was no prospect of Sky using its mark to all computer software in an application covering this specification, the court ruled that having no prospect of use in relation to “every conceivable sub-division” of computer software was not a relevant indication of bad faith.
2. It also deemed that a trade mark applicant didn’t have to formulate a commercial strategy for using the mark in relation to every species of goods or services – stating: “an applicant is entitled to say ‘I am using the mark for specific goods falling within description X. I have no idea precisely where my business in goods of that description will develop in the next 5 years, but there will undoubtedly be more such goods than there are now.’”

Ultimately, the Court of Appeal reversed the restriction on Sky’s marks, finding that its “particularly prolific” expansion and extensive brand recognition could justify the broad protection. But Sky’s appeal against the dismissal of the passing-off action, and SkyKick’s cross-appeal, were both dismissed.

A word of caution

For those who want to continue filing trade marks with broad classifications or are just embarking on this strategy, the judgment provides some reassurance that, so long as the broad classifications can be justified, they won’t necessarily be deemed to have been applied for in bad faith. Whilst this worked for Sky (due to their extensive brand recognition), lesser-known brands may not get away with the same strategy.

Brand owners must also be aware that filing a broad trade mark solely to stop a third party from using the mark, with no intention to use the trade mark (to offer the entire range of goods and services for which the mark has been registered), will not fly.

What constitutes bad faith is highly dependent on the context, and on the goods and services being looked at. It is always advisable to discuss your trade mark strategy with an intellectual property expert. The first step is easy: you can just drop us a line here.