Review of trade marks prudent after ruling

Florian Traub of Pinsent Masons, the law firm behind Out-Law, was commenting after a High Court judge this summer ordered "the overall winners" of an ongoing dispute over trade mark rights to pick up legal costs totaling more than £1.5 million it incurred in bringing trade mark infringement proceedings. The costs order was issued as a sanction over the company's registration of a trade mark for an overly broad range of goods and services. Pinsent Masons has developed a brand protection platform, Alteria, which allows businesses to easily and efficiently manage their trade mark portfolio, relieving them of this administrative burden and allowing them to focus instead on their strategic priorities. 

Traub said, "Following this ruling, launching infringement proceedings based on a trade mark with an overly broad specification of goods or services carries the risk not only that the trade mark could be at least partially invalidated but also that the court may make an adverse costs order against the trade mark owner."

The High Court's costs order related to a dispute over trade mark rights asserted by broadcaster and telecoms provider Sky. Sky claimed that SkyKick, a US supplier of cloud migration software, was responsible for infringing five of its UK and EU trade marks covering goods and services falling within a number of technology categories. SkyKick challenged the validity of Sky's marks, arguing that they had been registered in bad faith because they cover overly broad classes of goods and services and said they should be revoked.

In a ruling in January 2020, the Court of Justice of the EU (CJEU) gave some clarification of the law in this area. It decided that trade mark applications made without any intention to use the trade mark in relation to the goods and services specified will be considered to have been registered in 'bad faith' and subject to revocation "if the applicant for registration of that mark had 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".

Applying the CJEU's ruling to the facts of the case in April 2020, the High Court held that SkyKick had infringed Sky's trade marks covering email services in relation to its cloud migration service. However, it partially invalidated some of Sky's trade marks, including those covering 'computer software' and 'data storage', after finding that Sky had deliberately registered those marks for goods and services they had no intention of using their rights for.

In its latest judgment, the High Court considered whether an injunction should be granted against SkyKick, restraining it from infringing Sky's trade marks in the future, and who should pay the costs of the litigation to date. The court decided that it would not withhold an injunction because of Sky's bad faith in applying for overly broad trade mark protection, but said that Sky's "bad faith should be reflected in costs" instead. 

"The risk of an adverse costs order being made against a trade mark owner when it comes to enforcing their rights can be mitigated at the application stage in the case of new trade mark rights," said Traub. "While we would not recommend an overly cautious approach to the scope of trade mark specifications, brand owners should file for protection that they can commercially justify as part of current or genuine future business strategy."

Many businesses will own trade marks registrations covering broad swathes of goods and services that pre-date this ruling.  

Traub said: "It has been common practice for businesses to seek trade mark protection not only for the goods and services which are core to their activities but also to extend their rights into unrelated goods and services with a view to keeping not only direct competitors but anyone seeking to trade on their wider brand reputation at bay. Until now, this has been entirely legitimate." 

Iain Connor, also an intellectual property law expert at Pinsent Masons, said: "This latest judgment will cause trade mark owners to reflect before launching trade mark infringement proceedings in the UK. They will need to ensure that they only assert rights that directly reflect the alleged infringer's activities or risk cost sanctions."

According to Traub, trade mark owners may want to "get their house in order now" to prepare for any future enforcement action. He said: "This process would involve a review of the scope of each of the trade mark registrations which are key to the business and on which enforcement action might be based. An assessment should be made of how accurately the goods and services covered by the registrations reflect actual business activity." 

For some businesses this is not always a straightforward exercise. This is particularly true for those that own a substantial portfolio of registered trade marks. 

Traub said: "In our experience, some businesses do not know exactly what trade marks they have. This could be because their portfolio has expanded significantly over time, or because the business simply does not have the in-house resource available to keep on top of it."

Traub said the latest High Court ruling in the Sky v SkyKick case also emphasised the importance of carrying out clearance searches before launching a new brand. SkyKick argued that the financial burden of having to rebrand to avoid falling foul of the injunction was a reason why it should not be granted, but the court disagreed. It was of the view that the consequences of the injunction for SkyKick were "largely self-inflicted". One of the reasons for that was because "SkyKick did not commission an international trade mark search which they were recommended to do and could have afforded".

Traub said: "A business considering expansion by launching a new product or service, or perhaps into another jurisdiction, should undertake 'freedom to operate' searches to ensure that the path is clear for the brand name to be used. Early searches can save significant time and cost overall in either having to come up with an alternative brand name in the event that the searches are not clear, or in having to defend a trade mark infringement claim if the expansion has already begun. Searching across multiple jurisdictions and industries can be expensive, so identifying the appropriate depth of your search exercise is vital."

The High Court's ruling is not the last word on these issues. Both Sky and SkyKick have been given permission to appeal on the findings of infringement and bad faith. The matter is likely to be heard by the Court of Appeal in the latter half of 2021.

More information on Alteria.