Insights | February 14, 2020

Unclear and imprecise goods and services do not allow trademarks to be invalidated in the EU

Trademarks cannot be invalidated on the grounds that they cover unclear and imprecise goods and services; but no intention to use trademarks might constitute bad faith.

According to a recent preliminary ruling (case C‑371/18, Skykick, issued on 29 January 2020) by the Court of Justice of the European Union (CJEU), EU trademark registrations and national trademark registrations in EU Member States cannot be invalidated if the goods and services covered by the trademarks are unclear and imprecise. However, if the trademark owner had no intention of using its trademarks, in certain circumstances this constitutes bad faith.

On the one hand, the judgment emphasizes legal certainty, as trademark holders can rely on the validity of their trademark registrations even though goods and services may later be considered too unclear and imprecise. On the other hand, trademark applicants and registrants may in the future face further objections based on bad faith if their trademarks applications or registrations cover goods and services that are not intended to be used.

Background

The underlying dispute was between Sky plc, Sky International AG and Sky UK Ltd (“Sky and Others”) and SkyKick UK Ltd and SkyKick Inc. (“SkyKick”). Sky and Others’ core business area is television broadcasting, telephony and broadband provision, while SkyKick offers certain kinds of Software as a Service (SaaS) based products.

Based on its EU trademarks and UK trademark including the word Sky, Sky and Others had brought an action for trademark infringement before the referring court, i.e. the High Court of Justice (England & Wales), Chancery Division (United Kingdom). Sky and Others’ trademarks covered a wide variety of goods and services, including “computer software” in class 9.

SkyKick filed a counterclaim for a declaration that Sky and Others’ trademarks were invalid on the grounds that they covered goods and services which were not sufficiently clear and precise. The CJEU had ruled in IP Translator in 2012 (C‑307/10, para 55) that the “competent authorities” should determine on a case-by-case basis whether the goods or services covered by the trademark application were sufficiently clear and precise. SkyKick also argued that Sky and Others’ trademarks should be declared invalid on the grounds that they were registered in bad faith. According to SkyKick, Sky and Others did not intend to use their trademarks in relation to all of the goods and services covered by the registrations and, consequently, those registrations should be cancelled, at least for the goods and services that were not intended to be used.

The referring court decided to stay the proceedings and to refer five questions to the Court of Justice for a preliminary ruling. To summarize, these were: (1) whether trademark registrations may be declared invalid on the ground that the goods and services covered lack clarity and precision, (2) if in the affirmative, whether “computer software” is sufficiently clear and precise, (3) whether simply applying for a trademark, without any intention to use it, constitutes bad faith, (4) if in the affirmative, whether bad faith applies to just those goods and services where there was no intention to use or all goods and services, and (5) whether a UK national trademark law provision requiring the trademark applicant to state use or intention to use complies with the EU Trademark Directive.

The CJEU’s ruling

As regards the first question, the CJEU explained that the criteria for declaring a trademark registration invalid are listed in an exhaustive manner in both the EU Trademark Regulation and the EU Trademark Directive. Neither contain a provision which allows a trademark registration to be invalidated on the grounds that the trademark covers goods and services that lack clarity and precision.

The Advocate General had considered (para 63-73 of his opinion) that those provisions of the EU Trademark Regulation and EU Trademark Directive (Articles 7(1)(f) and 4(1)(f), respectively, of the current statutes) which allow trademarks to be declared invalid in the event they are contrary to public policy could be interpreted to cover situations where the trademarks covered unclear and imprecise goods or services. However, the CJEU disagreed with the Advocate General and pointed out (in para 66) that these provisions do not cover the characteristics, e.g. the goods and services, concerning the trademark applications themselves but rather the trademarks. For this reason, the CJEU ruled that EU trademarks or national trademarks in EU member states cannot be declared wholly or partially invalid on the basis of the trademarks covering unclear and unprecise goods and services.

Therefore, the CJEU did not address the second question of whether the goods “computer software” are sufficiently clear and precise (the Advocate General opined that they are “clear” but not “precise” (para 74 of his opinion)).

As for the third and fourth questions on bad faith, the CJEU’s findings were primarily based on what it had already raised in its preliminary ruling in September 2019 (C‑104/18 P, Koton, para 46). The CJEU did, however, give some guidance on what does not constitute bad faith:

• the trademark applicant is not required to indicate or even to know precisely, on the trademark filing or examination date, the use he or she will make of the mark applied for (para 76; already stated earlier in para 22 of C‑541/18, #darferdas?)
• bad faith cannot be presumed on the basis of the mere finding that, on the filing date, the trademark applicant had no economic activity corresponding to the goods and services referred to in the application (para 78)

As a conclusion on bad faith, the CJEU ruled that “a trade mark application made without any intention to use the trade mark in relation to the goods and services covered by the registration constitutes bad faith, within the meaning of those provisions, 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“.

If the absence of intention to use concerns only certain goods and services, bad faith exists only for those goods and services.

Finally, as regards the fifth question, the CJEU stated that the UK trademark law provision, which requires trademark applicants to state whether their trademark is being used or intended to be used, is not precluded by the EU Trademark Directive. However, the CJEU stressed that, while such a provision may constitute evidence for establishing possible bad faith, the UK trademark registration cannot be invalidated on the basis of infringing that provision (para 86).

Conclusions

Many IP practitioners were eagerly following the SkyKick case because the Advocate General’s opinion, had the CJEU agreed with it, might have resulted in numerous trademark registrations being challenged via invalidation proceedings. While the Advocate General’s opinion includes sound practical arguments on why trademark registrations with terms that are too broad are detrimental to a functional trademark system, the fact remains that using the “public policy” ground as an invalidation tool is overstretching the wording of the trademark legislation. Trademark registrants may now in any case rest assured that their registrations cannot be challenged on the ground of goods and services lacking clarity and precision.

Ensuring that goods and services covered by trademark applications fulfil the “clear and precise” requirements is now left to the EU trademark offices. Based on a 2013 common communication between the EU offices, the number of general indications being considered unacceptable has been reduced to only four in the current Nice classification (“computer software” is not one of them). One may conclude that EU trademark offices are examining applications in this respect too leniently which in turn may result in trademark registrants enforcing their rights in relation to such goods and services which they do not intend to use and dissimilar to their used goods and services. For instance, the EU Intellectual Property Office (EUIPO) database contains over 96,000 EU trademark registrations which were registered during the last five years and contain the goods “computer software”. These registrations are not vulnerable to non-use cancellations until five years have elapsed from their registration dates. They might, however, be vulnerable to invalidation actions based on bad faith and no intention to use.

The bad faith element of the SkyKick judgment gives recourse in tackling the aforementioned issue. Indeed, brand owners should in the future pay more attention to the goods and services covered by their eventual trademark applications (although prior to filing this could be rather difficult). Mere “no intention to use” is not sufficient to constitute bad faith as additional criteria must also be fulfilled. Unfortunately, these criteria are open to interpretation as they are rather abstract (e.g. “a manner inconsistent with honest practices”, “the interests of third parties” and “purposes other than those falling within the functions of a trade mark”) and will hopefully be clarified in future cases in the years to come. The General Court might provide such clarification in a case (T-663/19) it is currently considering; it concerns whether an EU trademark for MONOPOLY was filed in bad faith (as ruled by the EUIPO Boards of Appeal) based on the trademark registrant’s earlier trademark registrations for the same mark.