Trade Marks - Sky v SkyKick: The Order

Jane Lambert

Chancery Division (Lord Justice Arnold) Sky Ltd and others v Skykick UK Ltd and another [2020] EWHC 1735 (Ch) (2 July 2020)

"Thus endeth a lawsuit that required three hearings before Lord Justice Arnold as he now is, one to the Court of Appeal and another to the CJEU. Sky scraped home on electronic mail services but not much else. The Sky companies lost their passing off claim and part of their goods and services specification. The excursion to Luxembourg did result in a ruling that lack of clarity and precision is not fatal to a trade mark registration and that bad faith in applying for registration of some goods and services does not vitiate the whole mark."

Only the litigation didn't end.  There was a further hearing before Lord Justice Arnold on 2 July 2020 to argue the terms of the final order (see  Sky Ltd and others v Skykick UK Ltd and another [2020] EWHC 1735 (Ch) (2 July 2020)).  Also, we may not have heard the last of this case even now because the learned Lord Justice gave each side permission to appeal, albeit on quite narrow issues.

Sky's Letter of 30 April 2020
In Trade marks - Sky v Skykick, The Final Chapter I wrote:

"Just before trial, Sky had focused their claim on selected goods and services but they did not give up their claim to infringement of other parts of their trade marks. Lord Justice Arnold put them to their election. He gave them 7 days from the date of the handing down of the judgment to withdraw their infringement claim in respect of those other goods and services. If Sky withdrew their infringement claim in respect of other parts of the trade marks within that period, the judge promised not to make any order on the counterclaim beyond the order he had already indicated. But he warned Sky that if they failed to withdraw their infringement claim in relation to other parts of the registrations he would consider the marks' validity and make appropriate declarations."

At paragraph [3] of his 2 July judgment, Lord Justice Arnold announced that  Sky had abandoned its claim for infringement in relation to goods and services other than those specified in its original claim in a letter dated 30 April 2020.  He added that he would make no order on SkyKick's counterclaim for a declaration of invalidity in respect of the other goods and services.

Cloud Backup Services
In Sky Plc and others v Skykick UK Ltd and another [2020] EWHC 990 (Ch) (29 April 2020), Lord Justice Arnold said at paragraph [39]:

"........ I concluded in [Sky Plc and others v Skykick UK Ltd and another [2018] EWHC 155 (Ch) (6 Feb 2018), [2018] ETMR 23, [2018] RPC 5] at [297] that SkyKick's email migration service was identical to "electronic mail services". To that extent, therefore, I did not accept SkyKick's "squeeze" argument based on clarity and precision. Still further, I concluded at [302] that, where SkyKick's goods and services were identical to those covered by the Trade Marks, there was a likelihood of confusion. As Sky submit, it follows that SkyKick have infringed the Trade Marks at least in so far as SkyKick have used the signs complained of in relation to their email migration service and in so far as the Trade Marks are registered in relation to "electronic mail services".

He added at [42] that that conclusion was probably determinative of the issues between the parties.  He considered Sky's infringement claim in relation to goods and services other than email added nothing to its case,

The parties interpreted paragraph [39] differently.   Sky believed that the Lord Justice had said that SkyKick may have infringed Sky's trade mark in respect of goods and services other than those relating to email.  SkyKick believed that his lordship had dismissed the claim in respect of everything except email.  Both parties were formulating arguments on the terms of the final injunction and liability for costs around their respective interpretations of the paragraph.   It was clear to the judge that a ruling was required in relation to at least cloud backup services.

Lord Justice Arnold referred to paragraph [297] of the judgment that he had delivered in 2018:

"Mr Schwartz also accepted that SkyKick’s products were provided over telecommunications links, namely the internet. Whether this means that SkyKick provides 'telecommunications services' in Class 38 depends on how broadly that term is interpreted. Sky’s case requires it to be very broadly interpreted, which engages SkyKick’s case on clarity and precision. If it is narrowly interpreted, it is debatable whether SkyKick’s products are even similar."

Following the preliminary reference to Luxembourg, the judge had held at paragraph [33] of his 29 April judgment that Sky had a valid registration in respect of  "computer services for accessing and retrieving audio, visual and/or audio-visual content and documents via a computer or computer network".  At paragraph [7] of his 2 July judgment, the learned Lord Justice confirmed that cloud backup is identical to those services or at least very similar.   He continued at paragraph [8]:

"Given the identity or very close similarity of services, it follows from the reasoning in the Main Judgment that use of the signs complained of in relation to Cloud Backup also gives rise to a likelihood of confusion. Thus SkyKick have also infringed the Trade Marks by using those signs in relation to Cloud Backup pursuant to Article 9 (2) (b) of the Regulation and Article 10 (2) (b) of the Directive."

Sky applied for a final injunction which SkyKick opposed on the grounds of Sky's bad faith and proportionality.  The judge acceded to Sky's request and granted an EU wide injunction in the standard form except that after 31 Dec 2020, the injunction will prohibit infringement of the UK equivalents to the EU trade marks arising pursuant to art 54 (1) (a) of the EU withdrawal agreement.

The route by which his lordship arrived at that decision is instructive. His starting point was the understanding in art 21 of TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) "that the compulsory licensing of trademarks shall not be permitted."    He explained at [15] that:

"The relevance of this is that the Court of Justice of the European Union has repeatedly held that, in a field of intellectual property law where the European Union has legislated, such as trade marks, national courts must interpret both European and domestic legislation as far as possible in the light of the wording and purpose of relevant international agreements to which the EU is a party, and in particular TRIPS."

He referred to art 130 of the EU Trade Mark Regulation (Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark (Text with EEA relevance) OJ L 154, 16.6.2017, p. 1–99):

"(1) Where an EU trade mark court finds that the defendant has infringed or threatened to infringe an EU trade mark, it shall, unless there are special reasons for not doing so, issue an order prohibiting the defendant from proceeding with the acts which infringed or would infringe the EU trade mark. It shall also take such measures in accordance with its national law as are aimed at ensuring that this prohibition is complied with.
(2) The EU trade mark court may also apply measures or orders available under the applicable law which it deems appropriate in the circumstances of the case."

It followed that he had a duty to grant an injunction unless there were "special reasons" not to do so. Moreover, any derogation from that duty should not be tantamount to a compulsory licence.  

As for what constitutes "special reasons", the judge considered Case C-316/05 Nokia Corp v Wardell [2006] ECR I-12083, [2006] EUECJ C-316/05, EU:C:2006:789, ECLI:EU:C:2006:789 where the Court of Justice held at [28] that the term "special reasons" must be given a uniform interpretation within the Community legal order. The unlikelihood of a future infringement did not constitute a "special reason" in the view of the Court. He also mentioned Case C-280/15 Nikolajeva v Multi Protect OÜ   [2016] EUECJ C-280/15, [2016] WLR(D) 323, ECLI:EU:C:2016:467, [2016] Bus LR 980, EU:C:2016:467 where the Court held that the term "special reasons" 

"relates only to exceptional situations in which, in the light of the specific features of the conduct alleged against the third party, in particular the fact that it is impossible for him to proceed with the acts alleged against him which have infringed or threaten to infringe the EU trade mark, such a court is not required to issue an order prohibiting a third party from proceeding with such acts, although an application to that end has been made by the proprietor of the mark (see, to this effect, judgment of 14 December 2006 in Nokia, C-316/05, EU:C:2006:789, paragraph 35)."

The judge referred to art 3 of the Enforcement Directive:

"(1) Member States shall provide for the measures, procedures and remedies necessary to ensure the enforcement of the intellectual property rights covered by this Directive. Those measures, procedures and remedies shall be fair and equitable and shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays.
(2) Those measures, procedures and remedies shall also be effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse."

He took account of arts 11, 16, 17 and 52 of the Charter of Fundamental Rights of the European Union and the case law on their application. 

He directed himself that injunctions are a discretionary remedy in Engish law but that such discretion has to be exercised in accordance with well-settled principles one of which is that he who comes to equity must come with clean hands. He also noted that English courts had the option of awarding damages instead of an injunction ever since Lord Cairns Act.  

Lord Justice Arnold rejected SkyKick's argument that Sky should be refused an injunction on the ground that it had acted in bad faith.  First, the invalidation of part of Sky's registration with the costs consequences in this litigation was sufficient sanction and deterrent. It was neither just nor expedient to deprive Sky of the legal protection of its legitimate registration.  Secondly, the invalidation did not constitute a "special reason" for the purpose of art 130 of the EU Trade Mark Regulation.  Thirdly, the English clean hands doctrine does not apply to every EU member state.  

SkyKick also contended that an order

"i) requiring SkyKick to stop using the signs complained of in the EU would have massive consequences for the business;
ii) in particular, requiring SkyKick to stop using the signs in the EU would require a rebrand of all their products in all markets;
iii) this would be a very costly and disruptive exercise, which would jeopardise the survival of the business because SkyKick are still start-up companies which have yet to make a profit;
iv) the problem has been compounded by the Covid-19 pandemic;
v) there has been no confusion to date;
vi) SkyKick are willing, if the court deems it necessary, to take steps to minimise the likelihood of confusion in the future; and
vii) SkyKick is also willing, if the court deems it necessary, to pay an ongoing royalty of 0.5%."

His lordship rejected those contentions.  SkyKick only had itself to blame for the circumstances in which it found itself. It failed to carry out a thorough international trade mark search in the first place. It had missed plenty of opportunities to avoid o settle litigation once it became aware of Sky's rights. As for the expense of rebranding, SkyKick had been losing money from its trading activities in the EU,   Withdrawal from that market was an option.  Covid-19 was not relevant to the exercise of the judge's discretion.  The undertaking offered by SkyTech was vague and it was not obvious how the 0.5% royalty had been reckoned.

Relief sought by SkyKick
SkyKick sought certain recitals and declarations, orders dismissing the infringement claim and for the partial invalidation of Sky's trade marks (paragraphs [9] to [11] of the judgment) and a publicity order in relation to that partial invalidation (paragraphs [48] and [40]). Save for a declaration of invalidity in respect of the registration that was invalid, the Lord Justice refused the relief. An order dismissing the trade mark claim would have been wrong as the claimant had been successful though to a limited extent.  An order for invalidation was unnecessary in view of the declaration.  A publicity order in relation to SkyKick's success but not Sky's success would have been unnecessary and one-sided. 

Lord Justice Arnold ordered each side to bear its own costs.   Though Sky had been the overall winner the scale of its victory was narrow.  SkyKick had been successful in the counterclaim and on passing off.  Both sides raised issued that proved to be unsuccessful. 

Permission to Appeal
The judge gave SkyKick permission to appeal in respect of the finding of infringement in relation to cloud migration on the ground that the judge considered them as for class 38 rather than class 42. That was not an argument that had been raised at trial but his lordship felt that it had merit,  It caused to reconsider his finding.  He decided to let his judgment stand but allow SkyKick to take the point on appeal. He allowed Sky permission to appeal in respect of registration in bad faith.  Following judgmenet, SkyKick applied for permission to appeal the refusal to invalidate the whole registration or cut it down even further  As the issue of bad faith would already be before the Court of Appeal, the Lord Justice gave permission for that aspect of his order to be considered too.

Stay of the Injunction
SkyKick requested a 12 month or alternatively 3-month stay of the injunction to prepare for the order's implementation and also for the pendency of the appeal. Sky was prepared to agree a 3-month stay but not 12 months. As for the stay pending appeal, Sky feared that SkySkick could fail as a result of the pandemic and other matters before the appeal could be heard.  Lord Justice Arnold suggested an order on the lines of Brupat Limited and Another v Sandford Marine Products Ltd. [1983] R.P.C. 61 whereby SjyKick paid 2% of its gross revenues into a joint bank account pending appeal as a condition for extending the stay beyond 3 months.

Anyone wishing to discuss this article or the judgment should call my clerk on 07986 948267 or send me a message through my contact page.


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