There have been several recent decisions relating to bad faith by an applicant for a trademark. The Canadian Trademark Act includes bad faith as a ground of invalidity and opposition. A decision by the U.K. Supreme Court provides further clarification concerning what is required to show bad faith.
Sky Plc v. Skykick UK Ltd
The decision of Justice Richard Arnold in Sky Plc v. Skykick UK Ltd [2020] EWHC 990 provided detailed analysis of what is "bad faith" concerning a trademark application or registration in the U.K. In the course of four judgments and following a reference to the Court of Justice of the European Union, it was found that Sky had applied for the SKY marks in part in bad faith because the specifications included goods and services in relation to which Sky had never intended to use the marks, and categories of goods and services which were so broad that Sky could not have intended to use the marks across their breadth.. Sky had sought very broad protection regardless of whether it was commercially justified. This rendered the SKY marks partially invalid.
An appeal from his decision was partially allowed by the U.K Court of Appeal [2021] EWCA Civ 1121. The Court concluded that Sky had not acted in bad faith regarding the goods and services on which they had ultimately relied and restored these goods and services to the registrations.
After a long gestation period the U.K. Supreme Court unanimously allowed the appeal in part. The High Court was entitled to find that the SKY marks were applied for in bad faith to the extent that it did, and the Court of Appeal was wrong to reverse that finding. [2024] UKSC 36. It took the Court 514 paragraphs to set out its reasoning.
What amounts to bad faith?
A key factor is that the categories of bad faith and circumstances which may be bad faith are not closed, and any assessment of bad faith depends on the facts and circumstances of each individual case.
In seeking to identify the relevant principles, two fundamental aspects of trademark law must be considered: first, it is concerned with the use of marks in trade to denote the origin of goods and services. Second, the goal of the trademark regime is to contribute to a system of undistorted competition in which businesses attract and retain customers by the quality of their goods and services, and for that purpose can have registered marks which enable consumers to distinguish the goods and services of one undertaking from those of another. This system must also provide an incentive and protection for the investment by a brand owner in the quality and other beneficial aspects of its goods and services, and to let it develop goodwill in its business relating to their sale and supply.
The essence of the objection based in bad faith is that the motive or intention of the applicant was to engage in conduct that departed from accepted principles of ethical behavior or honest commercial practices, having regard to the purposes of the trademark system. Whether the conduct was undertaken with that motive or intention and departed from such practices must be assessed having regard to all the objective circumstances of the case.
It may be difficult for the attacking party to prove the subjective intention or motive of the applicant. It has been recognised this subjective part of the objection must generally be established by reference to relevant, consistent and objective criteria. But it remains open to an applicant or registrant faced with such a case to try to rebut it by explaining its purpose and intention in making the application as it did and why it was not made in bad faith.
The circumstances which may justify a finding that an application to register a sign as a trademark was made in bad faith have fallen into one of two broad categories:
i) Where the application was made, not with the intention of engaging fairly in competition but with the intention of undermining, in a way inconsistent with honest practices, the interests of third parties.
This category of case is generally concerned with conduct by an applicant intended to undermine the interests of one or more third parties, although the circumstances which may justify a finding of bad faith may vary a great deal from case to case. The applicant may, for example, have appropriated the mark of another trader; or made the application in breach of an agreement or fiduciary duty; or sought to secure by registration a right to prevent one or more third parties from using a mark in relation to specific goods or services despite those third parties having an earlier right to use the mark. These circumstances do not necessarily involve any suggestion that the applicant has not used or does not intend to use the mark itself. The impugned conduct may involve the use of the mark by the applicant.
ii) Where the application was made with the intention of obtaining, without targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trademark, in particular the essential function of indicating origin - and enabling the consumer to distinguish the goods and services of one undertaking from others which have a different origin.
This type of case is concerned with circumstances where the application for registration was, regarding all or some of the goods or services for which protection was sought, an abuse of the trademark system. Here it is unnecessary to show that the goods or services of the party asserting bad faith are the same as or similar to those that are the subject of the contested registration; nor is it necessary to show that the parties' respective marks are the same or similar. These may be relevant matters to consider but they are not essential to a successful objection on this ground.
It is necessary, however, to establish two core elements of the impugned activity one objective and the other subjective. First, the applicant for the contested registration must have adopted a strategy which was contrary to the principles of ethical behavior or honest commercial practices. Second, the applicant must have intended to obtain an advantage by artificially creating the conditions set out for securing the registration. Of particular importance here may be whether the application was made to obtain an exclusive right for purposes other than those falling within the functions of a trademark.
There was enough evidence before Justice Arnold to show that Sky had applied for and was prepared to take enforcement action for alleged infringement of the registrations of marks regarding goods and services of such a range and breadth that it was implausible that Sky would ever provide them, or that Sky ever had any genuine intention (whether provisional or conditional) to provide them under the SKY marks. He was entitled to find that the SKY marks had been applied for, in part, in bad faith.
If you have questions, please contact me at mckeown@gsnh.com
Goldman Sloan Nash & Haber LLP 480 University Avenue, Suite 1600 Toronto, Ontario M5G 1V2 Direct Line: (416) 597-3371 Fax: (416) 597-3370 Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.
A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.
Comments