Bad faith, goods and services and an important trademark decision by the EU Court

flag-2608475_1920The European Court has ruled in the highly anticipated Case C‑371/18, Sky plc, Sky SkyKick. It concerns bad faith and when such a thing can happen when it comes to the scope of the selected goods and services. The case regards the following:

Sky and Others are the proprietors of four Community figurative and wordmarks and one national United Kingdom word mark which include the word ‘Sky’. Those trade marks were registered in respect of a large number of goods and services in a number of classes of the Nice Classification, in particular Classes 9 and 38.

Sky and Others brought an action for infringement of the trade marks at issue in the main proceedings against the SkyKick companies before the referring court, the High Court of Justice (England & Wales), Chancery Division (United Kingdom). For the purposes of their action for infringement, Sky and Others rely on the registration of the trade marks at issue in the main proceedings in respect of goods in Class 9 within the meaning of the Nice Classification, namely computer software, computer software supplied from the Internet, computer software and telecommunications apparatus to enable connection to databases and the Internet, and data storage, and services in Class 38 within the meaning of that classification, namely telecommunications services, electronic mail services, Internet portal services, and computer services for accessing and retrieving information, messages, text, sound, images and data via a computer or computer network. The referring court emphasises that not every trade mark at issue in the main proceedings is registered in respect of those goods and services.

The referring court also states that Sky and Others made extensive use of the trade marks at issue in the main proceedings in relation to a range of goods and services relating to their core business areas of television broadcasting, telephony and broadband provision. It is not in dispute that those trade marks are a household name in the United Kingdom and Ireland in those areas. However, Sky and Others do not offer email migration or cloud backup goods or services, nor is there is any evidence that they plan to do so in the immediate future. The three main products offered by the SkyKick companies are based on Software as a Service (SaaS) and concern Cloud Migration, Cloud Backup and Cloud Management.

In the context of those proceedings, the SkyKick companies filed a counterclaim for a declaration that the trade marks at issue in the main proceedings are invalid. In support of that counterclaim, they contend that those trade marks were registered in respect of goods or services that are not specified with sufficient clarity and precision. The SkyKick companies rely in that regard on the judgment of 19 June 2012, Chartered Institute of Patent Attorneys (C‑307/10, EU:C:2012:361).

In that context, the referring court questions, in the first place, whether such a ground for invalidity may be asserted against a registered trade mark. In that regard, it recalls that the Court held, in that judgment, that an applicant for a trade mark must designate with sufficient clarity and precision the goods and services in respect of which protection for the trade mark is sought in order to enable the competent authorities and third parties to determine the extent of the protection conferred by the trade mark. If the applicant fails to do so, the national office or the European Union Intellectual Property Office (EUIPO) should refuse to allow the application to proceed to registration without the specification being amended to make it sufficiently clear and precise.

The referring court considers that it does not, however, follow from the case-law arising from that judgment that the trade mark concerned may be declared invalid after registration on the ground that the specification lacks clarity or precision.

It states that, in the case of an EU trade mark, Article 128(1) of Regulation 2017/1001 provides that a counterclaim for a declaration of invalidity ‘may only be based on the grounds for … invalidity mentioned in this Regulation’. In the present case, the SkyKick companies rely on the ground provided for in Article 59(1)(a) of that regulation, read in the light of Article 4 and Article 7(1)(a) of the regulation, which do not require that the specification of goods and services in an EU trade mark application be clear and precise. The position is the same in relation to a national trade mark.

In the second place, if such a ground may be asserted, the referring court is uncertain whether the specifications of the goods and services may be objected to in respect of all of the trade marks at issue in the main proceedings. It states that the SkyKick companies contend that, in the case in the main proceedings, the identification of the goods and services covered by those trade marks lacks clarity and precision, except for ‘telecommunications services’ and ‘electronic mail services’ in Class 38. The SkyKick companies and Sky and Others disagree as to whether the specifications ‘computer software’, ‘computer software supplied from the Internet’ and ‘computer software and telecoms apparatus to enable connection to databases and the Internet’ are clear and precise.

In that regard, the referring court considers that registration of a trade mark for ‘computer software’ is too broad and, therefore, contrary to the public interest because it confers on the proprietor a monopoly of immense breadth which cannot be justified by a commercial interest. However, in the referring court’s view, it does not necessarily follow that the term ‘computer software’ is lacking in clarity and precision. Nonetheless, it is uncertain to what extent the indications in the European Trade Mark and Design Network (ETMDN) Common Communication on the Common Practice on the General Indications of the Nice Class Headings, of 28 October 2015, in relation to ‘machines’ in Class 7 within the meaning of the Nice Classification, could not equally apply to ‘computer software’.

In the third place, the referring court is uncertain whether the validity of the trade marks at issue in the main proceedings may be affected by the trade mark applicant’s bad faith at the time of filing the application for protection.

Before that court, the SkyKick companies contend that the trade marks at issue in the main proceedings were registered in bad faith because Sky and Others did not intend to use them in relation to all of the goods and services covered by the registration of those trade marks. The trade marks should, therefore, all be cancelled or, at the very least, cancelled in part as regards the goods and services for which Sky and Others had no intention to use those marks.

In the referring court’s view, to register trade marks without requiring actual use of them would facilitate the registration process and enable brand owners to obtain protection of their trade marks more easily in advance of a commercial launch. However, the result of facilitating registration or allowing it to be obtained too broadly would be mounting barriers to market entry for third parties and an erosion of the public domain. Accordingly, the possibility of registering a trade mark without the intention to use it in relation to all or some of the specified goods and services would enable abuse, which would be harmful, if there were indeed no possibility of challenging an abusive registration by relying on the bad faith of the proprietor of the trade mark concerned. The referring court notes that, in their case-law, the United Kingdom courts and tribunals have focused more closely on the requirement of intention to use the trade mark concerned for the goods and services specified in the application for registration, because of the existence of Section 32(3) of the Trade Marks Act 1994 in that Member State’s law.

The referring court is uncertain whether that provision is compatible with EU law. Assuming that it is compatible with EU law, the referring court is also uncertain as to the scope of the condition relating to the intention to use the trade mark for the goods and services for which it was registered.

In those circumstances the High Court of Justice (England & Wales), Chancery Division decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Can an EU trade mark or a national trade mark registered in a Member State be declared wholly or partially invalid on the ground that some or all of the terms in the specification of goods and services are lacking in sufficient clarity and precision to enable the competent authorities and third parties to determine on the basis of those terms alone the extent of the protection conferred by the trade mark?

(2) If the answer to question (1) is yes, is a term such as “computer software” too general and covers goods which are too variable to be compatible with the trade mark’s function as an indication of origin for that term to be sufficiently clear and precise to enable the competent authorities and third parties to determine on the basis of that term alone the extent of the protection conferred by the trade mark?

(3) Can it constitute bad faith simply to apply to register a trade mark without any intention to use it in relation to the specified goods or services?

(4)  If the answer to question (3) is yes, is it possible to conclude that the applicant made the application partly in good faith and partly in bad faith if and to the extent that the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use the trade mark in relation to other specified goods or services?

(5)  Is section 32(3) of the UK Trade Marks Act 1994 compatible with [Directive 2015/2436] and its predecessors?’

The Court’s decision:

1. Articles 7 and 51 of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark, as amended by Council Regulation (EC) No 1891/2006 of 18 December 2006, and Article 3 of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks must be interpreted as meaning that a Community trade mark or a national trade mark cannot be declared wholly or partially invalid on the ground that terms used to designate the goods and services in respect of which that trade mark was registered lack clarity and precision.

2. Article 51(1)(b) of Regulation No 40/94, as amended by Regulation No 1891/2006, and Article 3(2)(d) of First Directive 89/104 must be interpreted as meaning 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. When the absence of the intention to use the trade mark in accordance with the essential functions of a trade mark concerns only certain goods or services referred to in the application for registration, that application constitutes bad faith only in so far as it relates to those goods or services.

3. First Directive 89/104 must be interpreted as not precluding a provision of national law under which an applicant for registration of a trade mark must state that the trade mark is being used in relation to the goods and services in relation to which it is sought to register the trade mark, or that he or she has a bona fide intention that it should be so used, in so far as the infringement of such an obligation does not constitute, in itself, a ground for invalidity of a trade mark already registered.

Volvo won a lawsuit in the US regarding car accessories

blur-1850687_960_720.jpgVolvo won a lawsuit in the US against an anonymous China-based company selling online different  counterfeit accessories for its cars.

According to the company, these products were cheap, low-quality imitations that were against the company’s intellectual property rights.

The Court agreed and ordered  $2 million in damages. The interesting part here is, however, the fact that the court required Pay Pal, which was used as a payment service by the counterfeiter, to transfer all of the funds related to the counterfeiter to Volvo as well as to reveal information for any closed or other accounts linked to that anonymous infringer.

Source: WIPR.

Storage of goods and copyright infringement – a European Court’s decision

forklift-835340_960_720The European Court has ruled in case C‑572/17 Imran Syed, which concerns the following:

Mr Syed ran a retail shop in Stockholm (Sweden) in which he sold clothes and accessories with rock music motifs. In addition to offering the items for sale in that shop, Mr Syed stored such goods in a storage facility adjacent to the shop and in another storage facility located in Bandhagen (Sweden), in a suburb of Stockholm. It is established that Mr Syed’s shop was regularly restocked with merchandise from those storage facilities.

It has been determined that the sale of several of those items infringed trade marks and copyrights. Criminal proceedings were brought against Mr Syed for trademark infringement and breach of Law (1960:729) before the tingsrätten (District Court, Sweden). According to the åklagaren (Public Prosecutor, Sweden), Mr Syed infringed the claimants’ copyright by unlawfully making available to the public clothes and flags bearing the motifs protected by copyright. The prosecutor therefore took the view that all of the goods bearing such motifs which were in the shop and in the storage facilities were being offered for sale or distributed to the public, and that such acts therefore constituted an infringement of Law (1960:729).

The tingsrätten (District Court) found Mr Syed guilty of trade mark infringement concerning all the goods discovered. That court also found him guilty of infringing Law (1960:729) with regard to the goods bearing a copyrighted motif which were in the shop he was running, as well as with regard to the goods stored in both the storage facilities at issue, in so far as identical goods were offered for sale in the shop. The tingsrätten (District Court) took the view, in holding Mr Syed liable for the goods in the storage facilities as well, that the concept of ‘offering for sale’ goods which infringe the copyright held by the claimants did not apply solely to the goods which, at a given point in time, were located in Mr Syed’s shop, but also applied to the identical goods in the storage facilities. In contrast, that court held that the other goods in the storage facilities could not be regarded as having been offered for sale. For all of those infringements, the tingsrätten (District Court) sentenced Mr Syed to a suspended custodial sentence and to 80 per diem fines.

Hearing the case on appeal, the Svea hovrätt, Patent- och marknadsöverdomstolen (Svea Court of Appeal, Stockholm, Sweden: patent and commercial division) found that Mr Syed had infringed Law (1960:729) only in so far as the goods located in his shop were concerned and not in relation to the goods in the storage facilities. That court took the view that Mr Syed had stored those goods for the purpose of sale. However, it could not be considered that those goods had been offered for sale or distributed to the public. Similarly, the handling of goods in the storage facilities did not, according to the court hearing the appeal, constitute an attempt or preparation to commit an infringement of Law (1960:729). The sentence given to Mr Syed was reduced, in so far as Mr Syed was sentenced to a suspended custodial sentence and 60 per diem fines.

Before the Högsta domstolen (Supreme Court, Sweden), the referring court in this case, the Riksåklagaren (Prosecutor-General) claimed that Mr Syed should be found guilty in respect of the same goods as those which the tingsrätten (District Court) had found to establish an infringement of Law (1960:729). He also submitted that the Högsta domstolen (Supreme Court) should refer the matter to the Court of Justice for a preliminary ruling concerning the interpretation of Article 4(1) of Directive 2001/29.

Before the referring court, Mr Syed argued that it followed from the case-law of the Court of Justice that infringement of a rightholder’s distribution right by an offer for sale requires acts directed towards the public with the aim of transferring each specific item. He contended that the purchase and storage of goods cannot be considered to be such acts. An interpretation to the contrary would extend the scope of criminal liability, in breach of the principle of legality.

The referring court notes that Law (1960:729) and Directive 2001/29 do not expressly prohibit the storage of goods bearing a copyrighted motif for the purpose of sale. It adds that, following the decision of the Court of Justice of 13 May 2015, Dimensione Direct Sales and Labianca (C‑516/13, EU:C:2015:315), there may be an infringement of an author’s exclusive right under Article 4(1) of Directive 2001/29 as a result of measures or steps that take place prior to the performance of a contract of sale. Nonetheless, the question arises whether goods bearing a protected motif which are kept, by a person, in storage facilities can be regarded as being offered for sale when that person offers identical goods for sale in a retail shop run by him.

In those circumstances, the Högsta domstolen (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1. When goods bearing protected motifs are unlawfully offered for sale in a shop, can there also be an infringement of the author’s exclusive right of distribution under Article 4(1) of Directive 2001/29 as regards goods with identical motifs, which are held in storage by the person offering the goods for sale?

2. Is it relevant whether the goods are held in a storage facility adjacent to the shop or in another location?’

The Court’s decision:

Article 4(1) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society must be interpreted as meaning that the storage by a retailer of goods bearing a motif protected by copyright on the territory of the Member State where the goods are stored may constitute an infringement of the exclusive distribution right, as defined by that provision, when that retailer offers for sale, without the authorisation of the copyright holder, goods identical to those which he is storing, provided that the stored goods are actually intended for sale on the territory of the Member State in which that motif is protected. The distance between the place of storage and the place of sale cannot, on its own, be a decisive element in determining whether the stored goods are intended for sale on the territory of that Member State.