Trademarks that will never be used can be ‘bad faith’ business – a UK case has lessons for NZ and Australia

According to New Zealand’s Trademarks Register, the name Red Bull has been registered for everything from “varnishes” to “sausage machines”. And, of course, energy drinks.

All have been registered by the maker of the eponymous energy drink, but this doesn’t necessarily mean Red Bull will be branching out into new products.

One of the purposes of trademark law is to protect names, words and logos so that when consumers see a product they know where it has come from.

Yet in most trademark registration systems around the world – including in New Zealand and Australia – you can acquire property rights in relation to a trademark simply by filing an application for the nominated goods or services (known as the “specification”).

You don’t have to have actually used the trademark on your product or service to apply – you just have to be the first to register it. As a result, some businesses may register their trademarks for a wide range of products or services to claim broad property rights. This prevents other companies from taking advantage of their brand.

Such “registration-based” systems can be contrasted with “use-based” systems. The prime example of the latter is the United States, where a mark will only be registered once an applicant proves they have used it for the goods or services in the specification.

The main benefit of a “registration-based” system is you are provided with some assurance that your trademark will be protected before you go to the trouble and expense of marketing your product or service.

Once you have marketed it, the hope is consumers will indeed come to recognise your product or service because of its trademark.

The downside of such a system, though, is that brand owners can potentially register trademarks for goods or services they will never use their marks for, and in which they have no real commercial interest.

A recent court ruling in the United Kingdom puts the spotlight on such filing practices in registration-based trademark systems, and how a better understanding of “bad faith” might curb such practices.

Sky Ltd vs SkyKick

A prohibition on filing trademarks in bad faith is one mechanism used to prevent abuse of “registration-based” trademark systems – present both in New Zealand’s and Australia’s trademark legislation.

The UK Supreme Court recently considered how “bad faith” ought to be interpreted. As well as being a “wakeup call” for some UK trademark owners with wide and commercially unrealistic specifications (the description of what a company may trade in), this decision is likely to influence the shape of the law in New Zealand and Australia.

In 2016, UK-based media companies Sky Ltd and Sky International AG (Sky) began trademark infringement proceedings against IT company SkyKick for use of the mark “SkyKick” in relation to the provision of various cloud-based products.

SkyKick responded by claiming Sky had filed its trademarks in bad faith and they should be cancelled. SkyKick’s arguments centred on the breadth of Sky’s specifications, its use of overly broad categories such as “computer software”, and its enforcement strategy.

One of Sky’s marks, for example, had a specification that ran to more than 8,000 words, and covered goods such as “bleaching preparations” and “whips”.

The High Court concluded Sky’s intention was to acquire trademarks as a legal weapon to use against third parties. This meant the trademark applications had been partially filed in bad faith.

The High Court finding was eventually overturned by the UK’s Court of Appeal. But the Supreme Court upheld the High Court decision.

In November, the Supreme Court confirmed it can be an abuse of the trademark system – and therefore bad faith – to file an application to register a trademark for goods or services for a purpose other than that contemplated by trademark law, and where the person had no intention to use the trademark as a badge of origin.

In this case, Sky had obtained registrations for a very wide range of goods and services without providing a plausible commercial rationale, and was prepared to enforce these marks against other traders.

Protecting against bad faith

Admittedly, New Zealand’s Trade Marks Act 2002 has additional mechanisms to prevent abuse of the registration system compared with the law in the UK.

The act allows the intellectual property office to question the justification of a specification, and third parties to challenge whether an applicant has a genuine intention to use a trademark, for example.

That said, the SkyKick judgement has the potential to trigger more scrutiny of trademark filing practices in all registration-based systems. New Zealand courts already seem open to interpreting bad faith in line with the purposes of trademark law.

In a case in the New Zealand High Court, Planet Fitness Ltd v PFIP International, it was alleged a business had filed for the trademark “Planet Fitness” to prevent the expansion of a global gym chain into New Zealand, rather than to use the mark itself.

The High Court found the application was made in bad faith because the applicant was pursuing aims unrelated to protecting a mark intended to be used to communicate origin in the marketplace.

This approach to finding whether a registration was made in bad faith may mean the days of registering trademarks for every good or service under the sun, for purposes unrelated to use in the marketplace, are numbered.