Technology and Intellectual Property Update: Sky attacks Skype brand name, EU Commission tackles Europe’s Digital future and Supreme Court decides IPTV brand dispute

In three recent developments of particular interest to technology companies: Sky has succeeded in stopping Skype’s registration of a trade mark for its name and logo; the EU Commission has announced its proposals for the future of Europe’s Digital Market. Meanhwile, the UK Supreme Court has rejected a Hong Kong company’s claim to the brand NOW TV. IP expert Lucy Harrold, examines the recent updates.

Sky and Skype battle trade mark issues

On 5 May 2015, the General Court of the European Union handed down a striking decision on Skype’s attempt to obtain a registered trade mark over its brand name ‘Skype’ used for its voice, video and text chat service in classes 9, 38 and 42 for computer related goods and services. Skype’s application for the word within its cloud-like logo was filed back in 2005. Some ten years later, the Court has now upheld telecommunications company Sky’s opposition to the registration based on its earlier word mark registration for ‘Sky’ for identical goods and services. Skype has announced it will be appealing to the European Court of Justice (“CJEU”). The key issue in the case was should ‘Skype’ be registered as a trade mark with the earlier well-known ‘Sky’ registration already in existence? Crucially, was there a likelihood of confusion in the minds of relevant consumers between the two brands, ‘Skype’ and ‘Sky’?

Having lost in the Opposition Division and the Board of Appeal, Skype appealed to the General Court claiming that the signs at issue were not similar and the mark applied for had acquired, through extensive use, a secondary meaning for the goods and services in issue which counteracted any similarity between the signs and that they had existed on the market without confusion.

The General Court of the European Union disagreed and upheld the Board of Appeal’s conclusion that there was a medium degree of visual, phonetic and conceptual similarity between the signs. ‘Sky’ started both words, the only difference being ‘pe’ at the end and the common concept of the sky led inexorably to that conclusion. Skype’s arguments such as the differences in short signs being of enhanced importance and consumers not breaking down the word ‘Skype’ into ‘Sky’ and ‘Pe’ were rejected and the signs were held likely to confuse.

On the issue of Sky’s enhanced distinctiveness as a brand in the United Kingdom, the General Court agreed with the Board of Appeal and said it had not overstated the recognition of the mark ‘Sky’. On the issue of Skype’s distinctiveness, this was judged at the time the mark was applied for and was not really relevant, the only relevant issue being a ‘likelihood of confusion’ based on the earlier mark. It rejected the argument that Skype had acquired a secondary meaning, saying, were that so, it would have become a generic term. The fact the signs had peacefully co-existed was also not decisive because the relevant time to consider that issue was the date of filing of the application by Skype at which time they had only co-existed for 22 months.

It does seem remarkable that a company building a brand for ten years can potentially be denied a registered trade mark but that is the consequence of the protracted nature of trade mark proceedings. It is hard to argue with the logic of the Court’s decision when one applies the settled test for assessing the likelihood of confusion. It remains to be seen whether Sky will sue Skype for trade mark infringement and attempt to prevent its use of the name rather than just preventing a trade mark registration. If that were successful, it would end the Skype brand as we know it. However, as in all trade mark matters, it’s not over ‘til the CJEU sings.

A digital single market for Europe

On 6 May, the EU Commission announced its plans for the Digital Single Market stating its aim to tear down regulatory walls and make the EU truly one digital market. It is especially keen to help and encourage SMEs to sell cross-border within the EU because at the moment only 7% do so. It announced 16 action items organised under 3 overarching themes: better access for consumers and businesses to digital goods and services across Europe; creating the right conditions and a level playing field for digital networks and innovative services to flourish; and maximising the growth potential of the digital economy.

Each action item in and of itself will involve a large policy review on the part of the Commission. The 16 steps include:

• harmonising EU rules on contracts and consumer protection for online purchases;
• more efficient and affordable parcel delivery;
• an end to geo-blocking of consumers i.e. where consumers are not permitted to order from websites in different EU member states;
• legislative proposals on European copyright law to reduce national differences;
• more vigorous enforcement powers against commercial online copying;
• a review of telecom rules and the audiovisual media framework;
• an in depth analysis of the role of online platforms (tackling issues such as non-transparent search results, pricing policies and illegal content);
• a review of the e-privacy directive and cyber security; and
• the creation of a European free flow of data initiative including a European cloud initiative.

Commission President Jean-Claude Juncker commented: "Today, we lay the groundwork for Europe’s digital future. I want to see pan-continental telecoms networks, digital services that cross borders and a wave of innovative European start-ups.”This development is good news for SMEs experiencing barriers to pan-European business and for citizens seeking consumer choice and protection around Europe. In terms of the development of European Copyright law, it should provide more comprehensive and accountable proposals and laws rather than, as is currently the case, harmonization of copyright law by stealth in the EU Courts. It will inevitably, however, create layers of law and regulation that must be carefully framed if they are to avoid overburdening the digital market and, instead, free it up.

Supreme Court confirms a foreign claimant must have UK customers to substantiate ‘goodwill’

On 13 May, the Supreme Court handed down its decision in Starbucks (HK) Limited v British Sky Broadcasting Group Plc. In a good week for Sky, Lord Neuberger confirmed that a foreign claimant, such as Starbucks (HK), must have actual UK customers before it can satisfy the goodwill requirement of an English ‘passing off’ claim. This has been a settled principle in the line of cases Anheuser-Busch, Alain Bernardin and Pete Waterman but has not previously come before the Supreme Court.

In this particular case, Starbucks (HK) had used the brand NOW TV for its internet protocol TV service since at least 2006. By 2012 it was the largest pay TV operator in Hong Kong with around 1.2 million subscribers. People within the UK knew about it either from their time in Hong Kong viewing it or through viewing it on the internet in the UK for free- via You Tube or the Starbucks (HK) website. It was also possible to view NOW TV on some flights into the UK from Asia. In 2012, Sky announced it was launching an IPTV service in the UK under the name NOW TV and Starbucks (HK) commenced proceedings for ‘passing off’ against it, alleging goodwill in the name NOW TV, an actionable misrepresentation by Sky and that it had or was likely to suffer damage as a result.

Lord Neuberger (and the other law lords) held that the Hong Kong company’s evidence did not amount to having UK customers and UK goodwill for the NOW TV service. He said: “mere reputation is not enough…the claimant must show that it has a significant goodwill in the form of customers in the jurisdiction….as opposed to people in the jurisdiction who happen to be customers elsewhere”. Even though he commented it was “one of the great virtues of the common law that it can adapt itself to practical and commercial realities, which is particularly important in a world which is fast changing in terms of electronic processes, travel and societal values” nevertheless a change in the law would, in his view, risk undermining legal certainty. He conceded that the internet rendered the notion of a single international goodwill “more attractive” but asserted that it was still problematic; for example it would be anti-competitive if a claimant could shut off use of a mark in a jurisdiction where it had no customers and had not spent any time or money in developing a market.

At least in relation to the English claim of ‘passing off’, the Supreme Court still seems able to throw off the technological and geographical implications of our changed world of commerce and to keep the claim rooted in the concept of paying, local customers. We may speculate, however, that it is only a matter of time before the Court is asked a similar question again (perhaps from a stronger factual base). If that happens, perhaps a concept of ‘international goodwill’ may then prove more attractive to the Court than it is today.