Even the big boys get it wrong sometimes...

It's your worst nightmare.

You launch a new product under a new brand name.

You trade under it for a few years, and it becomes a success.

You then receive a letter from a firm of solicitors, who tell you that you can't continue to use that brand name because it infringes their client's earlier registered trade mark, and that you are also committing passing-off.

This happened in a recent High Court case, where Microsoft were sued successfully by Sky (British Sky Broadcasting Group PLC & Ors v Microsoft Corporation & Anor [2013] EWHC 1826 (Ch)). The decision provides a timely reminder that all businesses (however big or small) should carry out adequate clearance searches before they launch products and services under new brand names

What was the case all about?

Sky brought an action against Microsoft for registered trade mark infringement and passing off, on the basis of two registered Community trade marks and two registered UK trade marks for the mark SKY. Sky sought to prevent Microsoft from using the sign SKYDRIVE as their name for their cloud storage service in the EU.

Sky first started providing digital storage for its set-top box customers in 2001, and has been an internet service provider since 2006. SKYDRIVE was launched by Microsoft in 2007. It provides an online 'cloud' document storage facility. As well as featuring as part of the Microsoft Windows 8 operating system, it is available as an app on iPhones, iPads, Android Phones, Xbox games machines, etc.

The case was heard by Mrs Justice Asplin in the Chancery Division. First, addressing the claim of registered trade mark infringement, she confirmed that whether there is a 'likelihood of confusion' should be judged from the perspective of the 'average consumer'. Revisiting the discussion on this point by Arnold J in the most recent decision in Interflora v M&S [2013], Mrs Justice Asplin confirmed that it is sufficient for a finding of infringement if "a significant proportion of the relevant class of persons are likely to be confused".

To compare the marks at issue, a global assessment must be made, considering all of the relevant factors in the case. In particular, one consideration is that a mark will be viewed as a whole by the average consumer. Mrs Justice Asplin accepted that 'DRIVE' is a descriptive term in the context of the relevant services. Therefore, the 'SKY' element would be seen as the dominant element of the sign. In light of this, the average consumer would see the 'SKY' element as fulfilling a trade mark function, rather than being merely a composite part of the sign SKYDRIVE as a whole. In other words, the mark would be seen as a "brand+descriptor" sign.

Sky's registered marks covered a wide range of goods and services. However, for the purpose of this action, the goods and services at issue were computer software including the storage of files on remote drives and storage services. Turning to whether the relevant goods and services would be considered to be similar, a comparison was made between Microsoft's sign and any normal and fair use of the registered trade marks, in relation to any of the goods and services for which they have been registered.

Microsoft tried to argue that the sign SKYDRIVE only appeared in a Microsoft context. However, it was clear from the evidence that the sign had often been used in circumstances in which it was seen by the public completely free from its Microsoft context e.g. by a recipient of documents or photographs through the SKYDRIVE service. Referring to the Arsenal and Anheuser Busch decisions, Mrs Justice Asplin confirmed that 'post-sale' confusion should also be taken into account when comparing the relevant goods and services.

In reviewing the evidence, particular weight was given to actual examples of confusion. The Sky Helpline had received several calls requesting assistance with the SKYDRIVE service. Although there were not numerous examples, it was accepted that there were enough examples of "spontaneous real life examples of confusion" to conclude that confusion was sufficiently likely.

Dealing with the question of whether the mark SKY could be protected on the basis of its reputation, Mrs Justice Asplin upheld Sky's claim that their mark would be "diluted" through Microsoft's continued use of their sign SKYDRIVE. It was accepted that Sky has a reputation in the UK for the relevant services. In addition, they were able to produce survey evidence which included examples of consumers associating the sign SKYDRIVE with Sky. Although the survey evidence was not conclusive, it was sufficient when combined with the evidence of actual confusion to demonstrate that it was likely that there was a serious risk that the SKY mark would lose distinctiveness, should Microsoft be allowed to continue with their use of the sign SKYDRIVE. The fact that dilution would occur was held to be an "obvious inference from the facts".

Finally, Sky was also successful in their allegation of passing off, proving all three elements of goodwill, misrepresentation and damage (see last month's Brands Bulletin for more information on passing off). Microsoft's counterclaim against all four marks for a declaration of invalidity was rejected. It has been reported that Microsoft will appeal the decision.

Lessons to be learnt from the case?

The importance of this case is that it demonstrates that, even if you are a big brand with a successful new product, if you don't conduct proper clearance searches before launching, you cannot preclude the possibility that an earlier rights holder will be able to stop you using your new brand in trade.

Registered trade marks and registered designs can be searched, in almost every country of the world. Unregistered trade marks and certain other earlier rights, such as trading and business names, are more difficult to search, but searches can be conducted, including, bespoke “on-the-ground” investigations.

If you wish to discuss this email, or any other brand or trade mark issue, please contact Carl Steele, Head of Trade Marks, or feel free to contact any of Ashfords' IP Partners.

Mark Lomas
M: +44 (0)7974 244484

Garry Mackay
M: +44 (0)7801 074241

Carl Steele
M: +44 (0)7841 663727