BSKYB on cloud 9 as court rules Microsoft's "SkyDrive" infringes its marks

The High Court has ruled in favour of British Sky Broadcasting Group plc ("BSkyB") following a trade mark dispute with Microsoft Corporation ("Microsoft") over Microsoft's "SkyDrive" online storage facility.

The Judge, Asplin J, resolutely held that Microsoft's use of "SkyDrive" in relation to cloud storage services, did infringe BSkyB's trade marks, and further amounted to passing off.  In reaching this decision, Asplin J relied heavily on the evidence of actual confusion submitted by BSkyB. 

Background

BSkyB is a renowned provider in the UK of telecommunication services.  For over ten years, BSkyB has offered its popular set-top box service (Sky+), allowing customers to record, store and replay digital content.  Since 2006, BSkyB has provided a broadband service to its customers and in 2012, it was estimated that 4.1 million households in the UK used BSkyB's broadband service.

This case concerned four of BSkyB's core UK and Community registered trade marks for the word "SKY", registered for a plethora of goods and services including: computer software, the online storage of files and sharing files, images, music, videos, photos, drawings, audio-visual, text, documents and data.

In 2007 Microsoft launched "Windows Live SkyDrive", an online storage facility. It enabled users to store documents and photos online making them accessible anywhere using an internet connection.  By 2012, the "SkyDrive" branding had transitioned away from Windows Live, and "SkyDrive" was used alone in the form of the signs pictured below.  "SkyDrive" featured as one of the main start-up tiles on Microsoft's Windows 8 operating system and "SkyDrive" apps are available for most mobile devices.  

BSkyB claimed against Microsoft for trade mark infringement under sections 10(2)(b) and 10(3) of the Trade Marks Act 1994 and Articles 9(1)(b) and 9(1)(c) of the Community Trade Mark Regulationⁱ, and also for passing off. Meanwhile, Microsoft counterclaimed for a declaration of partial invalidity in respect of all four "SKY" marks on the grounds of descriptiveness for cloud devices, and for one of BSkyB's Community marks on the basis of alleged bad faith.

Decision

Likelihood of confusion

Asplin J considered the salient question of whether by reason of similarity between the "SKY" mark and the "SkyDrive" sign, and the identity/similarity of the goods and services for which the sign is used and those for which the mark is registered (being software for the online storage and sharing of files), there is a likelihood of confusion amongst the relevant public.

It was common ground that the "SkyDrive" sign was being used in relation to identical goods and services covered by the earlier "SKY" marks. 

In terms of the comparison between the respective marks, BSkyB had submitted that the term "DRIVE" was simply descriptive and generic. BSkyB's argument was that the average consumer, aware that BSkyB is operating in this field, would take "SkyDrive" to be another BSkyB operation or alternatively a sub-brand of BSkyB.  In support, BSkyB put forward actual real-life examples of confusion recorded on BSkyB's customer service helpline.  Indeed, BSkyB produced evidence of 17 callers to the helpline from people seeking to attribute problems with SkyDrive to BSkyB.

Microsoft, on the other hand, had argued that the "SkyDrive" sign would be read by consumers as a single word (like PayPal or DreamWorks) and so they would not associate "SkyDrive" with BSkyB.  Microsoft had also argued that "SKY" was a term which would be understood by the average consumer as descriptive of the services or goods being offered, and had referred to various articles where "SKY" had been used as a metaphor for the internet.  Following this line of argument, Microsoft had suggested that the descriptive nature of the "SKY" mark in the context of cloud storage detracted from BSkyB's ability to denote origin. 

Asplin J rejected Microsoft's arguments and held that "DRIVE" was descriptive and that "SKY" must be seen as the dominant element of the SkyDrive sign. In light of the evidence provided, Asplin J succinctly summarised that having undertaken a global assessment there was every reason to conclude that there was a likelihood of confusion. 

Additional rights – non-identical services

BSkyB also sought to rely on the non-identical goods and services covered by its earlier "SKY" marks, such as the provision of a broadband service.  Microsoft had acknowledged that there was some similarity between broadband provision and cloud storage. 

Asplin J accepted that there was a particularly complementary connection between the provision of broadband services and file storage, management and sharing software.  The Judge also observed that a significant number of broadband providers also provide data storage.  In reaching her conclusion that there was a likelihood of confusion under this head, Asplin J noted the close conceptual similarity of the goods and services together with the aural similarity between the "SKY" mark and the "SkyDrive" sign.

Additional rights – BSkyB's reputation

BSkyB went on to rely on its reputation in the SKY marks within the UK.  On the basis of the Judge's previous conclusions on infringement, and not least because of the examples of actual confusion provided by BSkyB, it was also clear to the Judge that the average consumer would make a link such that "SkyDrive" calls to mind the "SKY" mark. Asplin J went on to conclude that dilution of BSkyB's marks was an obvious inference.

Additional rights – Passing off

It was not disputed that BSkyB had extensive goodwill.  Asplin J swiftly concluded, paying particular attention to BSkyB's successful demonstration of actual confusion, that there was likelihood of confusion and that damage was inherently likely where frequently the customers of a business wrongly connect it with another.

Microsoft's counterclaims

Microsoft made two counterclaims.  First, it was submitted that the "SKY" marks should be declared invalid on the basis that the word "SKY" was simply descriptive of online or digital storage; and second, that Sky had acted in bad faith at the time when it applied to amend certain goods and services covered by its CTMs (which allegedly had the effect of widening the coverage of the registration). 

Asplin J dismissed Microsoft's first counterclaim on the basis that there was no evidence to suggest that the average consumer would understand the word "SKY" as meaning cloud computing or to be descriptive of the internet at the time the "SKY" marks were registered (in 2002 and 2006).

Asplin J then found that there was no evidence of bad faith, and confirmed the position that bad faith is to be assessed at the time an application is actually filed and not some later date.

Comment

At a time when surveys are often being criticised (as was the case in this decision) and so reliance on them may be more limited, evidence of actual confusion remains king.  The evidence of real life confusion in the form of customer calls to BSkyB's helpline, when those customers wrongly enquired about Microsoft's "SkyDrive", played a crucial role in this judgment.  As an aside, it did not assist Microsoft in its defence that there were numerous examples of "SkyDrive" appearing with little or no Microsoft branding.

From an evidential perspective, brand owners should ensure that if litigation is anticipated, all personnel should be notified of the need to look out for any confusion so that such evidence is captured. From a disclosure obligation viewpoint, brand owners should also ensure that all potentially relevant calls within its organisation are recorded and retained. (It was acknowledged in this decision that call recordings are typically only kept for 6 months). 

Microsoft has indicated that it will appeal this decision and so the battle may continue.

Written by Jeremy Drew and Rebecca Williams

ⁱCouncil Regulation 40/94/EC of 20 December 1993 on the Community Trade Mark (replaced by Council Regulation 207/2009/EC of 26 February 2009).