Internet Goliaths give a lesson for smaller business

Posted 08/10/2013

A court battle between software giant Microsoft and broadcasting colossus Sky has delivered a sharp lesson in the need to check out trade marks before launching a new product, which experts say is just as relevant to small business.  

Microsoft are being forced to change the name of their SkyDrive online storage after Sky issued proceedings alleging trade mark infringement and passing off, arguing that the average consumer would make a link to the Sky brand. Sky’s claim – backed up with evidence of calls to their helpline from customers who had assumed it was one of their services – was successfully upheld in the High Court.  

Sky also successfully argued that there was a serious risk to their reputation and that Microsoft’s use of SkyDrive would dilute the brand; and that Microsoft’s actions amounted to passing off by showing goodwill that was generated across Sky’s broadband business and digital content storage which Microsoft could draw upon.  
An attempt by Microsoft to counter-claim invalidity of Sky’s trade mark registrations on the basis that ‘sky’ was simply descriptive of cloud computing was unsuccessful.

This case has highlighted the need for companies to undertake clearance searches to check there is no conflict with an existing registered mark and also to minimise the risk of encroaching on the goodwill and reputation of another company which could give rise to a claim of ‘passing off’ such as this. 

Corporate and Commercial lawyer, Mark Whittaker of Ashtons Legal, commented: “It turns out that Microsoft had done their research back in 2007 but perhaps underestimated the importance of the Sky brand, believing that the company was solely concerned with broadcasting. But Sky had started to supply internet services in 2006 and by 2010 was in use in three million households and they raised an objection to the SkyDrive name at the outset, which Microsoft decided to contest.”

“But the lesson is not just for big business. Global brands are particularly zealous about protecting their name and image and it would be quite wrong for a small company to imagine that they are too small to be noticed by a major international company or that such a company would not bother pursuing a little business.”

He added: “It’s a complex area, but the message to any company looking to develop a new brand for a product or service is to make sure a realistic assessment has been made against current brands, including the potential for any future developments by any similarly named competitor, particularly in fast moving technology markets such as this.”