Bad Karma for Expensify – KARMAPOINT to be registered
In a recent Intellectual Property office of New Zealand (IPONZ) opposition decision Swappoint AG v Expensify, Inc. [2024] NZIPOTM 32 (7 August 2024) some interesting issues were raised. This was the final decision of Assistant Commissioner of Trade Marks, Natasha Alley, before returning to private practice in September 2024.
The case concerned New Zealand designation of international trade mark registration No 1121257 KARMAPOINT in the name of Swappoint AG (Swappoint) in Classes 9, 35, 38, 39, 41, 42, 43 and 45 and opposition by Expensify, Inc. (Expensify).
Swappoint’s application covered a wide range of goods and services in 8 separate goods and services Classes, and this was at the heart of Expensify’s objection.
Ultimately, Expensify’s opposition was unsuccessful, and the s 32(1) ground was not made out, but there are interesting pleadings issues in connection with s 32(2) of the Trade Marks Act 2002 (NZ) worth highlighting.
The case is also interesting in that the overclaiming issue, characteristic of s 32(2) and that ultimately was not pursued before Assistant Commissioner Alley, is currently before The Supreme Court of the United Kingdom of Great Britain and Northern Ireland in SkyKick UK Ltd and another (Appellants) v Sky Ltd and others (Respondents) UKSC 2021/0181.
Expensify’s Notice of Opposition Grounds/Pleadings
Getting your pleadings in order, was at the heart of the issue and a timely reminder was provided by Natasha Alley at a recent IPSANZ seminar on 24 September 2024, Inside the mind of a hearing officer, presented by Jane Glover and Natasha Alley. Although, Swappoint AG v Expensify, Inc. was not specifically discussed and only mentioned in passing as her final IPONZ decision, the importance of getting the pleadings right was emphasised by former Assistant Commissioner Natasha Alley, including checking that what you intend to include in your submission was included in the pleadings. Getting the pleadings right in the first place was seen as a fundamental aspect of any case, but it seems that it is an area that is often overlooked, as we have seen in Swappoint AG v Expensify, Inc.
Expensify’s two grounds of opposition, not including s 32(2)
In their Notice of Opposition Expensify relied on two grounds:
- s 32(1) - No prior use or assertion of use; (later abandoned at the hearing); and
- no intention to use s 32(1).
Unfortunately for Expensify, s 32(2) was not included in the pleadings.
In response, it was denied by Swappoint that its application was contrary to s 32(1) and it plead that it had used or formed an intention to use the KARMAPOINT mark before the priority date.
Section 32 of the Trade Marks Act 2002
Section 32 of the Trade Marks Act 2002 reads:
32 Application: how made
(1) A person claiming to be the owner of a trade mark or series of trade marks may, on payment of the prescribed fee (if any), apply in the prescribed manner (if any) for the registration of the trade mark or series of trade marks used or proposed to be used in respect of the following:
(a) particular goods or services within 1 or more classes:
(b) particular goods and services within 1 or more classes.
(2) The Commissioner must not register a trade mark in respect of all of the goods and services included in a class, or a large variety of goods or services, unless the specification is justified by the use or intended use of the sign.
Section 32(2)
As highlighted by leading intellectual property law academic Dr Rob Batty in his article Bad Faith: A Section Whose Time has Come? New Zealand Law Review Vol 2024 no. 2 (August 2024) 261 at 273, in referring to s32(2) ... “The intention of such a provision appears to be to empower IPONZ – rather than third parties - to query overly and unrealistically broad specifications and (if necessary) obtain the applicant’s agreement to limit the specification.” As authority for this proposition Dr Batty refers inter alia to the IPONZ Practice Guidelines; Classification and Specification www.iponz.govt.nz at [4]. Dr Batty acknowledges “however s32(2) has emerged as an independent ground of opposition (or invalidation) where a third party alleges that the applicant did not have a justifiable intention to use the trade mark for the goods or services covered by the specification.” Batty cites Apple Inc v Swatch Ag (Swatch SA) (Swatch Ltd) [2019] NZIPOPTM 30 in support “noting at [167} that s 32(s) only “comes into play” if the specification covers all goods or services”.
No Equivalent to s 32(2) in the UK and Singapore
Dr Batty further notes that “an equivalent section is not found in the UK 1994 Act or the Singapore legislation.” The New Zealand legislation is chiefly derived from the UK and Singapore, so it is an interesting comparison and that it is absent in these jurisdictions. Overclaiming issues are dealt with under s 3(6) of the Trade Marks Act 1994 (UK), as we will see below.
Pleadings Issue and findings
As noted already, Expensify’s written submission relied on s 32(2), in addition to s 32(1) however, there was no reference to s 32(2) in the notice of opposition/pleadings.
Expensify submitted that the “extraordinarily broad” scope of the goods and services is not justified by the use which the applicant made, or intends to make, of the mark in New Zealand. As per the decision at [20] “this is essentially a s 32(2) ground of opposition and indeed s 32(2) is specifically relied upon in Expensify’s submissions”.
Expensify’s written submissions refer to the issue of “overclaiming”, where applicant’s apply to register trade marks for a scope of goods and services which far exceeds not only their intended use, but their actual capabilities as a business.
Assistant Commissioner Alley in her decision held that she had not taken Expensify’s submission on s 32(2) into account, given that s 32(2) was not pleaded as a ground of opposition. The decision notes the importance of pleadings in trade mark case as highlighted by the High Court in Chettleburgh v Seduce Group Australia Limited [2012] NZHC 2563.
So alas, no finding was made on s 32(2) which would have been interesting especially in the context of the emerging jurisprudence on this issue in the UK.
Overclaiming in other jurisdictions - SkyKick UK Ltd and another (Appellants) v Sky Ltd and others (Respondents)
Thie issue of overclaiming is also the allegation in this long-running trade mark case currently before The Supreme Court of the United Kingdom of Great Britain and Northern Ireland.
In SkyKick UK Ltd and another (Appellants) v Sky Ltd and others (Respondents) UKSC 2021/0181. As reported on The Supreme Court website case details, Sky brought actions against SkyKick for infringement of its trade marks across a range of goods and services, while SkyKick challenged those trade marks' validity.
SkyKick alleges that Sky employs a strategy of applying for overly broad trade marks for goods and services which it does not deal in, and for which it has no conceivable commercial rationale.
The issues before The Supreme Court
As there is no equivalent s 32(2) in the UK legislation as noted by Dr Batty, the issues before The Supreme Court are:
(1) What is the test for determining "bad faith" in s 3(6) of the Trade Marks Act 1994? (2) If such bad faith is found, what is the correct approach to determining the specification that the proprietor of the trade mark should be permitted to retain?
The Earlier Courts
The judge in the High Court found that Sky had acted in bad faith and that its trade marks were partially invalid, but also found that SkyKick's email migration and cloud storage services infringed Sky's trade marks. The Court of Appeal allowed Sky's appeal and held that it had not acted in bad faith and dismissed SkyKick's cross appeal on infringement.
The Appeal and Expected Decision
SkyKick has now appealed to The Supreme Court on the issue of bad faith. At this stage in the proceedings, the parties' arguments are focused on whether Sky applied for its trademarks in "bad faith" within the meaning of s 3(6) of the Trade Marks Act 1994, which would render Sky's trade marks invalid.
The appeal before Justices Lord Reed, Lord Lloyd-Jones, Lord Kitchin, Lord Hamblen and Lord Burrows was heard in June 2023 and according to some sources a decision is imminent.
This is likely to be a seminal judgment on overclaiming in trade mark cases in the UK and other common law jurisdictions. It ultimately could see a divergence in the UK from EU trade mark law, following Brexit.
Concluding remarks
As Swappoint AG v Expensify, Inc demonstrates it is important to get the pleadings right. It might sound a basic consideration, but it is an important aspect of your case.
In New Zealand, it is possible to amend the pleadings prior to the hearing under s 194 of the Trade Marks Act 2002 and Regulations 11 and 11A of the Trade Mark Regulations 2003, so if in doubt apply to amend.
We await the decision in SkyKick UK Ltd and another (Appellants) v Sky Ltd and others (Respondents), which will provide helpful guidance on “overclaiming” by applicants and the development of the law of bad faith under s 3(6) and, if bad faith is found, the correct approach to determining the specification of goods and services that the proprietor of the trade mark should be permitted to retain.
