When is a decision on its merits not over? When Sky v SkyKick leaves rightsholders in limbo

Kat friend Jake Campbell of the TLT firm has shared his thoughts on the recent case of FIL Ltd & Anor v Fidelis Underwriting Ltd & Ors, and why the shadow cast by Arnold J's reference to the CJEU in Sky v SkyKick clouds the result.

In the case of FIL Ltd & Anor v Fidelis Underwriting Ltd & Ors [2018] EWHC 1097 (Pat), the Patents Court has held that use of "Fidelis" for insurance underwriting does not infringe FIDELITY for “insurance services” or “financial services”. However, perhaps more troubling for the claimant and for other rightsholders is that the continued existence of their trade marks rests upon the outcome Arnold J's reference to the CJEU in Sky v SkyKick [2018] EWHC 943 (Ch) (previously discussed in IPKat here). There, the judge concluded that guidance was required on:

(1) whether a trade mark could be declared wholly or partially invalid on the ground that some or all of the terms in the specification are lacking in sufficient clarity or precision; and

(2) whether it can constitute bad faith to apply to register a trade mark without any intention to use it in relation to the specified goods or services.

The current case

Fidelity, the claimant, is a large financial services business, founded in 1969, managing over £149bn in assets and with 1.2m customers in the UK. It has various registrations for FIDELITY for such services as “financial services” and “insurance services”. Fidelis, the defendant, is a specialist insurance underwriter set up in 2015. Despite its youth, the reputation and experience its founders enabled Fidelis to raise $1.5bn in capital and conclude several thousand insurance contracts.

The dispute arose in 2015, when Fidelity alleged trade mark infringement and passing off, inter alia, in the UK, by virtue of the Defendant’s use of "Fidelis". Proceedings were not issued until December 2016, when Fidelity filed in the English High Court. Fidelis counterclaimed for a declaration that the Fidelity trade marks in question were either invalid or should be revoked for non-use. The court considered the following questions:

• Is “Fidelity” descriptive of "insurance services"?

There is a type of insurance known as “fidelity insurance” and the defendant asserted that this meant that FIDELITY was descriptive of “insurance services”. The judge (Arnold J) agreed but based upon his reasoning in Omega Engineering v Omega SA [2012] EWHC 3440 (Ch), he held that rather than delete “insurance services” from the specification, the appropriate order was to amend the specification so as to read: “insurance services except fidelity insurance” (emphasis added).

• Was there use in relation to “insurance services”?

Fidelis’ counterclaim was partly based on revocation for non-use of the marks in so far as they related to “insurance services”. On the facts, the judge concluded that there was genuine use but only in relation to pensions, and therefore the specification should be limited to “pension-related insurance services” (emphasis added).

• Does “financial services” lack clarity and precision?

In IP TRANSLATOR the CJEU held that a trade mark application should be refused if the goods and services for which the protection of the trade mark is sought lack “sufficient clarity and precision”. However, in Sky v SkyKick, the judge held that the EU Trade Mark Regulations (1994, 2009 and 2017) did not explicitly state that a lack of clarity and precision was a ground for invalidity of a registered trade mark, and the CJEU would have to provide guidance. In this case, Fidelis raised the same argument – that “financial services” was too broad and therefore invalid for lacking clarity and precision. As a result, the judge held that the outcome of this factor would depend on this decision in the Sky v SkyKick reference ([95]).

• Were the marks registered in bad faith?

In Sky v SkyKick, the defendant argued that Sky’s marks should be invalidated on the grounds of bad faith because there was never intent to use the mark for the goods and services covered by the registration. However, the judge concluded there was no express requirement of an intention to use in EU Trade Mark Regulations or Directives but, because there may be an implicit requirement, he had to refer the question to the CJEU. Again, Fidelis raised the same argument in relation to Fidelity’s trade marks. Although the outcome of Fidelity’s case did not depend on this factor (the defendant was found not to infringe), from Fidelity’s point of view, the status of its trade marks was left in limbo because, until the CJEU has made its decision, the judge held it was “arguable” that the marks were registered without an intent to use and should be invalidated.

Fidelis raised a further argument that it may be bad faith to refile the same trade mark at five-yearly intervals to avoid the impact of a non-use cancellation action. It was held in T-136/11 Pelicantravel.com sro v OHIM that such a practice “may” constitute bad faith. On the facts, Arnold J held that Fidelity was unlikely to have acted in bad faith, as its trade mark filings differed in territorial scope (some were UKTMs and others were EUTMs) and covered different services (although there was some overlap). However, the judge stated that the “uncertain state of the law” meant that his conclusion on this point could only be provisional ([132]) until the CJEU gives guidance in Sky v SkyKick on what circumstances may constitute bad faith.

• In the event that the marks were valid, were they infringed?

In relation to the claim under Art 9(2)(b), the judge concluded that even though the signs were similar and the services were similar or identical, there was no likelihood of confusion. Despite the fact that FIDELITY was well known by both the general public and professionals, the average consumer of Fidelis’ services was “knowledgeable” and exercised “a high degree of care and attention” and often used brokers who were even more knowledgeable ([147]), and therefore unlikely to be confused.

In relation to the claim under Art 9(2)(c), the judge held that there was no unfair advantage taken by Fidelis as it relied on the strength and reputation of its founders, rather than on the “Fidelis” sign. There was no detriment because of the specialist and professional nature of Fidelis’ services did not tarnish the distinctive character of FIDELITY.

A final takeaway point

Besides losing this case, Fidelity has another problem – the uncertain status of its trade marks and, until the CJEU has answered the Sky v SkyKick reference, this uncertainty will remain. In the meantime, it may be difficult to enforce its rights against other third parties because of the unresolved validity issues hanging over its marks.

IPKat has previously pointed out that Sky v SkyKick “could have far-reaching consequences for all of us” and this case is perhaps the first of many to follow. One would expect that defendants will, as a matter of course, raise invalidity arguments about specifications lacking sufficient clarity and precision or that the relevant marks were registered bad faith. Where such arguments are raised, trade mark owners may settle on less favourable terms in order to preserve the validity of their trade marks rather than wait for decision from the CJEU, which may not come until late next year.