Starbucks (Hong Kong) Ltd and others v British Sky Broadcasting Group plc

14 May 2015

Peter Brownlow, Audrey Horton

[2015] UKSC 31
Background - High Court and Court of Appeal

This case concerns the NOW trade mark for the claimants' internet television service in Hong Kong. The registered mark had been held to be descriptive and therefore invalid.

The High Court also dismissed the passing off claim holding that the claimants had not generated a protectable goodwill in the UK for a business carried on by them under the name "NOW TV" because:

  • Viewers in the UK of the "NOW TV" programmes without paying a subscription were not, unlike Hong Kong subscribing viewers, customers of the claimants.
  • The claimants' preparations for the proposed launch of "NOW TV" in the UK in March 2013, including confidential negotiations, did not give rise to a protectable goodwill in the UK.

The Court of Appeal dismissed the claimants' appeal on the passing off issue on the basis that the ability of UK consumers to access programmes emanating from Hong Kong was not a sufficiently close market link to establish an identifiable goodwill with a customer base in the UK. To establish goodwill in the UK, it was necessary to have some kind of connection with customers in the market with a view to transacting business and repeat business with them. The claimants' preparatory activities in the UK were also insufficient to establish sufficient goodwill.

Supreme Court

The issue to be determined by the Supreme Court was whether a claimant in a passing off action need only establish a reputation among a significant section of the public within the UK, or whether, as the courts below held, such a claimant must also establish a business with customers within the UK. There is conflicting jurisprudence in the common law world on this issue and it is of particularly acute significance in the age of global electronic communication.

Lord Neuberger concluded that the appeal should be dismissed on the same ground as in the courts below.  He reaffirmed that a claimant in a passing off claim must establish that it has actual goodwill in the UK, and that such goodwill involves the presence of clients or customers in the UK for the products or services in question.

The Supreme Court can develop or change the law in relation to a common law principle if it has become archaic or unsuited to current practices or beliefs, in order to adapt to practical and commercial realities in a world which is fast changing in terms of electronic processes, travel and societal values. However, it noted that changing the common law risked undermining legal certainty and could sometimes lead to other consequential changes.

Mere reputation was held not sufficient to amount to goodwill. The claimants must show that they had significant goodwill, in the form of customers, in the UK, although they need not have an establishment or office in the UK. In order to establish goodwill, they must have customers within the UK, as opposed to people in the UK who happen to be customers elsewhere. Thus, where its business is carried on abroad, it is not enough for a claimant to show that there are people in the UK who happen to be its customers when they are abroad. However, it could be enough if the claimants could show that there were people in the UK who, by booking with, or purchasing from, an entity in the UK, obtained the right to receive the claimants' service abroad. In such a case, the entity need not be a part or branch of the claimant: it could be someone acting for or on behalf of the claimant.

Since passing off is a common law concept, the assessment of the appropriate balance between competition and protection, which arises in relation to any intellectual property right, must be made by the Court. If it was enough for a claimant merely to establish reputation within the UK to maintain a passing off action, it would tip the balance too much in favour of protection. Without having any business or any consumers for its product or service in the UK, a claimant could prevent another person using a mark, such as an ordinary English word, "now", for a potentially indefinite period in relation to a similar product or service. A claimant who had simply obtained a reputation for its mark in the UK in respect of his products or services outside the UK had not done enough to justify granting him an effective monopoly in respect of that mark within the UK.

Worldwide travel and global electronic communication via the internet might at first appear to render the notion of a single international goodwill more attractive, given that it is so easy to penetrate into people's minds almost anywhere in the world so as to be able to claim some reputation within virtually every jurisdiction. However the imbalance between protection and competition described above would be exacerbated. The same point applied to increased travel: it rendered it much more likely that consumers of a claimant’s product or service abroad will happen to be within the UK and thus to recognise a mark as the claimant’s. If that were correct, it would mean that a claimant could shut off the use of a mark in the UK even though it had no customers or business here, and had not spent any time or money in developing a market here - and did not even intend to do so.

The Court left open the question of whether a passing off claim can be brought by a claimant who had not yet attracted goodwill in the UK, but had launched a substantial advertising campaign within the UK making it clear that it will imminently be marketing its goods or services in the UK under the mark in question.

In summary, the appeal was dismissed because the claimants' business was based in Hong Kong, and they had no customers, and therefore no goodwill, in the UK. A significant number of members of the Chinese community in the UK associated the claimants' internet television service with the mark NOW TV. However, they were not customers in the UK, because it was only in Hong Kong that they could enjoy the service in question, and the service was not marketed, sold or offered in the UK. The people in the UK with access to the NOW TV programmes via websites, or on various international airlines, were not customers in the UK, because there was no payment involved (either directly by the people concerned or indirectly through third party advertising), and the availability of the service in these outlets was intended to, and did, promote the Hong Kong business. A reputation acquired through advertising in the UK was not enough to found a claim in passing off.

Comment

The Supreme Court has opted to maintain the status quo. Goodwill in the context of passing off remains territorial in nature in the UK. The transformation of the business world by technology, with the spread of information over the internet, has not led in the UK to an equivalent expansion of the scope of protection in passing off available to businesses.