The Supreme Court has confirmed that, for the purposes of passing off, goodwill is territorial and cannot be established on the basis of reputation alone without a customer base within the UK.
The elements of the tort of passing off are:
- Goodwill or reputation attached to the relevant goods or services.
- A misrepresentation by the defendant to the public, leading or likely to lead the public to believe that its goods or services are those of the claimant.
- Resulting damage to the claimant (Reckitt & Coleman Products Ltd v Borden Inc  RPC 341).
S used the NOW trade mark on its internet television service in Hong Kong. In March 2012, B announced that it intended to launch a new internet television service in the UK under the name "NOW TV". S issued proceedings against B for trade mark infringement and passing off.
The High Court held that the registered mark was descriptive and so was invalid. It also dismissed the passing off claim on the basis that S had not generated a protectable goodwill in the UK for a business carried on by them under the name “NOW TV” because:
- UK viewers of S’s “NOW TV” programmes without paying a subscription were not, unlike Hong Kong subscribing viewers, customers of S.
- S’s preparations for the proposed launch of “NOW TV” in the UK in 2013, including confidential negotiations, did not give rise to a protectable goodwill in the UK. S appealed.
The Court of Appeal dismissed the appeal. It held that the ability of UK consumers to access programmes 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. S’s preparatory activities in the UK were also insufficient to establish sufficient goodwill.
S appealed to the Supreme Court, arguing that a claimant in a passing off action need only establish a reputation among a significant section of the public within the UK.
The court dismissed the appeal. It held that a claimant in a passing off claim must establish that it has actual goodwill in the UK, and that this goodwill involves the presence of clients or customers in the UK for the relevant products or services.
Mere reputation was not sufficient to amount to goodwill. S must show that it had significant goodwill, in the form of customers, in the UK, although it did not need have an establishment or office in the UK. In order to establish goodwill, it must have customers within the UK, as opposed to people in the UK who happen to be customers elsewhere. Where S’s business is carried on abroad, it is not enough for S to show that there are people in the UK who happen to be its customers when they are abroad. However, it could be enough to show that there were people in the UK who, by booking with, or buying from, an entity in the UK, obtained the right to receive S’s service abroad. If so, the entity need not be a part or branch of S: it could be someone acting for or on its behalf.
As passing off is a common law concept, the assessment of the appropriate balance between competition and protection 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, without having any business or any consumers for its product or service in the UK, 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.
S’s business was based in Hong Kong, and it had no customers, and so no goodwill, in the UK. A significant number of members of the Chinese community in the UK associated S’s 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.
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.
The Supreme Court opted to maintain the status quo: goodwill in the context of passing off remains territorial in nature in the UK. The court noted there is conflicting case law on this issue and that it is of particular significance in the age of global electronic communication and worldwide travel, both of which might at first appear to make the idea of a single international goodwill more attractive. However, the court was concerned that an imbalance between protection and competition would be created if a claimant could prevent the use of a mark in the UK even though it had no customers or business, and had not spent any time or money in developing a market, in the UK.
This decision also illustrates one of the advantages of registered trade mark protection, which to some extent does protect reputation alone, over common law passing off.
Case: Starbucks (HK) Limited and another v British Sky Broadcasting Group plc and others  UKSC 31.
First published in the July 2015 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.