On 13 May the UK Supreme Court delivered its judgment in Starbucks (HK) Limited and another v British Sky Broadcasting Group PLC and others (Starbucks v BSkyB). The case is significant because it considered the law of passing off in the context of a business world transformed by technology into a global market place. In view of increased globalisation and the way business is conducted on the internet, is our established understanding of goodwill, as something dependent on geographical context with customers in a particular territory, appropriate? In reaching its decision, the Supreme Court looked at this issue and reaffirmed the law that reputation is not the same thing as goodwill and reputation alone is not enough for a passing off claim to succeed. This article examines the background to, and the implications of, this decision.
A claim for passing off arises out of the common law principle that “a man is not to sell his own goods under the pretence that they are the goods of another man” (Perry v Truefitt 1842). In simple terms, in order to make a successful passing off claim, a three part test must be satisfied:-
- There is goodwill or reputation in the product or services;
- There is misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the claimant; and
- Damage to the claimant results.
In the Starbucks v BSkyB case, the argument centred on the first part of the test and what must be established for a successful passing off claim in the UK.
The litigation, recently decided by the Supreme Court, started in 2012 with a dispute between a Hong Kong based media group and BSkyB over the right to use the mark “NOW TV”. Starbucks (HK) Ltd (which has nothing to do with coffee!) and PCCM Media Ltd (together PCCM) had, since 2006, operated a closed circuit internet protocol television service in Hong Kong under the name “NOW TV”. This service, broadcast in Mandarin and other dialects, was not available in the UK and no subscribers with UK billing addresses were registered. However, the service was potentially available to the public in the UK on PCCM’s website, and certain programmes and trailers could be viewed on YouTube and inflight on various international airlines. Privately, PCCM was considering expanding the operation with an international subscription service which would include the UK when, in 2012, BSkyB announced plans for the launch of its TV internet service under the same name – “NOW TV”. In April 2012, PCCM issued proceedings in the UK for passing off. (Proceedings for trade mark infringement based on its Community Trade Mark (CTM) for “NOW” were also issued but both the High Court and Court of Appeal found the CTM invalid and this issue was not subsequently appealed).
The judge at first instance dismissed PCCM’s claim for passing off and the Court of Appeal, agreeing with the decision, dismissed PCCM’s appeal. The reasoning was that although PCCM had a reputation in the UK, there was no goodwill in the UK associated with its NOW TV service in Hong Kong because PCCM’s “customers were its viewers in Hong Kong, but were not viewers in the UK”.
The question for the Supreme Court was whether merely establishing a reputation among a section of the public could enable a successful claim to be brought for passing off (i.e. could the first stage of the three part test be satisfied?), or was actual goodwill in the form of customers in the UK, necessary?
Historically, English law had requested that those claiming rights in passing off provide evidence of actual goodwill in the UK involving customers in the UK for the relevant goods or services; goodwill having been described by the Courts as “the attractive force which brings in custom”. PCCM argued, citing an Australian case, that this conflicted “with the needs of contemporary business and international commerce” and a trend to consider commercial realities apparently signalled in other jurisdictions. The PCCM case was that in spite of the fact it had not traded in the UK, it had goodwill by virtue of its reputation sufficient to allow a claim of passing off. In an important judgment the Supreme Court again rejected this argument, maintaining PCCM’s business was based in Hong Kong and since it had no customers in the UK, it had no goodwill in the UK. For the purposes of a claim of passing off, goodwill is territorial.
Roy Crozier, Partner in the Intellectual Property Group said: “This case restates the fundamental principle that reputation alone is not enough to support a claim for passing off in common law and neither the existence of the internet nor the march of globalisation has changed this. As always, it is important that brands ensure they have adequate trade mark protection, especially in advance of any UK launch, as passing off will not provide protection to those who have not traded in the UK as they will not have generated any goodwill regardless of their fame and reputation”.