The UK Supreme Court has unanimously ruled ( UKSC 31) that a UK passing-off action cannot succeed on the basis of a reputation alone. Goodwill, deriving from actual paying customers within the Court’s jurisdiction, has also to be established.
This arose out of a claim by a Hong Kong Company, Starbucks (HK) Limited (nothing to do with coffee shops) and its parent, PCCW Media Ltd, against British Sky Broadcasting Group plc (Sky) and others regarding use of the term “NOW TV”. PCCW operate the largest internet-based TV service in Hong Kong under this name and discussions about launching the service for Chinese-speaking residents in the UK had been taking place for a few years. In June 2012, PCCW Media had launched a NOW player “app” in the UK, both on its website and via the Apple App Store, in order to warm up the market for a launch of PCCW’s NOW TV on the platform of its proposed UK partner. However, in March 2012, Sky had independently announced a plan to operate an internet-based TV service in the UK under the same name.
Starbucks/PCCW sued Sky both for trademark infringement and for passing-off, on the basis that although its programmes cannot be received in the UK, its service and programmes enjoyed a reputation amongst a large part of the Chinese community in the UK who had either lived in or visited Hong Kong and/or who had seen some of them on-line or elsewhere. Both these claims were dismissed in the High Court ( EWHC 3074 Ch) and then Court of Appeal ( EWCA Civ 1465) but the issue of whether the passing-off claim could succeed on the basis of international reputation and goodwill was allowed to be referred to the Supreme Court.
UK law has long taken the view that a claimant in a passing-off case has to show, as part of the classic ‘trinity’, goodwill, in the form of a customer base for its products or services, in the UK. Despite a massive increase globally in commercial awareness, the Supreme Court has reiterated this. An establishment or office in the UK is not necessary, but there have to be paying customers within the UK, as opposed to people in the UK who are customers elsewhere, in order for goodwill to be established. If a company carries out its business abroad, it is not enough for a claimant to show that there are people in the UK who have been its customers when abroad. It could however be sufficient if the claimant 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 a claimant’s product or service abroad.
In common law cases such as this, the Court has to assess the balance between competition and protection and took the view that if a claimant only had to establish a reputation in the UK to support a passing-off action, the balance would tip too far towards protection. Such a claimant could prevent another person from using a word or mark, such as an ordinary English word ‘now’, for a potentially indefinite period without having any business or consumers in the UK. The Court took the view that such a claimant would not have done enough in the UK to justify granting him an effective monopoly over that word or mark. The increase in worldwide travel and global internet communication would exacerbate any such imbalance, meaning that a claimant could potentially shut off the use of a word or mark in the UK without ever having spent or intending to spend any time or money developing a market in the UK.
The appeal therefore failed. PCCW’s business was based in Hong Kong, and it had no customers, and therefore no goodwill, in the UK. The people in the UK who got access to PCCW’s NOW TV programmes via any websites were not PCCW customers in the UK, because there was no payment involved and such availability as there was of PCCW’s product in the UK or on airlines was intended only to promote PCCW’s Hong Kong business.
The Court did leave open the question of whether a company that had launched an advertising campaign in the UK with a view to attracting, but who had not yet attracted any, customers might succeed in a passing off action. Such a case might appear to go against this hard-line approach requiring actual customers but might be justified by commercial fairness rather than principle.