In the case of Starbucks (HK) Limited and another v British Sky Broadcasting Group plc and others ( UKSC 31), the Supreme Court reaffirmed that a claimant in a passing off claim must establish that it has actual goodwill in this jurisdiction and that such goodwill involves the presence of customers in the UK for the products and services in question. The Court confirmed that there is no actionable passing off as the Claimants do not have protectable goodwill in the UK.
- Claimants cannot rely on reputation alone in a passing off case – they must be able to demonstrate significant goodwill.
- Actual goodwill must be established within the territory and this goodwill necessarily involves the presence of customers in the UK. If a claimant's business is abroad, it is not enough for a claimant to show that there are people in the UK who happen to be customers when they are abroad.
- Mere accessibility of a website in the UK is not enough without UK customers. This simply amounts to advertising in the UK and a reputation acquired through advertising is not enough to found a claim in passing off.
- Goodwill in the context of passing off is territorial in nature. Despite case law developments in this area in other common law jurisdictions, when it comes to domestic common law issues such as passing off, an English court must consider the factual position in the UK.
- Claimants with 'well-known' marks in the UK but without UK customers may have more success under s.56 of the Trade Marks Act 1994.
Starbucks (HK) (entirely unrelated to the coffee company of the same name) is a Hong Kong based media company that provides an IPTV (internet protocol television) service called 'NOW TV' with approximately 1.2 million subscribers in Hong Kong. It is a member of the PCCM group and the Appellants are referred to as 'PCCM' throughout the judgment of the Supreme Court. People in the UK cannot receive PCCM's service and there are no UK subscribers. However, UK residents could have become aware of the NOW TV service in other ways, such as accessing PCCM's websites where the Chinese language content is available free of charge. Programmes from the NOW TV service are also available free of charge on PCCM’s YouTube channel.
PCCM issued proceedings for trade mark infringement and passing off in April 2012, shortly after British Sky Broadcasting ("Sky") announced the launch of NOW TV, which is an internet TV service. Arnold J. found no infringement or passing off at first instance.
Arnold J. accepted that PCCM did have reputation in the UK but the contention that UK viewers of PCCM's programmes on websites represented goodwill "would stretch the concept of customer to breaking point". Otherwise, hundreds of TV channels worldwide would have customers and hence protectable goodwill in the UK simply as a result of YouTube. Arnold J.'s judgment was upheld on appeal (please see our ebulletin here on the Court of Appeal's judgment) with PCCM then appealing to the Supreme Court on the passing off issues alone.
2. Passing off
In order to succeed in a passing off claim, a claimant must satisfy the three elements of the test as set out by Lord Oliver in the case ofReckitt v Coleman:
- First, the claimant needs to establish that goodwill or reputation attaches to the goods supplied in the UK in the mind of the purchasing public by association with the identifying get-up, such that the get-up is recognised by the public as distinctive specifically of the claimant's goods; and
- Secondly, the claimant must demonstrate a misrepresentation by the third party to the public (whether or not intentional), leading or likely to lead the public to believe that goods offered are the goods or services of the claimant; and
- Thirdly, the claimant must demonstrate that it is likely to suffer damage as a result of the erroneous belief caused by the misrepresentation.
The judgment of the Supreme Court only deals with the first limb of Lord Oliver's test.
3. Decision of the Supreme Court
Lord Neuberger delivered the leading judgment with all judges in assent. PCCM's appeal was dismissed in its entirety with the Court upholding the earlier decisions of Arnold J. and the Court of Appeal. PCCM failed in its claim for passing off as its business was based in Hong Kong and it did not have any UK customers. Whilst PCCM did have reputation in the UK, this was not enough as it lacked the requisite goodwill in the UK to found a claim in passing off. Reputation alone was not enough to found a claim for passing off and this had been established in a long line of UK cases. Accordingly, Sky is free to continue to call its service 'NOW TV' in the UK.
The key question was whether the viewers of PCCM's programmes in the UK constituted customers for its service so as to give rise to a protectable goodwill in the UK. PCCM argued that it was inconsistent with commercial reality in an age of global electronic communications to treat the reputation or goodwill associated with a mark for a particular product or service as limited to jurisdictions in which there is a business with customers for the product or service.
PCCM also pointed to a trend in common law passing off cases (and most notably in Australia and South Africa), which signalled a potential move away from a 'hard-line' approach manifested in the UK cases. The Court accepted that there was conflicting jurisprudence on this issue in the various common law territories and conducted a very thorough analysis of passing off case law, taking into account how the case law on this issue has developed in other common law jurisdictions. However, it was not swayed by the alleged trend in other common law territories and found that when it comes to domestic common law issues such as passing off, an English court must consider the factual position in the UK. Goodwill is territorial in nature.
The Court clarified what constitutes sufficient business to give rise to goodwill as a matter of principle. Mere reputation is not enough. A claimant must demonstrate significant goodwill but it is not necessary that the claimant actually has an establishment or office in the UK. The customers must be in the UK, as opposed to people in the UK who happen to be customers elsewhere. Where a claimant's business is carried on abroad, it will not suffice for the claimant to show that there are people in the UK who happen to be customers of the business when they are abroad. However, it could be enough if there are people in the UK who by booking with or by purchasing from an entity in the UK obtain the right to receive a claimant's service from abroad. In such cases, the entity can be acting on behalf of the claimant – it does not need to be a part of or a branch of the claimant.
The Court cautioned against the temptation to conclude that wherever a defendant has copied a claimant's mark or get up and benefitted from the claimant's inventiveness or hard work, there should be a cause of action against the defendant. Lord Neuberger's view was that "copying is an essential step to progress". There is an important balance to be struck between the public interest in not hindering competition and the public interest in encouraging originality, effort and expenditure. If it was simply enough to establish reputation within the jurisdiction to maintain a passing off action, this would tip the balance too much in favour of protectionism. Whilst the Court accepted that there was force in the point that the internet renders the notion of a single international goodwill more attractive, a claimant who has simply obtained a reputation for its mark in this jurisdiction in respect of goods or services outside the jurisdiction has not done enough to justify the grant of an effective monopoly within this jurisdiction.
The Court referred to significance of the provisions on well-known marks in section 56 of the Trade Marks Act 1994 which states that such marks must be "well-known in the United Kingdom". The Court took the view that this provision offers claimants some degree of protection, as if a mark is used abroad and has a reputation in this country, the mark could still be enforced in the UK, if it satisfies the requirements of section 56(1), even if the owner of the mark does not have UK customers or sufficient goodwill in the UK.
The Supreme Court accepted that the common law can adapt itself to practical and commercial realities in the internet age but that changing the common law risks undermining legal certainty. It was not minded to change the common law in this case. The Court resisted the temptation to broaden out the territorial scope of goodwill in passing off claims and has firmly rejected any idea that mere reputation can suffice to satisfy the first limb of the passing off test. The Court referred to its decision as "reaffirming the law" in this area, rather than making new law but the decision does provide helpful clarification on the type of goodwill required in order to make good on a passing off claim. The central message in the judgment is that a claimant should not be able to shut off use of a mark in a jurisdiction where it has no customers or business and has not invested in developing a market (nor has any intent to do so).