The United Kingdom Supreme Court has issued an important decision on unregistered trade mark rights in circumstances where a company has not yet entered the market in the U.K. but has acquired a reputation through advertising or other means. The decision may cause the Irish Courts to reconsider their stance on the same issues, i.e. companies abroad who claim to have rights in Ireland despite not having a business in this jurisdiction yet; an act referred to as “passing off.”

What is Passing-off?

While a registered trade mark is the preferred form of protection for any brand, under the common law system in the U.K. and Ireland, there is also the possibility to take action against another entity for “passing off”. This occurs when a first trader (A) takes action against another party (B) who is unfairly using A’s trade mark, branding or get-up, thereby taking unfair advantage of the goodwill that exists.

The three elements needed to succeed in passing-off are to show that, (1) the existing trader A has goodwill in the goods or services in question, or in the get-up, branding or trade mark used to sell the goods or services; (2) that the new entrant B has made a misrepresentation leading the public to mistakenly associate its goods or services with A; and (3) that A’s goodwill has or will be damaged as a result.

The concept is most clearly illustrated by a seminal case involving the familiar “Jif lemon” product; lemon juice which Reckitt & Coleman sold in a yellow, lemon-shaped container. The get-up was therefore that container, which the court held to have goodwill attached to it. When a competitor, Borden, sold a lemon juice product in a similar container, it was held that customers were likely to mistakenly assume this good to be the original “Jif lemon” product and that this would damage the goodwill in the brand. As a result, Borden was prevented from selling its offering in that type of container.

Reputation versus Goodwill

The recent decision from the U.K. Supreme Court involves a Hong Kong broadcaster, Starbucks (HK) Limited, who are not related to the coffee chain, and Sky U.K. Ltd. Starbucks had an internet TV service in Hong Kong called “NOW TV”. This service was known to some people in the U.K., particularly in the Chinese community, and there would have been some exposure to the service via a YouTube channel and advertising on airlines flying between the U.K. and Hong Kong. As a result “NOW TV” had a certain level of reputation in the U.K but it had no subscribers, customers or business in the marketplace itself (as contrasted with U.K residents who had been subscribers when living in Hong Kong).

The well-known Sky broadcaster announced its intention to launch an internet TV service in the U.K. under the brand “NOW TV”. Starbucks sued for infringement of a registered trade mark and for passing-off. As the trade mark was ultimately held to be invalidly registered, passing off was the only basis left for objection.

Therefore, this brought to question whether a reputation on its own was enough to allow Starbucks to prevent Sky from launching its service under the same name; or whether they needed to have goodwill attached to an actual business in the U.K?

Crazy Horse and C&A

This was not the first time that foreign companies had tried to prevent an unregistered trade mark from being used in the U.K., Ireland, and several other common law countries that also allow the passing-off action.

The famous “Crazy Horse” nightclub and venue in Paris failed to prevent an English establishment from opening with the same name on the basis that it was unable to prove any goodwill in the U.K. This was true even though the court accepted that many people had traveled from the U.K. to Paris and had visited the Parisian venue.

In contrast, in a case involving the UK department store C&A, the Irish courts held that even though it had no branches in Ireland, the store had sufficient goodwill to prevent an unrelated company trading under the “C&A” brand. This goodwill, the Irish courts expressed, arose from advertising activities executed in Ireland coupled with shopping trips made by Irish customers to the Belfast C&A store.

The verdict is in

In the Starbucks case, the U.K. Supreme court considered the decisions made in the aforementioned regions, as well as decisions from Canada, Australia, New Zealand, South Africa, Hong Kong, Singapore and the U.S., while also reviewing a century of its own jurisprudence.

The Court, led by Lord Neuberger, concluded that it was not willing to change its position on the issue; for a business to be able to claim for passing-off in the U.K., it must demonstrate goodwill in the form of actual customers in the same market. Reputation acquired through advertising was insufficient in cases where a company was not trading in the U.K.

While the U.K. position has been clarified, for Ireland, this decision is in no way binding. However, it will certainly be considered seriously by the Irish Supreme Court if any future case should arise on the same facts and issues. A defendant accused of passing-off by a company not yet trading in Ireland will surely seek to convince the Irish Supreme Court to reconsider the C&A decision and to reconsider what is required for “goodwill” to actually come into being in Ireland.