Starbuck (HK) Limited and another (Appellants) ("Starbucks")


British Sky Broadcasting Group PLC and others (Respondents) ("Sky")

It all started in 2012, when Starbucks (the broadcasters not baristas!) was not best pleased to learn of Sky's intention to launch its new "NOW TV" service.   Starbucks claimed it had goodwill in its NOW internet television service, and a prior CTM registration for its NOW (stylized) mark.  Sky responded to Starbucks threat of infringement by successfully invalidating the CTM registration and successfully defending the passing off claim.  Starbucks appealed the decision.

The Appeal was dismissed. Let this be a warning to brand owners selecting marks that comprise of ordinary, non-distinctive words. Rights in marks containing non-distinctive/descriptive words with figurative elements are limited. If such a trade mark is to be enforced, the mark in dispute must contain the figurative elements (or something similar to the figurative elements) rather than just the have the non-distinctive/descriptive word in common.  In this case, the figurative element of the Starbucks mark, was so simple and the word "now" so descriptive, that it should have not been registered in the first place. 

Further, it was held that even if the registration was valid, Sky would not have infringed it as the figurative element was not adopted.  Starbucks was also unable to convince the Court that it had the sufficient reputation and goodwill in order to succeed in respect of passing off.  The key argument being whether the Chinese speaking community in the UK were customers, and whether use of the NOW mark by Starbucks, was used in commerce. Starbucks dropped its infringement claim, and successfully sought leave to appeal to the Supreme Court regarding its passing off claim. 

The legal community and brand owners, around the globe waited eagerly for the decision.  For some, the reconsideration of the traditional test for passing off and in particular goodwill, was way overdue in view of today's world. Starbucks questioned the importance of international travel and the internet in terms of goodwill. It relied on decisions taken in other common law countries (Ireland, Canada, New Zealand, Australia, Africa, Hong Kong and Singapore). Is the law out of kilter with how businesses operate today? Is reputation, without actual sales/business presence in the relevant jurisdiction enough? Australia seems to think so.   After a full review of common law authorities (including those in the UK) in a recent case, the Federal Court of Australia decided that, the traditional approach established in UK decisions was too "hardline" and in conflict with commercial realities (see CongAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465).  

The Supreme Court recognized, and to some extent supported the view taken in Australia (though noted that it was on Appeal for further evaluation) and recognized the need to balance the public interest in free competition and the protection of a trader against unfair competition. However, in its final conclusion it maintained its "hardline" approach and confirmed that for passing off in the UK, a claimant must show that it has goodwill in the form of customers in the jurisdiction and that mere reputation is not sufficient.

A Hong Kong perspective:  Starbucks (HK) Limited, known as PCCW need no introduction in Hong Kong. It is a well-known broadcasting company offering pay-TV services under the trade mark NOW TV. It is known to aggressively protect its rights.  It is therefore, no surprise that the Supreme Court recognized Starbucks' reputation in the NOW trade mark in Hong Kong.   

Thanks to its colonial past, English common law plays an important part in Hong Kong's legal system.  Accordingly, the reaffirmation of the law on passing off, is important to brand owners seeking to protect their rights in Hong Kong and particular, should be a warning regarding the reliance often placed on "international goodwill".    The Hong Kong High Court on an application for an interlocutory injunction, has in the past (see Ten-Ichi Co. Ltd v Jancar [1989] 2 HKC 330) held that mere reputation was enough to found a passing off claim.  In this case, the defendant opened a restaurant already owned in Japan, the restaurant owner in Japan had done no business in Hong Kong, but its restaurant featured in a US TV program aired in Hong Kong. The Court held that reputation was enough.  Starbuck's counsel referred to this case in the UK Supreme Court. However, The Supreme Court noted, that this case was put into question by a later Court of Appeal decision (see Re: Ping An Securities Ltd (2009) 12 HKCFAR 808) where the Hong Kong Court of Final Appeal held (citing earlier English case law) that the "plaintiff must establish goodwill (in the country or region) in a business in the supply of goods or services".  The latest UK Supreme Court, decision further supports this view and further descents from the position taken in Ten-chi.