On 15 November 2013, the Court of Appeal handed down it decision in Starbucks (HK) Limited and Anor. V. British Sky Broadcasting Group Plc & Ors.  EWCA Civ 1465 in which it upheld the High Court's decision that, based on the evidence, the Claimant did not have a valid Community Trade Mark or any goodwill in the UK that would give the Claimant the right to prevent BSkyB from using the name "NOW TV" in relation to its internet protocol TV service. The appeal considered the requirement of distinctiveness for a Community Trade Mark to be valid and whether a reputation built up outside the UK could give rise to goodwill in the UK on which to base a claim for passing off.
Starbucks, a Hong Kong-based media group (unrelated to the coffee shop chain), provides an internet protocol TV service in Hong Kong under the name "NOW TV" with some of the programmes accessible in the UK via the internet.
Starbucks owned a Community Trade Mark ("CTM") covering television and telecommunication services for the word "now" (in lower case) in which the "o" was shown with 6 radiating lines so as to appear like a star or sun.
In 2012 BSkyB announced (and subsequently launched) a new, stand-alone, internet protocol TV service in the UK under the name "NOW TV". This prompted Starbucks to commence proceedings in the UK for infringement of its CTM and for passing off.
In the High Court, Arnold J held that Starbucks' CTM was invalid under Article 7(1)(c) of Regulation 207/2009 (the CTM Regulation) on the basis that the word "now" would be considered by the average consumer to be descriptive of the services provided under the mark or of a characteristic of those services. The judge also found that the passing off claim failed. Whilst UK customers could access the Claimant's Hong Kong website the website was targeted at consumers in Hong Kong and this was not sufficient to establish a goodwill in the UK. Also the Claimant's preparations for the launch of its own IPTV service under the name "Now TV" in the UK did not give rise to a protectable goodwill. Starbucks appealed.
Court of Appeal's decision – key points
After identifying the common ground between the parties, outlining the outstanding issues, and summarising Arnold J's decision and each party's arguments, the Court of Appeal gave its conclusions. The leading judgement was delivered by Sir John Mummery (who also delivered the leading judgments in the recent decisions relating to Cadbury's trade mark application for the colour purple and Mattel's Scrabble tile mark – see here).
Trade mark issues
BSkyB claimed that Starbucks' CTM was invalid. They relied on Articles 7(1)(b) and 7(1)(c) of the CTM Regulation. For the purposes of the appeal, it was agreed that invalidity under 7(1)(c) also resulted in invalidity under 7(1)(b).
Article 7(1)(c) of the CTM Regulation provides that: "trade marks which consist exclusively of signs or indication which may serve, in trade, to designate the kind, quality, intended purpose, value, geographical origin or the time or production of the goods or of the rendering of the service, or other characteristics of the goods or service" shall not be registered.
The Court of Appeal summarised the effect of this provision such that a sign which designates a characteristic of the relevant service is devoid of any distinctive character and held the following:
- the CTM was devoid of any distinctive character that was able to distinguish Starbuck's services from those offered by other undertakings. The mark was not inherently distinctive nor had the mark acquired distinctiveness through use of the mark.
- This did not mean that the word "now" could not be distinctive of a service. Depending on the context, a word could be used in a distinctive way or a descriptive way.
- The Claimant had chosen a commonplace, easily understood, ordinary English word as its trade mark even though it could have chosen or invented many other words to identify its service.
- The characteristic of the Claimant's service that was attractive to consumers was the availability of the programming on demand in an instant, that is to say its "nowness".
- Arnold J did not make any error when deciding that the average consumer of the Claimant's service would understand the mark "NOW" to designate the attractive instant and immediate characteristic of the service. The mark "NOW" described something about the service, its immediacy. In conclusion, the Claimant's CTM was invalid.
Passing off issues
The principal issue was whether Starbucks had "customers" of its IPTV service in the UK who counted as customers for the purposes of supporting a claim for passing off. The main discussion centred on the Court of Appeal's previous decision in Anheuser Busch Inc v. Budjovicky Budvar NP  which held, in that case, that even though the claimants' beer was on sale to service men at US military bases (and a few other places) in the UK, this did not amount to the beer being available in the UK, the claimants had no customers and were not carrying on a business in the UK. As such Anheuser Busch had no protectable good will in the UK.
In order to claim a protectable goodwill in the UK, Starbucks relied on: (i) access in the UK to its Chinese language TV programmes on its web-site, "now-tv.com"; (ii) access to its videos on YouTube under the NOW TV brand which had been viewed around 238,000 times; and (iii) availability of small number of its programmes on video services on various international airlines flying to and from the UK. Starbucks also showed that it had plans to expand its television service to the UK.
The Court of Appeal acknowledged that goodwill can be established without the need for customers to be charged and also where the customers are a non-English speaking ethnic minority. It also stated that it was possible to establish goodwill in a service by advance advertising and promotional activities.
However the Court of Appeal considered that the actions of the Claimant and the exposure of the Claimant's service in the UK were not sufficient to establish a goodwill in the UK and confirmed that the legal requirement to succeed in a claim of passing off is having goodwill and customers in the UK. Even in circumstances where there is wide accessibility to the internet, access in the UK to programmes emanating from Hong Kong is not sufficient to establish a goodwill and a customer base in the UK. Further Starbuck's plans were not enough to establish a goodwill in the UK. Steps such as promotion or advertising were necessary to have a protectable goodwill.
As such Starbuck's appeal was dismissed and, as matters currently stand, BSkyB are able to promote and continue to provide its internet TV service under the "NOW TV" brand.
We do not know whether an application to appeal to the Supreme Court will be made. However, Starbucks expressly reserved the right to argue before the Supreme Court whether there was a legal requirement for there to be customers in the UK to succeed in a passing off claim in the light of the obiter remarks made by Lloyd LJ in Hotel Cipriani Srl v. Cipriani (Grosvenor Street)Ltd in which he commented that it might be salutary to review the requirement for customers to be in the UK for the kinds of service providers operating from abroad.
The NOW TV case highlights two important reminders for brand owners. First, there are risks in adopting a brand that is descriptive of the goods and/or services provided under that brand. There is great potential value (including the ability to prevent others from using the same or similar brand) by creating and developing a distinctive brand that cannot be said to be descriptive of the relevant goods and /or services provided.
Further, owners of brands that are well known outside the UK but without a business in the UK, may not be able to establish a sufficient goodwill in the UK to succeed in a passing off action. However, such brand owners may be able to find some recourse by seeking to rely on Section 56 of the Trade Marks Act 1994 which gives the owner of a trade mark that is famous outside the UK (and is entitled to protection under the Paris Convention), the right to seek an injunction to prevent the use of an identical or similar mark in relation to identical or similar services.