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Supreme Court confirms that passing off requires goodwill not just reputation

The Supreme Court has confirmed in Starbucks (HK) Limited & Anor v British Sky Broadcasting Group Plc & Ors [2015] UKSC31 that, in order to bring a successful passing off case, a claimant needs to The Supreme Court has confirmed in Starbucks (HK) Limited & Anor v British Sky Broadcasting Group Plc & Ors [2015] UKSC31 that, in order to bring a successful passing off case, a claimant needs to have actual goodwill, in the sense of a customer base in the UK. Where a business is carried on abroad, it is not sufficient to show that it has a mere reputation in the UK acquired because, for example, people were exposed to its services on the Internet.

Background

The appellants ("PCCM") are a group of companies based in Hong Kong, which has provided TV services over the Internet in Hong Kong since 2006 under the name "NOW TV". By 2012, PCCM had become the largest pay TV operator in Hong Kong. People in the UK cannot receive this service. However, a number of Chinese speakers resident in the UK are aware of the NOW TV service through exposure to it when visiting Hong Kong or from viewing NOW TV programmes on the Internet. In 2012, the respondents ("Sky") launched a new Internet Protocol TV ("IPTV") service under the name "NOW TV".

In April 2012, PCCM began proceedings to prevent Sky from using the name NOW TV in connection with its IPTV service in the UK on the ground that the use of the name amounted to passing off. The High Court found that a substantial number of Chinese speakers resident in the UK were acquainted with PCCM's NOW TV service and that the service had acquired a reputation amongst that community. However, none of the viewers in the UK were PCCM's "customers" because there was no payment involved. Accordingly, PCCM had no goodwill in the UK and the passing off claim was dismissed. The appeal to the Court of Appeal was also dismissed.

Supreme Court Decision

The Supreme Court unanimously dismissed the case. Lord Neuberger gave the judgment with whom the other Justices agreed.

After a thorough review of the previous case law, the Court took the view that the English courts have consistently held that goodwill needs a customer base in the UK in order to satisfy the first element of passing off. It did not think it appropriate to change this common law principle. There wasn't a clear trend in commonwealth countries away from territorial goodwill: Singapore supports the English approach but other jurisdictions (such as Australia and South Africa) support the opposite view.

The Justices thought that territorial goodwill is supported by the refusal of judges to accept that a court of one jurisdiction has power to make orders in relation to the goodwill in another jurisdiction. The CJEU has also emphasised that the need for "genuine use" of a mark means "real commercial exploitation of the mark in the course of trade".

Comment

Although the Supreme Court acknowledged that the appeal was not without force, the decision isn't particularly surprising as it simply confirms decisions in the lower courts and previous case law. To be successful in a passing off case, it is clear that businesses need evidence of customers within the UK. PCCM's use in the UK amounted to advertising of the Hong Kong business in in the UK, which isn't enough to establish a  passing off claim in the UK.

It is important that the Court considered the impact of worldwide travel and global electronic communication but was still unpersuaded by the notion of international goodwill. The Court thought that the Internet made it easy to penetrate the minds of people anywhere in the world. However, without a customer base in the UK, you should not be able to prevent others from using a mark for a potentially indefinite period for a similar product or service. In the Court's opinion, with which we agree, this strikes the right balance between the public interest in free competition and protection of the trader against unfair competition.

Sky will be pleased with another successful trade mark case. They have had recent wins against Skype (see our previous post) and Microsoft (over the use of SkyDrive).

 

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