Starbucks (HK) Ltd & Anor v British Sky Broadcasting Group PLC & Ors [2015] UKSC 31

Hong Kong-based PCCM operated a NOW TV service and sought to prevent Sky from launching a UK service under the same name. The Supreme Court held that passing off requires actual goodwill, in the form of customers, within the UK jurisdiction—mere reputation is insufficient.

Facts

The appellants, Starbucks (HK) Ltd and PCCW Media Ltd (collectively ‘PCCM’), are part of a Hong Kong-based group which had operated a closed circuit internet protocol television (IPTV) service in Hong Kong since 2003, branded as ‘NOW TV’ from March 2006. By 2012, it was the largest pay TV operator in Hong Kong with around 1.2 million subscribers.

PCCM’s closed circuit service could not be received in the United Kingdom: no set top boxes were supplied there, no UK billing addresses were registered, and PCCM held no Ofcom licence. However, UK residents (particularly Chinese speakers) had become acquainted with NOW TV through (i) exposure when visiting or residing in Hong Kong, (ii) free Chinese-language content on PCCM’s websites since July 2007, (iii) programmes available on PCCM’s YouTube channel, and (iv) some programmes shown as video-on-demand on certain international airlines.

PCCM had been considering UK expansion since 2009 and in June 2012 launched a ‘NOW player’ app in the UK (downloaded by just over 2,200 people by October 2012). On 21 March 2012, the respondents (‘Sky’) announced their intention to launch a new OTT IPTV service in the UK under the name ‘NOW TV’. PCCM commenced passing off proceedings on 19 April 2012.

Arnold J found that PCCM had acquired a modest but more than de minimis reputation among Chinese speakers in the UK, but dismissed the claim on the basis that PCCM had no customers, and therefore no goodwill, in the UK. The Court of Appeal upheld that decision.

Issues

The central issue was whether a claimant in a passing off action must establish actual goodwill, in the form of customers within the jurisdiction, or whether it is sufficient to establish a reputation among a significant section of the public within the jurisdiction. A subsidiary issue was whether PCCM’s exposure to UK viewers via websites, YouTube and international flights gave it customers, and thus goodwill, in the UK.

Arguments

PCCM (appellants)

Mr Silverleaf QC argued that (i) it was sufficient that PCCM had established a reputation for the NOW TV name in connection with its IPTV service among a significant number of people in the UK, even if they were not UK customers; and (ii) PCCM in any event had UK customers by virtue of UK exposure to its programmes on the websites and on international flights. He submitted that the traditional ‘hard line’ requirement of UK customers was inconsistent with the realities of global electronic communication and international travel, and that the question of where goodwill exists is one of fact, not law. He relied on authorities from Ireland, Australia, South Africa and elsewhere.

Sky (respondents)

Mr Hobbs QC supported the conclusions of the courts below, arguing that consistent UK authority required actual goodwill in the form of customers within the jurisdiction. He further contended that section 56 of the Trade Marks Act 1994 indicated that Parliament had determined the limited circumstances in which mere reputation abroad would be protected in the UK (namely, for ‘well-known’ marks under the Paris Convention).

Judgment

The Supreme Court (Lord Neuberger giving the lead judgment, with whom Lord Sumption, Lord Carnwath, Lord Toulson and Lord Hodge agreed) unanimously dismissed the appeal.

The classical test

The Court reaffirmed Lord Oliver’s three-element test in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, requiring (1) goodwill or reputation attached to the goods or services, (2) misrepresentation, and (3) damage. The focus of the appeal was on the first element.

Consistent UK authority

Lord Neuberger traced a consistent line of House of Lords and Privy Council authority from AG Spalding & Bros v AW Gamage Ltd (1915), through Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] AC 217, T Oertli AG v EJ Bowman (London) Ltd [1959] RPC 1, Star Industrial Co Ltd v Yap Kwee Kor [1976] FSR 256, Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, and Reckitt & Colman, supporting the proposition that goodwill is inseparable from the business and exists where the business is carried on. The ratio of Anheuser-Busch Inc v Budejovicky Budvar NP [1984] FSR 413 was that a claimant must establish goodwill in the form of customers within the jurisdiction.

Comparative analysis

The Court reviewed authorities from Ireland, Canada, New Zealand, Australia, South Africa, Hong Kong, Singapore and the United States. While the Australian Federal Court in ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) and the South African Supreme Court in Caterham Car Sales had favoured a reputation-based approach, the Singapore Court of Appeal in Staywell Hospitality [2013] SGCA 65, the Hong Kong Court of Final Appeal in In re Ping An Securities Ltd, and the US Court of Appeals in Grupo Gigante had maintained the traditional position. There was no clear trend away from the ‘hard line’ UK approach.

Reasoning

Lord Neuberger reaffirmed that a passing off claimant must establish actual goodwill in the jurisdiction, involving the presence of clients or customers there. People in the UK who are customers of the claimant only when they go abroad do not suffice. However, the claimant need not have an establishment or office in the UK; it is sufficient if there are persons in the UK who, by booking with or purchasing from an entity in the UK (which may act on the claimant’s behalf), obtain the right to receive the claimant’s service abroad.

The Court endorsed the territorial nature of goodwill, citing Lecouturier v Rey [1910] AC 262 and Ingenohl v Wing On (1927) 44 RPC 343, as well as Professor Wadlow’s analysis in The Law of Passing-off, distinguishing goodwill (a legal proprietary right) from reputation (a factual matter).

The Court considered the balancing exercise underlying passing off between protecting traders and preserving free competition. Allowing mere reputation to suffice would unduly tip the balance toward protection, permitting claimants without UK customers, business or even intention to trade in the UK to monopolise marks (including ordinary English words such as ‘now’). The age of global communication, far from supporting PCCM’s case, made the imbalance more acute. Section 56 of the Trade Marks Act 1994 already provided a route for protecting ‘well-known marks’ without UK goodwill.

Application to the facts

PCCM’s UK viewers via websites, YouTube and international airlines were not customers in the UK because no payment was involved and the availability was essentially promotional advertising for the Hong Kong business. UK residents who had been customers in Hong Kong were customers there, not here. PCCM’s pre-launch plans were not yet in the public domain, so even if a limited ‘pre-trading advertising’ exception exists (a point the Court left open), it would not assist PCCM.

Implications

The decision authoritatively reaffirms the ‘hard line’ English law position on passing off: a claimant must establish actual goodwill, in the form of customers, within the UK jurisdiction. Mere reputation, however substantial, is insufficient. This applies notwithstanding the realities of internet-based services and global electronic communications.

The judgment provides important clarifications: (i) a UK establishment or office is not required, provided the claimant has UK customers (possibly via an agent or representative who books or sells on its behalf for services provided abroad); (ii) people in the UK who are customers only when abroad do not generate UK goodwill; (iii) goodwill is territorial and the English court is concerned with goodwill in its own jurisdiction.

The Court expressly left open whether a substantial pre-launch advertising campaign in the UK, coupled with publicised imminent intention to trade, could generate protectable goodwill (which would involve reconsidering Maxwell v Hogg (1867) LR 2 Ch 307). The Court also declined to rule on Sky’s broader argument that section 56 of the Trade Marks Act 1994 occupies the field for protection of foreign marks based on reputation alone.

The decision is of particular significance to foreign businesses seeking to expand into the UK, internet-based service providers, and intellectual property practitioners. It confirms that reputation generated through digital exposure, free online content or incidental exposure (such as in-flight entertainment) without commercial transactions in the UK does not found a passing off action. Such businesses must instead consider trade mark registration, the ‘well-known marks’ provision under section 56 of the 1994 Act, or take active steps to establish a UK customer base before seeking common law protection.

Verdict: Appeal dismissed. The Supreme Court unanimously held that a claimant in a passing off action must establish actual goodwill, in the form of customers, within the UK jurisdiction. Mere reputation, even among a significant section of the public, is insufficient. As PCCM had no customers and therefore no goodwill in the UK, its passing off claim against Sky failed.

Source: Starbucks (HK) Ltd & Anor v British Sky Broadcasting Group PLC & Ors [2015] UKSC 31