It's NOW or never: BSkyB wins before Court of Appeal

On November 15 2013 the Court of Appeal handed down it decision in Starbucks (HK) Limited v British Sky Broadcasting Group Plc ([2013] 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 trademark (CTM) or any goodwill in the United Kingdom that would give the claimant the right to prevent BSkyB from using the name NOW TV in relation to its internet protocol TV (IPTV) service. The appeal considered the requirement of distinctiveness for a CTM to be valid and whether a reputation built up outside the United Kingdom could give rise to goodwill in the country on which to base a claim for passing off.

Starbucks (HK) Limited, a Hong Kong-based media group (unrelated to the coffee shop chain), provides an IPTV service in Hong Kong under the name NOW TV with some of the programmes accessible in the United Kingdom via the Internet.   

Starbucks owned a 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 IPTV service in the United Kingdom under the name NOW TV. This prompted Starbucks to commence proceedings in the United Kingdom 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 the Community Trademark Regulation (207/2009) 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 goodwill in the United Kingdom. In addition, the claimant's preparations for the launch of its own IPTV service under the name Now TV in the United Kingdom did not give rise to a protectable goodwill. Starbucks appealed.

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 judgment was delivered by Sir John Mummery (who also delivered the leading judgments in the recent decisions relating to Cadbury's trademark application for the colour purple and Mattel's ‘Scrabble tile’ mark).

BSkyB claimed that Starbucks' CTM was invalid. It relied on Articles 7(1)(b) and 7(1)(c) of the regulation. For the purposes of the appeal, it was agreed that invalidity under Article 7(1)(c) also resulted in invalidity under Article 7(1)(b).

Article 7(1)(c) provides that "trademarks 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 trademark 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 had not made 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.

With regard to passing off, the principal issue was whether Starbucks had "customers" of its IPTV service in the United Kingdom 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 (1984) which held that, even though the claimants' beer was on sale to servicemen at US military bases (and a few other places) in the United Kingdom, this did not amount to the beer being available in the United Kingdom; the claimants had no customers and were not carrying on a business in the country. As such, Anheuser Busch had no protectable goodwill in the United Kingdom.

In order to claim a protectable goodwill in the United Kingdom, Starbucks relied on:  

1. access in the United Kingdom to its Chinese language TV programmes on its website, ‘now-tv.com’;
2. access to its videos on YouTube under the NOW TV brand which had been viewed around 238,000 times; and
3. availability of a small number of its programmes on video services on various international airlines flying to and from the United Kingdom.

Starbucks also showed that it had plans to expand its television service to the United Kingdom.

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 United Kingdom were not sufficient to establish goodwill in the country, and confirmed that the legal requirement to succeed in a claim of passing off is having goodwill and customers in the United Kingdom. Even in circumstances where there is wide accessibility to the internet, access in the United Kingdom to programmes emanating from Hong Kong is not sufficient to establish goodwill and a customer base in the United Kingdom. Further, Starbuck's plans were not enough to establish goodwill in the United Kingdom. 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 is able to promote and continue to provide its internet TV service under the NOW TV brand.

It is not known 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 United Kingdom 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 (2008), in which he commented that it might be salutary to review the requirement for customers to be in the United Kingdom 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 United Kingdom, but without a business in the country, may not be able to establish a sufficient goodwill in the United Kingdom 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 Trademarks Act 1994, which gives the owner of a trademark that is famous outside the United Kingdom (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.

Joel Smith and Laura Deacon, Herbert Smith Freehills LLP, London