Supreme Court reaffirms that mere reputation is not enough for passing off

In Starbucks (HK) Limited v British Sky Broadcasting Group PLC ([2015] UKSC 31), the Supreme Court has reaffirmed that a claimant in a passing-off claim had to establish that it had actual goodwill in the jurisdiction, which meant having actual customers in the jurisdiction for the goods or services in question.

The facts of this long-running dispute will be well known to trademark practitioners.

Starbucks (HK) Ltd and its affiliates (together, Starbucks) provide an internet protocol television (IPTV) service in Hong Kong under the name NOW TV. The service was launched in 2003 and has become the largest service of its kind in Hong Kong.

In 2012 British Sky Broadcasting Group and its affiliates (together, Sky) announced, and subsequently launched, a new IPTV service in the United Kingdom under the name NOW TV.

Starbucks commenced proceedings seeking to prevent Sky from using the name NOW TV in the United Kingdom on the basis that such use amounted to passing off.

To be successful in a claim for passing off, a claimant must satisfy the three elements of the ‘classic trinity’ test set out in the decision of Reckitt & Colman Products Ltd v Borden Inc ([1990] 1 WLR 491) (the Jif Lemon case):

1. goodwill or reputation attached to the goods or services in the mind of the public that is associated with the get-up of the goods and services and distinguishes the goods or services from those of competitors;

2. a misrepresentation by the defendant to the public which leads or is likely to lead the public to believe that the goods or services offered by him are the goods or services of the claimant; and

3. the claimant has suffered, or is likely to suffer, damage by reason of the erroneous belief engendered by the defendant’s misrepresentation.

Starbucks claim was rejected by the High Court. While the High Court accepted that Starbucks’ NOW TV service had some reputation in the United Kingdom, it had no customers, and therefore, no goodwill, in that country. The High Court’s decision was upheld by the Court of Appeal.

The question to be decided by the Supreme Court on appeal was whether Starbucks needed to establish that its NOW TV service had customers in the United Kingdom be successful in a claim for passing off, or whether it was sufficient for Starbucks to show that its service had a reputation in the jurisdiction.

The Supreme Court rejected the appeal: for Starbucks to be successful in its claim for passing off, it first had to establish that it had actual goodwill in the United Kingdom, which meant having actual customers in the country for its NOW TV services. Starbucks’ business was based in Hong Kong and it had no customers in the United Kingdom and it therefore had no goodwill in that country.

In reaching its decision, the Supreme Court said that it had in mind the balancing exercise underlying the law of passing off, which involved a compromise between the public interest in free competition and the protection of a trader against unfair competition by others. The court ruled that, if it was enough for a claimant merely to establish a reputation, it could give rise to a situation whereby a claimant could prevent the use of a mark in the United Kingdom even though it had no customers or business the jurisdiction and had no intention of developing customers or business there.

The Supreme Court went on to clarify what would constitute sufficient business to give rise to goodwill in the United Kingdom. First, while a claimant must have customers in the United Kingdom, it is not necessary for a claimant to have a physical presence (for example, an office) in the jurisdiction. Secondly, it could be enough for the claimant to show that it had customers in the United Kingdom who obtained the right to receive the claimant’s services abroad. Finally, the Supreme Court stated that goodwill was territorial in nature insofar as an English court would consider the position as it was in the United Kingdom. In this regard, the court cited the Court of Justice of the European Union’s statement in L'Oréal SA v eBay International AG (Case C-324/09) that “the mere fact that a website… is accessible from the territory covered by the trademark is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory”.

The Supreme Court’s decision reaffirms that mere reputation is not sufficient to amount to goodwill, and will be welcomed by overseas companies for clarifying what may constitute sufficient business to give rise to goodwill in the United Kingdom where the company does not have a physical presence or provide its services there.

Nick Bolter and Martin Henshall, Cooley (UK) LLP, London