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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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The Season of Goodwill Comes Early for Sky

“Does a claimant, who is seeking to maintain an action in passing off, only need to establish a reputation among a significant section of the public within the UK, or
does the claimant also have to establish a business with customers in the UK?” That is the question the UK Supreme Court recently had to answer in a case (Starbucks (HK)
Ltd v British Sky Broadcasting Group PLC (2015) UKSC 31), involving internet protocol television (IPTV) being marketed under two similar trade marks.

By way of a reminder, to establish passing off in the UK, the claimant has to prove the holy trinity of:

1.  Goodwill or reputation in the UK attached to the goods or services under its mark;
2.  A misrepresentation, which has been made by the defendant to the public; and
3.  Damage or a likelihood of damage to the claimant.
Background to the Proceedings

Starbucks (HK) Ltd and its related company are two companies within a substantial media group based in Hong Kong headed by PCCW Ltd (the Supreme Court collectively referred to them as “PCCM”). (Note that Starbucks (UK) has


no connection at all with the US based coffee retail corporation).

Since 2003, PCCM has provided a “closed circuit” IPTV service in Hong Kong. Between 2003 and 2006, this service was sold in Hong Kong under the trade mark NOW BROADBAND TV and since March
2006, under the trade mark NOW TV. By
2012, NOW TV had become the largest pay TV operator in Hong Kong, covering over half the households. As a result, PCCM
had in excess of 1.2 million subscribers and 200 channels. PCCM’s programmes are in Mandarin or Cantonese but
the channel also carries some English language programmes (including Sky News).

PCCM didn’t have an Ofcom license which would have permitted it to broadcast in the UK, so it had no UK customers. However, a number of Hong Kong ex pats living in the UK were aware of the NOW TV service through exposure to it when living or visiting Hong Kong. The NOW TV service was also advertised on YouTube, the Chinese language content was accessible free of charge via PCCM’s website and its service had been available as videos-on-demand on various
international airlines, three of which flew to the UK (but none of whose in-flight

magazines made reference to NOW TV). PCCM had also had some confidential negotiations with a prospective UK partner in 2012 with a view to launching their NOW TV service in the UK in March
2013. PCCM had even launched a NOW player “app” in the UK, both on its website and via the Apple App Store to “warm up” the market for the launch on the platform of its proposed UK partner. The app and the channels were to be targeted at the Chinese-speaking population in the UK.
By October 2012, just 2,200 people in the
UK had downloaded the app.

British Sky Broadcasting Group PLC (“BSkyB”), together with other companies in its group, is the UK’s largest pay TV broadcaster. In March 2012, BSkyB publicly announced an intention to
launch a new “over the top” IPTV service under the trade mark NOW TV in the UK. A beta form launch subsequently took place in mid-July 2012.

PCCM initiated legal proceedings in April
2012 to stop BSkyB from using NOW TV, NOWTV.com and the NOW TV logo (see image above), in the UK on the grounds that the use of these marks amounted
to trade mark infringement (of its
CTM Registration for a now device; CTM
4504891, see page 3) and passing off.

High Court  & Court  of Appeal
Decisions

Mr Justice Arnold, sitting in the English High Court, concluded inter alia that PCCM’s CTM registration was invalid for non-distinctiveness and descriptiveness and PCCM’s claim for passing off failed. Here, therefore, the decision of OHIM
not to take into account use subsequent to a mark’s registration was criticised by the General Court.
Arnold (J) held that the passing off claim failed because PCCM’s NOW TV service








hadn’t generated protectable goodwill in the UK; PCCM didn’t have any UK customers. PCCM’s customers were its viewers in Hong Kong and its primary purpose in making programme content available via YouTube, on its website and on international airlines was to promote its Hong Kong business.

PCCM was given permission to appeal
to the Court of Appeal, which dismissed the appeal, agreeing with Justice Arnold’s analysis of both the trade mark infringement and passing off claims.

The Supreme Court subsequently granted PCCM permission to appeal against the Court of Appeal’s decision as regards the passing off claim.

Supreme Court’s Decision

Lord Neuberger delivered a unanimous decision, dismissing PCCM’s appeal and upholding the High Court and Court of Appeal decisions as regards the passing off claim.

Lord Neuberger conducted a thorough review of UK case law in the area of goodwill, compared this with case law
in other common law jurisdictions
on the same issue and reaffirmed the current position in the UK, namely that PCCM needed UK customers in order
to have protectable goodwill here. Mere reputation acquired through advertising in the UK is not enough, although he made the obiter observation that in certain circumstances, “public advertising with an actual and publicised imminent intention
to market, coupled with a reputation in the UK”, may also be sufficient to generate protectable goodwill. However, this type of case would be an exception and would
have to be justified by commercial fairness rather than principle.

PCCM’s UK launch plans, whilst 

reasonably well-advanced when BSkyB launched their NOW TV service, were insufficient to establish goodwill in the UK since they were not in the public domain.

Lord Neuberger also reaffirmed that goodwill may be established if UK customers booked the claimant’s services even though they are based abroad. The claimant in a passing off action therefore does not need an office or establishment in the UK in order to establish goodwill.
Lord Neuberger accepted that whilst PCCM’s case “is not without force” and the common law “can adapt itself to practical and commercial realities, when it has become archaic or unsuited to current practices or beliefs”, it was not proper to extend the law to allow reputation not generated by


UK customers to constitute protectable goodwill since doing so would undermine legal certainty. If PCCM’s claim was allowed to succeed, then “it would mean that a claimant could shut off the use of a
mark in this jurisdiction even though it had no customers or business here, and had not spent any time or money in developing a market in
the UK - and did not intend to do so”.

Further, Lord Neuberger made the obiter observation that if, PCCM’s case were correct, it would be hard to see what purpose Section 56 of the UK Trade Marks Act (which enshrines Article 6bis
of the Paris Convention) protecting “well known” marks would have if the courts would protect (under the law of passing off) marks that have a lesser degree of
fame.

Comment

The outcome of this case is not a surprise; PCCM were attempting to overturn 100 years of UK case law which supported BSkyB’s position. However, the Supreme Court’s ruling is a salutary reminder that if a passing off action is to get off the ground in this country, the claimant must first demonstrate significant UK based goodwill in the mark in the form of UK customers. Having a reputation in the mark in the UK,
but no customers in this country, is not good enough. In the UK, goodwill is territorial not international.

This case also serves as a warning that the courts are unlikely to extend or change the law on passing off in this country, if they continue to believe that legal certainty will be undermined.

“Does a claimant, who is seeking to maintain an action in passing off, only need to establish a reputation among a significant section of the public within the UK, or does the claimant also have to establish a business with customers in the UK?” That is the question the UK Supreme Court recently had to answer in a case (Starbucks (HK) Ltd v British Sky Broadcasting Group PLC (2015) UKSC 31), involving internet protocol television (IPTV) being marketed under two similar trade marks.

By way of a reminder, to establish passing off in the UK, the claimant has to prove the holy trinity of:

1.  Goodwill or reputation in the UK attached to the goods or services under its mark;
2.  A misrepresentation, which has been made by the defendant to the public; and
3.  Damage or a likelihood of damage to the claimant.

Background to the Proceedings

Starbucks (HK) Ltd and its related company are two companies within a substantial media group based in Hong Kong headed by PCCW Ltd (the Supreme Court collectively referred to them as “PCCM”). (Note that Starbucks (UK) has no connection at all with the US based coffee retail corporation).

Since 2003, PCCM has provided a “closed circuit” IPTV service in Hong Kong. Between 2003 and 2006, this service was sold in Hong Kong under the trade mark NOW BROADBAND TV and since March 2006, under the trade mark NOW TV. By 2012, NOW TV had become the largest pay TV operator in Hong Kong, covering over half the households. As a result, PCCM had in excess of 1.2 million subscribers and 200 channels. PCCM’s programmes are in Mandarin or Cantonese but the channel also carries some English language programmes (including Sky News).

PCCM didn’t have an Ofcom license which would have permitted it to broadcast in the UK, so it had no UK customers. However, a number of Hong Kong ex pats living in the UK were aware of the NOW TV service through exposure to it when living or visiting Hong Kong. The NOW TV service was also advertised on YouTube, the Chinese language content was accessible free of charge via PCCM’s website and its service had been available as videos-on-demand on various international airlines, three of which flew to the UK (but none of whose in-flight magazines made reference to NOW TV). PCCM had also had some confidential negotiations with a prospective UK partner in 2012 with a view to launching their NOW TV service in the UK in March 2013. PCCM had even launched a NOW player “app” in the UK, both on its website and via the Apple App Store to “warm up” the market for the launch on the platform of its proposed UK partner. The app and the channels were to be targeted at the Chinese-speaking population in the UK.

By October 2012, just 2,200 people in the UK had downloaded the app.

British Sky Broadcasting Group PLC (“BSkyB”), together with other companies in its group, is the UK’s largest pay TV broadcaster. In March 2012, BSkyB publicly announced an intention to launch a new “over the top” IPTV service under the trade mark NOW TV in the UK. A beta form launch subsequently took place in mid-July 2012.

PCCM initiated legal proceedings in April 2012 to stop BSkyB from using NOW TV, NOWTV.com and the NOW TV logo (see image above), in the UK on the grounds that the use of these marks amounted to trade mark infringement (of its CTM Registration for a now device; CTM 4504891, see page 3) and passing off.

High Court  & Court  of Appeal Decisions

Mr Justice Arnold, sitting in the English High Court, concluded inter alia that PCCM’s CTM registration was invalid for non-distinctiveness and descriptiveness and PCCM’s claim for passing off failed. Here, therefore, the decision of OHIM not to take into account use subsequent to a mark’s registration was criticised by the General Court.

Arnold (J) held that the passing off claim failed because PCCM’s NOW TV service hadn’t generated protectable goodwill in the UK; PCCM didn’t have any UK customers. PCCM’s customers were its viewers in Hong Kong and its primary purpose in making programme content available via YouTube, on its website and on international airlines was to promote its Hong Kong business.

PCCM was given permission to appeal to the Court of Appeal, which dismissed the appeal, agreeing with Justice Arnold’s analysis of both the trade mark infringement and passing off claims.

The Supreme Court subsequently granted PCCM permission to appeal against the Court of Appeal’s decision as regards the passing off claim.

Supreme Court’s Decision

Lord Neuberger delivered a unanimous decision, dismissing PCCM’s appeal and upholding the High Court and Court of Appeal decisions as regards the passing off claim.

Lord Neuberger conducted a thorough review of UK case law in the area of goodwill, compared this with case law in other common law jurisdictions on the same issue and reaffirmed the current position in the UK, namely that PCCM needed UK customers in order to have protectable goodwill here. Mere reputation acquired through advertising in the UK is not enough, although he made the obiter observation that in certain circumstances, “public advertising with an actual and publicised imminent intention to market, coupled with a reputation in the UK”, may also be sufficient to generate protectable goodwill. However, this type of case would be an exception and would have to be justified by commercial fairness rather than principle.

PCCM’s UK launch plans, whilst reasonably well-advanced when BSkyB launched their NOW TV service, were insufficient to establish goodwill in the UK since they were not in the public domain.

Lord Neuberger also reaffirmed that goodwill may be established if UK customers booked the claimant’s services even though they are based abroad. The claimant in a passing off action therefore does not need an office or establishment in the UK in order to establish goodwill.

Lord Neuberger accepted that whilst PCCM’s case “is not without force” and the common law “can adapt itself to practical and commercial realities, when it has become archaic or unsuited to current practices or beliefs”, it was not proper to extend the law to allow reputation not generated by UK customers to constitute protectable goodwill since doing so would undermine legal certainty. If PCCM’s claim was allowed to succeed, then “it would mean that a claimant could shut off the use of a mark in this jurisdiction even though it had no customers or business here, and had not spent any time or money in developing a market in the UK - and did not intend to do so”.

Further, Lord Neuberger made the obiter observation that if, PCCM’s case were correct, it would be hard to see what purpose Section 56 of the UK Trade Marks Act (which enshrines Article 6bis of the Paris Convention) protecting “well known” marks would have if the courts would protect (under the law of passing off) marks that have a lesser degree of fame.
 
Comment

The outcome of this case is not a surprise; PCCM were attempting to overturn 100 years of UK case law which supported BSkyB’s position. However, the Supreme Court’s ruling is a salutary reminder that if a passing off action is to get off the ground in this country, the claimant must first demonstrate significant UK based goodwill in the mark in the form of UK customers. Having a reputation in the mark in the UK, but no customers in this country, is not good enough. In the UK, goodwill is territorial not international.

This case also serves as a warning that the courts are unlikely to extend or change the law on passing off in this country, if they continue to believe that legal certainty will be undermined.