NOW That’s NOT What I Call Passing Off

It seems that we are always hearing about the Internet breaking down traditional barriers, globalisation and the end of borders. So perhaps nobody should be surprised that the claimants in Starbucks (HK) Ltd v British Sky Broadcasting Group PLC [2015] UKSC 31 thought that the fact that they had long used the term NOW TV in Hong Kong meant that the use of that same branding term by Sky was passing off. But the courts here took a different view and, on 13 May, the Supreme Court has put the position clearly in a (relatively) simple judgment (a mere 68 paragraphs) on the topic.

The appeal raised the issue of whether someone seeking to maintain an action in passing off need only establish a reputation among a significant section of the public within the jurisdiction, or whether a claimant must also establish a business with customers within the jurisdiction. Although the trial court and the Court of Appeal were clearly against the claimant’s, the issue was not quite as straightforward as one might think. As Lord Neuberger noted, ‘there is conflicting jurisprudence in the common law world, and [the issue] is of particularly acute significance in the age of global electronic communication’. 

Background 

The claimants had provided a closed circuit IPTV service in Hong Kong since 2003. IPTV, or Internet protocol television, is a way of delivering TV or video content over the Internet. IPTV can be ‘closed circuit’ or ‘over the top’. Since 2006 the claimant’s service had been marketed and delivered under the name ‘NOW TV’. By 2012, NOW TV had become the largest pay TV operator in Hong Kong, with around 1.2 million subscribers, covering over half the households in Hong Kong. People in the UK cannot receive this closed circuit service, and no subscribers for its Hong Kong IPTV service have been recruited in the UK. However, a number of Chinese speakers permanently or temporarily resident in the UK in 2012 were aware of the NOW TV service through exposure to it when residing in or visiting Hong Kong, or from viewing NOW TV programmes on YouTube and other websites in the UK. The claimants had been considering expanding the NOW TV subscription service internationally since 2009 and, in June 2012, launched a NOW player ‘app’ in the UK on a website and via the Apple Store, targeted at the Chinese-speaking population in the UK. Meanwhile, in March 2012, the Sky announced that they intended to launch a new over the top IPTV service under the name ‘NOW TV’. The service was launched in beta form in mid-July 2012.

In April 2012, the claimants began proceedings seeking to prevent Sky from using the name NOW TV in connection with Sky’s IPTV service in the UK on the grounds that the use of the name amounted to ‘passing off’. At first instance, Arnold J found that a substantial number of Chinese speakers permanently or temporarily resident in the UK were acquainted with the Hong Kong service and that it had acquired a reputation amongst members of the Chinese-speaking community in the UK; this reputation was modest but more than de minimis. However, the judge he held that the key question was whether the viewers of programmes in the UK were ‘customers’ and that, for the purposes of passing off, it was not enough for the claimants to establish a reputation among a significant number of people in this country if they had no goodwill in this country. Arnold J dismissed the claim. An appeal to the Court of Appeal was also dismissed.

Judgment

The Supreme Court unanimously dismissed the appeal.

Lord Neuberger, with whom the other justices agreed, stated that courts in the UK have consistently held that it is necessary for a claimant to have actual goodwill, in the sense of a customer base, in this jurisdiction before it can satisfy this requirement for the law of passing off [20-25]. Where a claimant’s business is abroad, people who are in the jurisdiction, but who are not customers of the claimant in the jurisdiction, will not do, even if they are customers of the claimant when they go abroad.

As Lord Neuberger put it:

52. As to what amounts to a sufficient business to amount to goodwill, it seems clear that mere reputation is not enough… The claimant must show that it has a significant goodwill, in the form of customers, in the jurisdiction, but it is not necessary that the claimant actually has an establishment or office in this country. In order to establish goodwill, the claimant must have customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customers elsewhere. Thus, where the claimant’s business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad. However, it could be enough if the claimant could show that there were people in this jurisdiction who, by booking with, or purchasing from, an entity in this country, obtained the right to receive the claimant’s service abroad. And, in such a case, the entity need not be a part or branch of the claimant: it can be someone acting for or on behalf of the claimant. …

54. It would be wrong to suggest that there is a rule of law that, whatever the point at issue, goodwill has to be divided between jurisdictions, not least because (unsurprisingly) we have not had an exhaustive analysis of all the circumstances in which goodwill may have to be considered by the court. However, it seems to me that, when it comes to a domestic, common law issue such as passing off, an English court has to consider the factual position in the UK. That is well illustrated by the fact that, even if [the claimants’] argument was accepted and it was enough for a claimant merely to establish a reputation, that reputation would still have to be within the jurisdiction.

55. The notion that goodwill in the context of passing off is territorial in nature is also supported by refusal of judges to accept that a court of one jurisdiction has power to make orders in relation to the goodwill in another jurisdiction. 

He went on to acknowledge that the law of passing off involves striking a balance between the public interest in free competition and the protection of the trader against unfair competition, stating (at [63]):

I am unpersuaded that [the] case is strengthened by the fact that we are now in the age of easy worldwide travel and global electronic communication. While I accept that there is force in the point that the internet can be said to render the notion of a single international goodwill more attractive, it does not answer the points made [earlier]. Further, given that it may now be so easy to penetrate into the minds of people almost anywhere in the world so as to be able to lay claim to some reputation within virtually every jurisdiction, it seems to me that the imbalance between protection and competition which [the claimants’] case already involves … would be exacerbated. The same point can be made in relation to increased travel: it renders it much more likely that consumers of a claimant’s product or service abroad will happen to be within this jurisdiction and thus to recognise a mark as the claimant’s. If [the claimants’] case were correct, 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 here – and did not even intend to do so. 

One interesting point arises on the international issue. As Lord Neuberger points out, an examination of the approach in other common-law jurisdictions suggests that the Singapore courts follow the approach of the UK courts, whereas the courts of Australia and South Africa seem to favour the approach supported by the claimants. The possibility therefore arises that completely conflicting approaches may stymie a valid local UK ‘brand’, such as NOW TV, from expanding in many jurisdictions – not just the home jurisdiction of some similarly named brand. So, despite the Sky success here, the onus on companies seeking to establish an Internet-based product to find a universally safe name may remain.