Case Note

• Author: SAW Cheng Lim LLB (Hons) (National University of Singapore), LLM (Cambridge); Advocate and Solicitor (Singapore); Associate Professor, School of Law, Singapore Management University.
• Published date: 01 December 2015
• Date: 01 December 2015

GOODWILL HUNTING IN PASSING OFF

England Retains the “Hard Line” for NOW

Starbucks (HK) Ltd v British Sky Broadcasting Group plc

[2015] WLR 2628; [2015] UKSC 31

This recent UK Supreme Court decision has confirmed that the “hard line” perspective to interpreting “goodwill” in the common law action for passing off remains good law in England. There are, however, subtle hints in the judgment that going forward, the court may be prepared to consider and endorse (pragmatic) exceptions or extensions to the “hard line” in appropriate cases.

I. Introduction

1 It is generally accepted in the common law world that there are essentially two schools of thought —“hard line” and “soft line”, respectively — in the interpretation of the goodwill element in a passing off action brought by a foreign trader.1 The former approach requires the foreign trader to demonstrate that he has a place of business (and hence customers) in the jurisdiction, whereas the latter approach advocates that the existence and extent of a trader's goodwill — which is ultimately a question of fact — should not be delineated by territorial confines.

2 Some years ago, this author had expressed the hope that the highest court in England would, in an appropriate case, reconsider the strict “hard line” approach and jettison it in favour of the other approach.2

3 Unfortunately, this is not to be, as the UK Supreme Court (the “Court”) in Starbucks (HK) Ltd v British Sky Broadcasting Group plc3

(“Starbucks”) recently reaffirmed the view that the “hard line” approach to interpreting goodwill — save in one limited respect — remains very much alive and well in the law of passing off in England.

II. The factual background

4 The facts in Starbucks are briefly these. The appellant claimants, referred to compendiously as “PCCM” by the Court, are members of a group of companies based in Hong Kong that provided internet protocol television (“IPTV”) services in that country under its present name, NOW TV. There is no dispute that the claimants' business enjoyed significant goodwill in Hong Kong, given that they had a large pool of subscribers and spent substantial sums on marketing there. The majority of the programmes carried on NOW TV were in Mandarin or Cantonese.

5 PCCM did not carry on business in the UK. Residents in the UK could not subscribe to or pay for PCCM's IPTV services and PCCM did not, in any event, hold a broadcasting licence in the country. Despite this, evidence was led at trial indicating that a number of Chinese-speaking residents in the UK were aware of the NOW TV service by 2012 — for example, through exposure to the service when residing in or visiting Hong Kong, the accessibility of programmes free of charge via PCCM's own website and YouTube channel, as well as the availability of a number of programmes as inflight entertainment on three international airlines that serviced the UK.

6 From 2009, however, PCCM had harboured plans to expand its NOW TV subscription service into the UK in collaboration with a local partner. It then launched, as part of preparations for its UK debut, a NOW player “app” in the UK in June 2012, targeting the Chinese-speaking community in the country. By October 2012, more than 2,200 people in the UK had downloaded the app.

7 Meanwhile, the respondent defendants (collectively referred to as “Sky”) had, on 21 March 2012, announced their intention to launch a similar IPTV service in the UK under the identical name NOW TV. This launch was subsequently effected in beta form in mid-July 2012. PCCM decided to initiate passing off proceedings against Sky on 19 April 2012.

8 The trial judge, Arnold J, dismissed PCCM's claim.4 Although his Lordship held that PCCM did acquire more than a de minimis reputation in the UK amongst members of the Chinese-speaking community, this body of people did not qualify as PCCM's customers for its IPTV service

in the UK and therefore PCCM did not enjoy any protectable goodwill in the jurisdiction to support its claim in passing off. In short, viewers of PCCM's programmes in the UK were clearly aware of its IPTV service but they were not PCCM's customers in so far as satisfying the goodwill element in passing off was concerned. PCCM's appeal on the passing off claim was also dismissed by the English Court of Appeal, which essentially agreed with Arnold J's analysis.5 PCCM then brought this appeal before the Court.

III. The court's decision

9 As a preliminary matter, it was “common ground” that to succeed in an action for passing off, the claimant had to establish its claim — including the first element of goodwill in the “classical trinity”—“as at the inception of the use complained of”.6 In so far as PCCM's claim was concerned, the relevant date was 21 March 2012, which was when Sky went public about its imminent intention to launch its IPTV service in the UK under the name NOW TV. Further, the only issue on appeal concerned the element of goodwill, since the trial judge had already accepted that PCCM did establish, on the facts, the second and third elements of the “classical trinity”.

10 Counsel for PCCM sought to persuade the Court that it was sufficient for a claimant in a passing off action to establish a “reputation”— as opposed to “goodwill”— among a significant section of the public in the jurisdiction.7 This argument had earlier been rejected by both the trial judge as well as the Court of Appeal. The Court embarked on a careful and extensive survey of decisions from Ireland,8 Canada,9 New Zealand,10 Australia,11 South Africa,12 Hong Kong13 and Singapore,14 before coming to the view that this was an area where there was conflicting jurisprudence in the common law world.

11 In dismissing PCCM's appeal, Lord Neuberger (who delivered the judgment on behalf of a unanimous Court) reaffirmed the “hard line” position in the English law of passing off thus:15

[A] claimant in a passing off claim must establish that it has actual goodwill in this jurisdiction, and that such goodwill involves the presence of clients or customers in the jurisdiction for the products or services in question. And, where the 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. [emphasis added]

12 His Lordship observed that the “hard line” view of passing off — that mere association by people in the jurisdiction of the mark/get-up with a foreign trader's goods/services without an actual customer base in the jurisdiction will not suffice — had been consistently adopted by the highest courts in England (namely, the House of Lords and Privy Council) in a string of precedents.16 There was also much to be said for maintaining the status quo in the case law going forward, in particular so as not to undermine legal certainty.17

13 Lord Neuberger further went on to clarify the issue as to what — quite apart from mere “reputation”— constitutes “sufficient business” to give rise to a protectable goodwill. In his Lordship's view, “[t]he 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” [emphasis added].18 Crucially, there must be customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customers in the overseas jurisdiction where the claimant's business is carried on. An example of the former is where people in the jurisdiction had booked with, or purchased from, an entity in the jurisdiction for the right to receive the claimant's services abroad. In such an instance, his Lordship explained that the entity in

question “need not be a part or branch of the claimant”—“it can be someone acting for or on behalf of the claimant” [emphasis added].19

14 One significant reason that contributed to the Court's reluctance to develop the English law of passing off further (by extending the ambit of the goodwill element) was the existence and availability of the “well-known marks” provisions in statutory trade mark law.20 For example, a foreign trader who owns and uses a mark abroad and has a huge reputation in the UK (or an “international reputation” for that matter) can surely seek protection under s 56 of the UK Trade Marks Act 199421 (a provision which gives effect to Art 6bis of the Paris Convention for the Protection of Industrial Property),22 even if the claimant cannot establish that it has any customers or sufficient goodwill in the UK. Lord Neuberger expressed concern that a provision such as s 56 might well become redundant if PCCM's submission on “reputation”, as opposed to “goodwill”, were accepted as good law, but his Lordship felt it unnecessary to rule on the point.23

15 Finally, the Court, in reference to the decision of the Singapore Court of Appeal in Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc24 (“Staywell”), also left open the question whether a passing off claim may be brought by a claimant who has not yet attracted goodwill in the jurisdiction but has launched a substantial advertising campaign therein, making it clear that it will imminently be marketing its goods or services in the jurisdiction under the mark in question. This was precisely the question that Sundaresh Menon CJ had examined in some

detail in the Staywell decision.25 In any event, even if the Court had agreed with this limited exception to the “hard line” perspective, the result in Starbucks would not have been any different, because “PCCM's plans for extending its service into the UK under the NOW TV mark [though quite well advanced when Sky launched their NOW TV service] … were still not in the public domain”.26

16 In the result, the Court concluded that PCCM's business was clearly based in Hong Kong and that it had no customers — and therefore...