Reed Smith Client Alerts

Type: Client Alerts

Introduction On 13 May, the Supreme Court handed down judgment in Starbucks (HK) Limited and another (Appellants) v British Sky Broadcasting Group PLC and others (Respondents) [2015] UKSC 31. The case is significant in that it affirms the need to establish goodwill, as opposed to a mere reputation, among members of the public in the relevant jurisdiction in order to succeed in a passing off claim. Goodwill internationally will not be sufficient.

Facts Starbucks (HK) Limited (Starbucks) (not the famous coffee shop brand) has operated a subscription-based internet TV service in Hong Kong since 2003 under the name ‘NOW TV’. Within Hong Kong, the service is highly successful and Starbucks successfully registered, among others, a community trade mark for the word ‘NOW’ with stylised lines emanating from the ‘O’.

The service has never been provided on a subscription basis to customers in the UK; however, Starbucks estimated that 440,000 Chinese nationals resident in the UK were aware of the TV service through either (i) having used the service while themselves resident in Hong Kong; (ii) content available for free on NOW TV’s YouTube channel; (iii) free content available via websites operated by Starbucks; or (iv) NOW TV content being shown on various international airlines.

In July 2012, British Sky Broadcasting Group (BSkyB) launched an internet protocol TV service in the UK under the name NOW TV. Starbucks commenced proceedings for trade mark infringement and passing off in April 2012, in an attempt to prevent BSkyB from using the name NOW TV. The trade mark claim was dismissed at first instance and was not pursued in the Court of Appeal.

Judgments at first instance and in the Court of Appeal In the lower court1 Arnold J found, as a matter of fact, that although the Starbucks’ NOW TV service enjoyed a great deal of goodwill in Hong Kong, it had only developed a modest reputation among a section of the public in the UK. It had no customers in the UK, the NOW TV service was not marketed to the UK, and subscription was not possible from the UK, so there could be no goodwill in this jurisdiction.

Starbucks’ appeal was dismissed in the Court of Appeal2 for reasons given by Sir John Mummery. The court upheld the first instance decision, stating that goodwill within the jurisdiction of the court was required, and it was not enough that Starbucks had acquired goodwill in Hong Kong. The ability of the public to access free content online (e.g. via the YouTube channel) was not sufficient to establish an identifiable goodwill with a customer base in the UK. Generating goodwill would instead rely on “making, or at least attempting to make, some kind of connection with customers in the market with a view to transacting business and repeat business with them”.

The fact that Starbucks had been in confidential talks with a provider around launching their service in the UK was not sufficient to establish goodwill. Rather, Starbucks would have had to promote and publicise or advertise to a customer base in the UK in order to establish protectable goodwill.

Arguments raised before the Supreme Court Before the Supreme Court, Starbucks argued that, as a result of the proliferation of electronic communication and cheap travel, it would be inconsistent with commercial reality to treat reputation or goodwill as limited to jurisdictions where there was a business with customers for a product or service, and not capable of extending to services where a mark is simply associated with a product or service as a matter of reputation. To the extent that finding in favour of Starbucks would be inconsistent with previous House of Lords’ judgments and require a departure from them, Starbucks argued that such a departure should be made to develop the law.

Judgment of the Supreme Court Lord Neuberger, delivering the judgment of the Supreme Court, started by reaffirming that in order for a successful claim in passing off to be brought, it would be necessary for a claimant to establish that it has goodwill involving the presence of clients or customers in the jurisdiction for the products or services in question. Where the claimant’s business is abroad, people who are in the jurisdiction and are not customers of the claimant in the jurisdiction will not be capable of generating goodwill, even if they might be customers of the claimant when they go abroad.

Tackling the submission that the law should be developed or changed, the court stated that “we should bear in mind that changing the common law sometimes risks undermining legal certainty, both because a change in itself can sometimes generate uncertainty and because change can sometimes lead to other actual or suggested consequential changes”.

The court examined the evolution of case law in other common law jurisdictions, and found that whereas the courts of Singapore and the United States adopted the approach reaffirmed by Lord Neuberger, Australia and South Africa seemed to support the approach advocated by the Appellants. However, there was not enough of a ‘clear trend’ in the common law courts outside the UK to justify moving away from the current position.

Laying down guidelines as to what would amount to goodwill, Lord Neuberger stated that:

  • The line of authorities make clear that mere reputation was not enough
  • The claimant must show customers in the jurisdiction, as opposed to people in the jurisdiction who happen to be customers when they are abroad
  • It is not necessary that the claimant actually has an establishment or office in the UK
  • If the claimant could show that there were people in the jurisdiction who, by booking with or purchasing from an entity in this country, obtained the right to receive the claimant’s services abroad, this could be enough to establish goodwill. The entity need not be a branch or part of the claimant.

This decision appears to put beyond doubt (if any existed) that establishing goodwill requires more than bare reputation. The decisions in the case accord with common sense and avoid the risk that anyone with a reputation in this jurisdiction may, without more, claim an effective monopoly in a name. In light of the global reach of the internet, an alternative conclusion would seem unworkable.


  1. [2012] EWHC 3074 (Ch)
  2. [2013] EWCA 1465

 

Client Alert 2015-124