May 13, 2015

NOW TV: Goodwill trumps Reputation

A recent United Kingdom Supreme Court decision in Starbucks (HK) Limited and another (Appellants) v British Sky Broadcasting Group PLC and others (Respondents) relating to the matter of passing off and the establishment of goodwill has been dismissed on the grounds that the Appellant could not establish goodwill in the UK.

Background

The Appellants are a group of companies based in Hong Kong that have been providing closed circuit Internet Protocol Television (IPTV) under the brand name NOW BROADBAND TV since 2003, and later, NOW, in 2006.

NOW TV developed into the largest payment subscriber operator in Hong Kong, boasting approximately 1.2 million subscribers, offering 200 channels and broadcasting a variety of programmes, some of which were owned by the Appellant and featured the brand tag NOW. The Appellant broadcasted programmes in Mandarin or Cantonese and, to a lesser extent, English. NOW TV generates its revenues predominantly through its subscription service (90%) and advertising (10%).

The service offered, IPTV, is a closed circuit televisual programming transmitted via a dedicated bandwidth and requiring a set top box to receive and decode the signal. Importantly, this service is not available to the UK and no subscriber has registered a UK billing address nor have any subscriptions been paid for with credit or debit cards with billing addresses within the UK. However, there are a number of permanent or habitual Chinese residents who know and are familiar with the Appellants service from their time in Hong Kong.

Residents of the United Kingdom could also gain familiarity with the Appellant's services through their website, their YouTube channel and through on-demand programming available on some international flight entertainment systems.

The Appellant had been looking to expand into the UK and other countries from 2009 and in June 2012, had launched an "app" in anticipation of this. The app had been downloaded 2,200 times by October 2012 in the UK.

The Respondents, British Sky Broadcasting and others, brought another form of IPTV to the market known as Over The Top (OTT) internet protocol television in July 2012. This product typically focussed on catch-up services and video-on-demand services. The Respondents, through a process of marketing, had started with the name Sky Movies NOW in September 2011 and later "Now".

First Instance and Appeal

The Appellant in 2012 brought proceedings against the Respondents to prevent them using the name in relation to IPTV services on the grounds of passing off.

In deciding the case, Arnold J considered the question whether viewers of the Appellant's programmes in the UK could be classed as customers so as to give rise to goodwill. Deciding in the negative, Arnold J dismissed the claim and the argument that identifying a body of people within the UK who associated the NOW TV mark with the Appellants Hong Kong IPTV services was enough to generate goodwill. Further, Arnold J held that these body of people could not be deemed as customers in the UK and the ability to access the Appellant's services in the UK via their website was not sufficient to give rise to goodwill.

The purpose of the Appellant making its content available through its website and YouTube channel was to encourage subscription in Hong Kong. Arnold J added: "[the Appellant's] customers were its viewers in Hong Kong, not viewers in the UK…[its] business had goodwill in Hong Kong but not in the UK."

Given the right to appeal, the Court of Appeal in 2013 also dismissed the appeal on the grounds of Arnold J's findings.

Supreme Court Appeal

The issue of contention in this appeal was whether a goodwill or reputation attached to the goods supplied to the purchasing public by association with the identifying get-up.

At First Instance and Appeal, it has been held that reputation alone, even among a large body of people, was not enough without the requisite goodwill paying customers. The fact that a large number of people associated NOW TV with the Appellant's services in Hong Kong was not enough if the body of people were not paying customers.

The Appellant argued that their claim for passing off was sufficient as they had established a reputation for NOW TV in relation to IPTV services among a large body of people in the UK and even though they were not customers in the UK, they were customers in Hong Kong.

Unless attempting to develop the law in this matter, the argument of the Appellant went against a host of House of Lords decision including, but not limited to Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491 in which Lord Oliver considered goodwill or reputation "in the mind of the purchasing public". Likewise, in Alain Bernardin et Cie v Pavilion Properties Ltd [1967] RPC 581, Pennycuick J held that an injunction against the use of a mark could not be obtained, even though a reputation had been established, because no identifiable business had been done in the UK.

Although some support for the Appellants arguments could be gained from ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465, in which Lockhart J said about the need to have a business or customer base within the UK to claim goodwill that "the hard line cases in England conflict with the needs of contemporary business and international commerce". Lockhart J continued: "it is not necessary…that a plaintiff, in order to maintain a passing off action, must have a place of business or a business presence in Australia, nor is it necessary that his goods are sold here…[it is ] sufficient if his goods have a reputation in the country among persons here, whether residents or otherwise."

Ultimately, the Appellants arguments failed and the appeal was dismissed. The law in relation to passing off was reaffirmed that a claimant must have actual goodwill in the jurisdiction and that goodwill involves the presence of customers.

 

The Judgment in Starbucks (HK) Limited and another (Appellants) v British Sky Broadcasting Group PLC and others (Respondents) is now available on Bailii.

Posted by: in: Case Law, Passing Off

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