The Supreme Court was recently asked to extend the law of passing off, so that a claim could be brought on the basis of reputation, rather than goodwill.
Both parties, Starbucks (HK) Limited and British Sky Broadcasting Plc, offer paid internet television services under their respective marks.
Starbucks (no relation to the coffee chain) had operated its service in Hong Kong since 2006. Legal proceedings began in 2012 following Sky’s announcement that it was to launch its own internet TV service. At the time the Starbucks service was not available in the UK but the trial judge found that UK residents were acquainted with the service due to the free Chinese-language content provided over the internet, its YouTube channels with and some programmes being shown on airlines. The trial judge concluded that Starbucks enjoyed a reputation in its NOW trade mark in the UK.
The question to be decided by the Supreme Court was whether reputation alone could be the basis for a passing off action in the UK.
Supreme Court decision
Lord Neuberger, following a detailed review of the competing case law presented by the parties, confirmed that a claimant in a passing off action must establish that it has actual goodwill in the UK, and that such goodwill involves the presence of clients or customers in the UK for its goods or services.
So what constitutes goodwill in the UK? The claimant must have customers in the UK, as opposed to people in the jurisdiction who happen to be customers elsewhere. The claimant need not be based, or have an office, in the UK. If a claimant operates outside of the UK, it is not enough for it to show that UK residents are its customers when they are outside of the UK. It may, however, be enough if the claimant can show that people in the UK purchase its goods or services from the UK, for use overseas.
As Starbucks had no customers in the UK, it could not have goodwill in the UK, despite having an established reputation among a significant number of people. These people were not customers because there was no payment involved and the availability of the service was only intended to promote the business in Hong Kong. Advertising a service in the UK is not a sufficient basis for a claim of passing off.