UK Supreme Court upholds law on passing off

Starbucks (HK) and PCCW are a group of companies which, since 2006, have provided internet TV content in Hong Kong under the name NOW TV (top right).

In March 2012 broadcaster Sky announced its plan to launch its own internet TV service under the brand NOW TV (right).

PCCW sued Sky for trade mark infringement and passing off, arguing that its service and programmes had acquired a reputation among a substantial number of Chinese speakers in the UK who were exposed to them, having lived or visited Hong Kong and/or viewed them online or elsewhere.

Both causes of action were dismissed at first instance and on appeal. However the passing off claim was allowed to come before the Supreme Court to determine whether PCCW can succeed relying on international goodwill.

During the two-day hearing in Court, it was clear from the arguments that the key question was whether the Chinese-speaking community in the UK were “customers” and whether there was “use in commerce”.

Michael Silverleaf QC (for PCCW) urged the Court to take a softer approach in light of decisions from other common law countries, while Geoffrey Hobbs QC (for Sky) argued in favour of a hard line approach warning of consequences to commerce in the digital age.

In reaching its decision, the Court (pictured left) reviewed cases from other common law jurisdictions but was not convinced they were a clear departure from the hard line approach adopted by the English courts.

To establish goodwill in a passing off claim in the UK, the Court confirmed that a claimant must show significant goodwill in the UK (namely, actual customers in the UK and not ones who also happen to be its customers abroad); and it is not necessary for the claimant to have an establishment or office in the UK.

The Court held:

• PCCW had customers and goodwill in Hong Kong, but not in the UK;

• The members of the Chinese-speaking community in the UK relied upon by PCCW in its claim were not customers “because there is no payment involved (either directly by the people concerned or indirectly through third party advertising)”;

• PCCW’s service was not “marketed, sold or offered in the UK”, and its activities promoted its Hong Kong business and amounted to advertising in the UK; and

• “[A] reputation acquired through advertising is not enough to found a claim in passing off”

The Court also confirmed that the law of passing off involves striking a balance between the public interest in free competition and IP protection against unfair competition.

It is noteworthy that the Court said (paragraph 49) it can “develop or even to change the law in relation to a common law principle, when it has become archaic or unsuited to current practices or beliefs”, but erred on the side of caution due to risk of legal uncertainty and other consequences to commerce.

Furthermore, the Court (paragraphs 64 to 66) did not rule on the purpose of section 56 of the Trade Marks Act 1994 which protects well-known marks, and whether a claimant who has not yet attracted goodwill in the UK but has spent substantial sums on advertising with a view to market its goods or services in the UK can bring an action for passing off.