Hong Kong media group has no protectable goodwill in the UK; its Community trade mark is ‘now’ invalid

Authors: Joel Smith and Laura Deacon (Herbert Smith Freehills)

Starbucks (HK) Limited and Another v British Sky Broadcasting Group Plc and others [2013] EWCA Civ 1465, Court of Appeal, England and Wales, 15 November 2013

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpt257, first published online: January 26, 2014

The Court of Appeal unanimously upheld the High Court's decision that, based on the evidence, the claimant (a Hong Kong-based media group) did not have a valid Community trade mark (CTM) or any goodwill in the UK that would give it the right to prevent BSkyB from using the name ‘NOW TV’ in relation to BSkyB's Internet protocol TV service. The appeal considered the requirement of distinctiveness for a CTM to be valid and whether a reputation established outside the UK could give rise to goodwill in the UK to support a claim for passing off.

Facts

Starbucks, a Hong Kong-based media group unrelated to the coffee shop chain, provided an Internet protocol TV (‘IPTV’) service in Hong Kong under the name ‘NOW TV’ with some of the programmes accessible in the UK via the Internet. Starbucks owned a Community trade mark (CTM) in respect of television and telecommunication services for the word ‘now’ (in lower case). The CTM was considered to be figurative because the ‘o’ in the word ‘now’ was depicted with six lines radiating from it so that it appeared like a star or sun. In 2012, BSkyB announced, and later that year launched, a new, stand-alone, IPTV service in the UK under the name ‘NOW TV’. Starbucks commenced proceedings in the UK for infringement of its CTM and for passing off. In the High Court, Arnold J held that Starbucks' CTM was invalid and that the passing-off claim failed. Starbucks appealed.

Legal context

In the High Court, the CTM was held invalid under Article 7(1)(c) of Regulation 207/2009 (the CTM Regulation) on the basis that the word ‘now’ would be considered by the average consumer to be descriptive of the services provided under the mark or was descriptive of a characteristic of those services.

In relation to the passing off claim, the High Court accepted that UK customers could access the claimant's Hong Kong website. However, the website was targeted at consumers in Hong Kong. This was not enough to establish goodwill in the UK. While the court recognized that the claimant had made preparations for the launch in the UK of its own IPTV service with the name ‘Now TV’, this did not give rise to a protectable goodwill. Starbucks appealed. In the High Court, BSkyB relied on Article 7(1)(b) and (c) of the CTM Regulation in support of their claim that the CTM was invalid. For the purposes of the appeal, it was agreed that invalidity under 7(1)(c) also resulted in invalidity under 7(1)(b).

Analysis

By Article 7(1)(c) of the CTM Regulation, ‘[t]rade marks which consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, intended purpose, value, geographical origin or the time or production of the goods or of the rendering of the service, or other characteristics of the goods or service’ shall not be registered.

The Court of Appeal confirmed that the effect of this provision is that a sign which designates a characteristic of the relevant service is devoid of any distinctive character: this CTM was devoid of any distinctive character that was able to distinguish Starbucks' services from those offered by other undertakings. The mark itself was not inherently distinctive and the mark had not acquired distinctiveness through use. This did not mean that the word ‘now’ could never be distinctive of a service. Depending on the relevant context, a word could be used in a distinctive way or a descriptive way. It was open to the claimant to choose or invent many other words to identify its IPTV service. However, the claimant had selected a commonplace, easily understood, ordinary English word as its trade mark. It was the instant availability of the programming of the claimant's on-demand service that made it attractive to consumers—the attractive characteristic of the service was its ‘nowness’.

The Court of Appeal therefore confirmed that Arnold J made no error in his determination that the average consumer of the claimant's service would understand the mark ‘NOW’ to designate the attractive instant and immediate characteristic of the service. The mark ‘NOW’ described something about the service, its immediacy: the claimant's CTM was thus invalid.

In relation to the passing-off claim, the main issue was whether Starbucks had ‘customers’ of its IPTV service in the UK who would count as customers for the purposes of supporting the passing-off claim. The discussion focused on the Court of Appeal's previous decision in Anheuser Busch Inc v Budjovicky Budvar NP [1984] FSR 413 that, even though the claimants' beer was on sale to servicemen at US military bases (and a few other locations) in the UK, this did not amount to the beer being available in the UK: the claimants had no customers and were not carrying on a business in the UK. Accordingly, Anheuser Busch had no protectable goodwill in the UK.

In order to establish protectable goodwill in the UK, Starbucks relied on the availability there of its Chinese language TV programmes on its website, ‘now-tv.com’ and on the availability of access to its videos on YouTube under the NOW TV brand, which had been viewed around 238 000 times. Starbucks also cited the availability of a small number of its programmes on video services provided by various international airlines flying to and from the UK, together with its plans to expand its television service to the UK.

The Court of Appeal acknowledged that goodwill can be established without the need for customers to be charged and also in circumstances where the customers are a non-English speaking ethnic minority. It was also possible to establish goodwill in a service by advance advertising and promotional activities. However, the Court of Appeal determined that the actions of Starbucks and the accessibility of the claimant's service in the UK were not sufficient to establish a goodwill in the UK. The legal requirement in order to succeed in a claim of passing off is having goodwill and customers in the UK. Even in circumstances where the Internet is widely available, access in the UK to programmes originating from Hong Kong is not sufficient to establish goodwill and a customer base in the UK. Finally, Starbucks' plans were insufficient to establish goodwill. Further steps, such as promotion or advertising, would be required to have a protectable goodwill in the UK. Therefore, Starbucks' appeal was dismissed.

Practical significance

In the event that there is an appeal to the Supreme Court, Starbucks expressly reserved the right to argue whether there is a legal requirement for customers to be in the UK in order to succeed in a passing-off claim in the light of the obiter remarks made by Lloyd LJ in Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2010] EWCA Civ 110, that it might be salutary to review the requirement for customers to be in the UK for the kinds of service offered providers operating from abroad.

The current case highlights two important reminders for brand owners. First, a prudent brand owner should create and develop a distinctive brand that cannot be considered to be descriptive of the goods or services provided under that brand.

Secondly, owners of brands that are well-known outside the UK but without a business presence in the UK are at risk of not being able to demonstrate goodwill in the UK that is sufficient to support a successful passing-off claim. However, owners of brands that are well known outside the UK may be able to rely on s 56 of the Trade Marks Act 1994 which gives the owner of a trade mark that is famous outside the UK (and which is entitled to protection under the Paris Convention), the right to apply for an injunction to prevent the use of an identical or similar mark in relation to identical or similar goods or services.