Starbucks (HK) Limited and Another v British Sky Broadcasting Group PLC and others  UKSC 31 (13 May 2015)
Journal of Intellectual Property Law & Practice (2015) doi: 10.1093/jiplp/jpv132, first published online: August 20, 2015
The United Kingdom Supreme Court has unanimously held that a claimant in a passing off action must have a business with customers within the jurisdiction.
The ‘classical trinity’ of elements that a claimant must demonstrate to succeed in a passing off action were set out by Lord Oliver in the Jif Lemon case, Reckitt & Colman Products Ltd v Borden Inc  1 WLR 491: goodwill attached to the claimant's goods or services; a misrepresentation by the defendant that his goods or services are the claimant's goods or services; and finally, damage to the claimant caused by the misrepresentation.
Goodwill is, according to Lord Macnaghten in Commissioners of Inland Revenue v Muller & Co's Margarine Ltd  AC 217, the ‘attractive force which brings in custom’, but the courts in England and Wales also draw a technical distinction between ‘goodwill’ and ‘mere reputation’. Goodwill does not exist in a jurisdiction unless there has been business carried on in that jurisdiction (Anheuser-Busch Inc v Budejovicky Budvar N.P  FSR 413).
However, different approaches have been taken in other common law jurisdictions.
The leading example of this is ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465, in which the Federal Court of Australia held that, as we now live in a modern world with mass advertising and international commerce,
It is not necessary in Australia 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 this country among persons here, whether residents or otherwise, of a sufficient degree to establish that there is a likelihood of deception among consumers and potential consumers and of damage to his reputation.In that case, the plaintiff failed to demonstrate sufficient reputation in Australia in ‘Healthy Choice’.
ConAgra was cited with approval by the Supreme Court of Appeal of South Africa in Caterham Car Sales and Coachworks Ltd. v Birkin Cars (Pty) Ltd and Another (393/95)  ZASCA 44. In their judgment, the Supreme Court of Appeal said that the correct question to ask was
whether the plaintiff has, in a practical and business sense, a sufficient reputation amongst a substantial number of persons who are either clients or potential clients of his business.The Supreme Court of Appeal held that extent and locality of the business are still however relevant, as they can determine the scope of the reputation, whether any harm takes place; and as in ConAgra, the plaintiff failed to establish the necessary reputation to found the case.
In Starbucks v British Sky Broadcasting the Supreme Court considered the conflicting jurisprudence, but came to reaffirm the traditional English approach, which requires customers within the jurisdiction.
The claimants, a Hong Kong-based media group, provided internet protocol television (IPTV) under the names NOW BROADBAND TV and NOW TV. The set-top service was provided in Hong Kong, where it was very popular; in the UK, it was only accessible through YouTube, through the claimants' website and as part of in-flight entertainment.
The claimants had planned to launch in the UK, but were pre-empted by Sky's own NOW TV service. The claimants launched proceedings for trade mark infringement and passing off, which failed in the High Court and the Court of Appeal. The passing off aspect was appealed to the Supreme Court on the basis that the claimants' reputation in the UK was sufficient foundation for a claim in passing off.
Lord Neuberger acknowledged the acute significance of this issue in an ‘age of global electronic communication’, and emphasized that ‘it is one of the great virtues of the common law that it can adapt itself to practical and commercial realities’. However, he thought that there was no clear trend away from the ‘hard line’ approach taken in previous English decisions, and emphasized that the law had to balance the competing interests of free competition and unfair competition. Lord Neuberger explained that a claimant who had
simply obtained a reputation for its mark in this jurisdiction in respect of his products or services outside the jurisdiction has not done enough to not justify granting him an effective monopoly in respect of that mark within the jurisdiction.Part of the foundation for this appears to come from the decision in Maxwell v Hogg (1867) LR 2 Ch 307, in which Turner LJ had said that merely advertising without having commenced selling a product meant that the plaintiff had not provided ‘consideration’ for the ‘monopoly’. It is interesting to see this cited, as the notion of ‘consideration’ had previously been considered irrelevant in passing off; in the fourth edition of his textbook Passing Off: Unfair Competition by Misrepresentation (2011), Professor Wadlow states at paragraph 3-066 that ‘no such concept is relevant in passing off or trade mark law, and Maxwell v Hogg appears to be the only case in which it has been advanced’.
Lord Neuberger also found support for his decision in section 56 of the Trade Marks Act 1994. Section 56 protects well-known trade marks that belong to proprietors that are nationals of countries (other than the UK) which have signed the Paris Convention, and allows such proprietors to obtain an injunction against use in the UK of an identical or similar mark for identical or similar services where the use is likely to cause confusion. Although Lord Neuberger chose not to rule on the point, he saw ‘considerable force’ in the argument that, as Parliament had legislated to protect well-known marks in this way, it was not for the courts to extend the principle to marks which are not well known.
The Supreme Court also chose not to rule on whether a business which has not commenced trading but had launched a substantial advertising campaign could bring a claim in passing off. There is case law in Singapore and in England and Wales which supports the view that such activities could be the foundation of a claim in passing off, but to device that would involve overruling Maxwell v Hogg, and Lord Neuberger refrained from deciding the point.
The Supreme Court's decision is a clear affirmation that to maintain a passing off action in England and Wales one must have a business with customers within the jurisdiction.
This action as a whole has shown how difficult it is to enforce a brand that has little inherent distinctiveness, particularly when no trade has taken place within Europe or the UK.
Where possible, brand owners should choose a brand which is distinctive. Where there is little inherent distinctiveness, developing distinctiveness is vital.
Unless a company can show that it has a mark that is well known in the UK, or that it has business with customers in the UK, it will not have enforceable rights in the absence of a valid registered trade mark.