The Supreme Court confirms test for goodwill in passing off actions

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The Supreme Court confirms test for goodwill in passing off actions

31 Jul 2015

The recent Supreme Court decision of Starbucks (HK) Limited and others v British Sky Broadcasting Group and Others [2015] UKSC 31 has confirmed that businesses can only have goodwill in the UK if they have customers who purchase their product in the UK.

The owner of a mark can use the tort of passing off to prevent others using the same, or a similar, mark to mislead consumers into thinking that their goods/services are the same as, or associated with, the owner of the mark. To succeed in an action for passing off three elements must be established:

• Goodwill in the mark in the UK

• Confusion

• Damage to the mark owner

Starbucks (HK), the largest pay TV operator in Hong Kong with around 1.2 million subscribers, was the owner of the mark NOW TV. Starbucks (HK) brought proceedings against Sky, in relation to Sky’s NOW TV internet television service. The key issue in this case was whether Starbucks could establish goodwill in the UK and thereby bring a successful passing off action.

Starbucks’ NOW TV service was not available to consumers in the UK, but there were people living in the UK who were aware of Starbucks’ service; for example, those having previously lived in and/or visited Hong Kong. Starbucks’ representatives argued that they had a reputation in the UK and so had goodwill, despite not making any actual UK sales.

Sky counter-argued that UK law made it clear that in order to have goodwill, Starbucks must have made sales to UK customers in the UK. The Supreme Court agreed with Sky’s argument, making it clear that purchases must be by UK customers in the UK to qualify as sufficient for goodwill for the purposes of a passing off action.

This judgment confirms that even if a business is widely recognised overseas, it will be very difficult to bring proceedings for passing off in the UK if it has not yet made any sales in the UK, even if it has private plans to expand into the UK.
This ruling will not be problematic where a business has a registered trademark, as it does not need to pursue an action for passing off. If a business has future plans to expand into the UK, then it is advisable, where possible, to ensure that a trademark is registered.

 To find out more information around this topic, contact a member of our Intellectual Property team on 0161 832 3434, or contact us.

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