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Hong Kong – Starbucks (HK) Ltd V British Sky Broadcasting Group Plc.

10 September, 2014

 

Legal News & Analysis – Asia Pacific – Hong Kong – Intellectual Property

 

[England and Wales Court of Appeal (Civil Division) – HCA 656/2010]

 
Starbucks (HK) Ltd (Claimant) and British Sky Broadcasting Group Plc (Defendant)

 
Judgment of the Court of Appeal (Patten L.J., and Sir John Mummery) dated 15 November 2013

 
Trade marks – EU law – Invalidity of registered Community Trade Mark – Passing off – Goodwill – Commercial activities on the internet

 
The Facts

 
This was an appeal by Starbucks (HK) Ltd and PCCW Media Ltd, who are members of a Hong Kong broadcasting, media and telecommunications group, (collectively the “PCCW Group”) against the dismissal of their action and the order granting the counterclaim, by British Sky Broadcasting Group Plc (“BSkyB”) that the registration of the PCCW Group’s Community Trade Mark (registered in the European Union) “NOW” was invalid.

 
Both parties are major players and competitors in the media telecommunications business. The PCCW Group had, since at least 2006, broadcast an internet protocol TV (“IPTV”) service under the name “NOW TV” and they had registered the Community Trade Mark “NOW” as they intended to enter the UK broadcasting market. BSkyB subsequently announced on 21 March 2012 that it was intending to launch a new, stand-alone internet protocol television service in the UK under the word mark “NOW TV” and they also used the sign NOWTV.com. The PCCW Group alleged that BSkyB’s use of the NOW mark infringed its own Community Trade Mark and also resulted in a case of ‘passing off’. BSkyB counterclaimed that the PCCW’s Group Community Trade Mark was invalid on the basis that the word NOW was a description of the characteristic of a service and devoid of distinctive character. The judge in the High Court agreed and found that the mark “NOW” was precluded from being registered as a Community Trade Mark because the average consumer would have understood the term “NOW” as describing a characteristic of the service (i.e. the instant immediate nature of the service). The Court also found that there was no passing off by BSkyB.

 
In their appeal, the PCCW Group contended that the judge had been wrong to find that (i) the sign or mark was invalid and (ii) that the claimants had not generated a protectable goodwill in the UK. In respect of the latter, relevant to PCCW Group’s claim of passing off, they claimed that they had viewers in the UK, mainly Chinese speakers who were acquainted with the NOW TV service in Hong Kong, who were able to view their TV programmes for free via the internet, and who constituted customers sufficient for PCCW Group to acquire goodwill in the UK.

 
The Judgement

 
The Court first considered the issue of whether the claimants had a valid trade mark. Article 7 of the Community Trade Mark Regulation (EC Regulation 207/2009) states that a mark cannot be registered as a Community Trade Mark if it is devoid of distinctive character or if it consists exclusively of signs or indication which could serve, in trade, to designate kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of the rendering of the service, or other characteristics of the goods. The Court of Appeal (“CA”) noted that the registration had to be valid for all contexts. There could not be a valid registration for a word that was capable of being descriptively used of a characteristic of the claimant’s internet protocol television service. Therefore, the CA found that the High Court had been correct in finding that the NOW mark could not be validly registered as a Community trade mark.

 
The second issue for the CA to consider was whether there had been an attempt at passing off. The CA noted that it is an essential requirement in a passing off claim under English law that the claimant is the proprietor of a business or goodwill in the UK. It was stressed that it is the property in the goodwill of a business in the UK that gives its owner the right to legal protection from others making misrepresentations by using similar marks or names in the UK. Following Anheuser-Busch Inc v Budgejovichy Budvar NP (t/a Budweiser Budvar Brewery) [1984] FSR 413, the CA noted that a foreign entity with a trading reputation but without a goodwill generated by business activities and use of the name or mark in commerce extending to the UK was not entitled to maintain a passing off action in the UK.

 
Applying this principle to the facts in this case, PCCW Group were involved in commercial activities in Hong Kong only. PCCW Group argued that, on the basis of those activities and through the internet there was a spill-over of reputation and goodwill in the UK amongst the expatriate Chinese-speaking people living there, who were able to access a website using the NOW TV name and view PCCW Group’s programmes online for free. PCCW Group submitted that the High Court judge ought to have held that the viewers of the PCCW Group’s NOW TV watched it because they appreciated the content and quality of the programmes shown and that, in consequence, those programmes generated goodwill for its NOW TV service.

 
The CA did not accept such an argument and held that that claim was contrary to the basic principles of the territorial location of goodwill and of the need for the existence of a separate goodwill in each territory in which the relevant business has been carried on. That principle is not eroded by the mere fact that a name or mark is accessible via the internet. Merely being heard of or being known in the UK by reputation is an insufficient basis for establishing goodwill protectable by a passing off claim.

 
The CA emphasised that there is more to establishing goodwill in a market for the supply of a TV service than evidence that the programmes in the service can be viewed by members of the public for free on a website. In proving that goodwill is generatedin a service delivery context, PCCW Group needed to show the making of, or at least an attempt to make some kind of connection with customers in the market with a view to transacting business and repeat business with them. However, the CA held that PCCW Group only targeted for business those subscriber customers in Hong Kong, and not the Chinese-speaking section of the UK who accessed the internet in the UK. Accordingly, the CA dismissed PCCW Group’s appeal on both the trade mark and passing off claims.

 

Commentary:

 

This decision of the English Court of Appeal (“CA”) may come as a surprise to some in Hong Kong, where PCCW’s “now TV” service has been widely advertised and used since 2003, originally using the name “now Broadband TV”. Whilst the PCCW group has since obtained permission to appeal the CA’s ruling at the English Supreme Court – and we await the appeal – this case serves as a reminder to businesses to review the marks, logos and names they choose for their brands and to ensure that any registered trade marks are actively marketed in all the territories in which the company targets or expects customers.

 
The PCCW group applied to register its “now” mark as a Community Trade Mark back in 2005, and it was duly registered in 2008. A Community Trade Mark is valid across all European Union countries. However, as the PCCW group discovered, simply owning a registered Community Trade Mark does not guarantee that your marks, logos and trade names will be protected.

 
Under the EC Community Trade Mark Regulation, a registered Community Trade Mark can be declared invalid if the mark is not distinctive, is unlawful or conflicts with earlier rights (pursuant to Articles 7 and 52 of EC Council Regulation No. 207/2009). In addition, a Community Trade Mark can be revoked if it is not used for a continuous period of five years (pursuant to Article 51).

 
In this particular case, the PCCW group had three Community Trade Marks relating to the word “now”, but it could only rely on the 2008 registration to bring a claim against BSkyB as the two older marks had fallen out of use and their validity was likely to be challenged. In any event, the English courts agreed with BSkyB’s claim that the word “now” essentially described the instantaneous nature of PCCW’s IPTV service and was not sufficiently distinctive.

 
Companies should therefore be careful when looking to brand their business offerings to ensure that the brand name is not descriptive of the goods or services themselves. This will enable the brand, firstly, to be registered as a trade mark and, secondly, to avoid third party claims of invalidity. Businesses should also ensure that their registered marks are put to genuine use in the territory, to avoid third party claims for non-use, which can lead to the trade marks being revoked.

 
Interestingly, BSkyB has in the meantime sought to register its “NOW TV” logos as Community Trade Marks. It is not surprising that the applications have been opposed and, given the CA’s current ruling, it is questionable whether BSkyB will be able to successfully register its desired marks because they may be considered non-distinctive.

 
The other issue which the CA looked at was PCCW group’s claim of passing off. Passing off is a common law remedy, available under the laws of both England and Hong Kong, which entitles a person to take action against a third party who is using that person’s marks without authorisation, even if those marks are unregistered.

 
Passing off is often difficult to prove, as a claimant needs to prove that it has generated goodwill in the marks in order to be protected. In the PCCW group’s case, it argued that it had sufficient goodwill in the UK because individuals in the UK were able to access the “now TV” service online to watch Chinese language programmes. However, this passive approach – by merely having an online presence that could be accessed in the UK – was held to be insufficient to generate goodwill in the UK. If a Hong Kong business wants to protect its brand name in the UK or any other European country, apart from having a registered national or Community trade mark, the business should ensure that it establishes the brand in the minds of customers in that territory by carrying out business activities in that territory and actively promoting the brand to local customer targets.

 

Pinsent Masons

 

For further information, please contact:

 

Jolene Reimerson, Pinsent Masons
jolene.reimerson@pinsentmasons.com

 

 

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