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Friday, 19 June 2015

The Supreme Court in Starbucks (HK); on adjectives and reluctance to embrace change

The 13 May ruling of the UK Supreme Court in Starbucks (HK) and another v British Sky Broadcasting Group  was well summarized by fellow Kat David Brophy. To remind Kat readers, the Supreme Court held that a claim for passing off required proof of goodwill as evidenced by actual business activity by the plaintiff in the jurisdiction. Mere reputation in the absence of such business activity, made more likely by the ease of international travel and communications, is not sufficient. This Kat could go either way on the point at issue. The Court ruled as it did and the result is not unreasonable. Aside from the result, this Kat found two notable issues in the back story to the judgment.

The first point addresses the Court’s use of adjectives. This Kat is as guilty as anyone in violating the rule that one should stick to subjects and verbs, firm in his belief that adjectives can play a role in good writing. At their best, adjectives can be emotive to the benefit of the writer and reader alike. Less usefully, as the polymath Harvard professor Steven Pinker reminds us in his 2014 book, The Sense of Style, adjectives can also serve as a qualifier that serves to hedge the statement being made. The risk of using an adjective is the manner by which it may detract from the force of the noun that it is modifying. Against this background, consider the following words in the judgment in paragraph 47:
“In other words, I consider that we should reaffirm that the law is that a claimant in a passing off claim must establish that it has actual goodwill in this jurisdiction, and that such goodwill involves the presence of clients or customers in the jurisdiction for the products or services in question.”
“Actual goodwill”—what does this mean, the Kat asks? The issue before the Court had been framed in terms of the distinction between reputation and goodwill, not whether the claimed goodwill is “actual”. In the court of first instance, Mr Justice Arnold had concluded in paragraph 146 that
“I accept that the reputation which PCCM's NOW TV service had acquired amongst UK residents in the three ways I have described by 21 March 2012 was modest, but I do not consider that it was de minimis.”
However, the plaintiff had failed to prove that it had goodwill in the jurisdiction, because it did not have customers in the jurisdiction. Proof of reputation, yes, but proof of goodwill, no. Within this analytical paradigm, the Court’s reference to “actual” goodwill is misplaced. Does this mean that there is such a thing as “non-actual” goodwill (i.e., perhaps, reputation)? If so, what does “non-actual” goodwill entail? If not, the use of the adjective merely confuses the reader regarding what is required by the Court to meet the proof of goodwill standard.

This Kat can already hear the whisper—“but didn’t the lower court itself rely on an adjective to qualify the nature of the reputation acquired by the plaintiff?” Indeed, yes, but the adjective in that case was used to indicate the strength of the reputation, not its presence or absence. While the use of "modest" may not have been strictly necessary, it did not detract from the court’s ultimate ruling--while the plaintiff enjoyed reputation, whatever its strength, the plaintiff did not meet the judge-made standard that required proof of customers in the jurisdiction.

The second point addresses the explanation by the Court in paragraph 49 why it declined to change what, it is reasoned, is the prevailing common-law rule regarding proof of goodwill:
“It is of course open to this court to 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. Indeed it is one of the great virtues of the common law that it can adapt itself to practical and commercial realities, which is particularly important in a world which is fast changing in terms of electronic processes, travel and societal values. Nonetheless, we should bear in mind that changing the common law sometimes risks undermining legal certainty, both because a change in itself can sometimes generate uncertainty and because change can sometimes lead to other actual or suggested consequential changes”.
The last sentence of this paragraph is bewildering. Of course, change in the common-law (or in anything else) will undermine certainty; if it does not, then it does not amount to change. But being wary about changing the law, because it will bring about a change in the law, in addition to being tautological, stands in contrast to what a living and breathing judicial system based on judge-made law should be doing in the face of changing commercial and technological circumstances. Whether or not John Maynard Keynes said that “when the facts change, I change my mind, what do you do?”, the observation is true—we should embrace change when appropriate. The Court is of a different view. Nissim Taleb has argued that an over-concern with maintaining the short-term resiliency of a system may have the result of ultimately leaving the system unequipped to deal with one too many challenges. In this Kat’s view, this observation applies as well to legal change in the face of commercial and technological developments. At the least, the reluctance to change because it leads to change should not in and of itself be a reason.


Anonymous said...

The last sentence of the quoted paragraph is neither bewildering nor is it tautological.

First the sentence states that a change can "sometimes" undermine legal certainty, not that it always does so. Obviously, changing the common-law can increase legal certainty. If the common-law in any specific area is currently very unclear it can definitely be changed to improve legal certainty. It is Mr Wilkof's stark position that any change to anything will always undermine certainty ("of course change... in anything.. will undermine certainty") that is bewildering.

Second, the sentence sates that change to common-law "can" lead to other actual or suggested consequential changes. I believe this means that if you change the common-law that change might lead to further changes and those changes may not be desired or have been considered fully and may, in themselves, risk undermining legal certainty.

The relevant sentence is nothing more than a warning that the common-law should not be changed unless it is clear that legal certainty will be improved and that there are no consequential changes (foreseen or unforeseen) that would, in themselves, undermine legal certainty. It seems that in this case the Supreme Court believed that they could not change the common-law appropriately without meeting those criteria and therefore no changes were made. That seems reasonable and logical.

THE US anon said...

Anonymous @12:57,

Nice job. You explain well how care with common law development should unfold.

This brings to my (American) mind, two tangential thoughts that might be a divergence from the intended direction of this thread. Please feel free to not take this different direction as anything but a comment on the US state of patent law.

1) The notion of writing with care because of the consequences of the change in law can not be stressed enough. Our own Supreme Court is quick to denigrate patent attorneys as scriviners gaming the rule of law as written by Congress and use this accusation as justification for its insertion into the law new caveats that are said to be "implicit" in the words of Congress, or of recent vintage are nakedly explicit additions. And yet, our Supreme Court lacks due care with its own scrivining, leaving terms undefined, and sweeping in broad "powers" for the judicial branch below that have no basis in the words of Congress, because, at least in the US, patent law was expressly set up per point 2), below.

2) In the US, we have a few strict rules of law to abide and limit the application of governmental power. We have a rule of law of limited federal authority, of requiring an actual case or controversy (no "opinion pieces" at the Supreme Court level), and a separation of powers doctrine that was meant to keep a balance and not let ANY one branch of our government (including the judicial branch) garner power in excess of the power explicitly doled out by the rest of our constitution. There are many points that flow from these foundational conditions, but the point explicitly here that your post reminds me of is that here in the States, our patent law is explicitly NOT a common law vehicle and thus, there is NO place** for common law change to patent law.

**I would place a caveat here in that our system does allow one branch to share limited authority with another branch with certain conditions met. Those conditions include a clear intent and limit of the sharing. For example, in our patent law, Congress has shared common law authority with the courts in setting remedies for patent infringement. Further, prior to 1952, our Congress had shared the power with the judicial branch to use common law evolution to set the definition of the word "invention." Of course, our Congress reacted to a Court that had turned excessively anti-patent and removed this authority in 1952.

MaxDrei said...

Since "actual" suggests one meaning in French and another in German, I thought I would check with an online dictionary what it means in English.

I should have realised. The English dictionary offers (of course!) both meanings. So, to decide which one ("real" or "current") the writer intended, you need to take into account the context.

Anonymous said...

I would think "it has actual goodwill" just means "it actually has goodwill". Or to put it another way, "actual" isn't being used as modifier which suggests there is such a thing as "non-actual" goodwill, but as an intensifier to make the "actual" stand out.

Anonymous said...

I'd go along with what first anonymous says. A change in the common law can clear up what is currently a mess. But an ill-thought-out change can have messy consequences. I'd also add, if a change is a radical departure from what seemed settled before, there may well be uncertainty as people are not sure whether or not a later court will get cold feet about the idea and change it back. Hence what the sentence says about there being two potential problems.

Back to the original point - if you define goodwill as being an attractive force that makes people buy a product, what happens if you have advertised a product and people are keen, even desperate, to buy it - but you haven't yet put it on the market? There are no customers as yet, but the force is there.

(It used to amuse me, in the days when I watched Big Brother, to see that they were taking orders for the winner's book about his or her experiences in the house. In other words, you were paying for a book which not only had not been written at that point, but where the author had yet to be determined!)

Anonymous said...

Another Supreme Court reluctant to embrace change: Kimble v. Marvel Entertainment, LLC.

Respecting stare decisis means sticking to some wrong decisions. The doctrine rests on the idea, as Justice Brandeis famously wrote, that it is usually “more important that the applicable rule of law be settled than that it be settled right.”

Anonymous said...

Knowing and accepting something that is known to be wrong is never right.

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