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.