Kat konfusion regarding passing off: likelihood of confusion and the Starbucks (HK) case

Legal tests are omnipresent in our profession, and IP is no exception. Take an action for passing off. To prevail at common law, the plaintiff must prove that it has goodwill in the mark or get-up; there has been a misrepresentation by the defendant that leads the public to think that his goods or services are those of the plaintiff; and the plaintiff has suffered damage by virtue of the representation (Per Lord Oliver of Aylmerton n Reckitt & Colman Products Ltd v Borden Inc.) The ultimate wrong here is that “no man may pass off his goods as those of another”. Goodwill, misrepresentation and damage—this is the classic three-part test for proving passing off. But how exactly do these three elements fit together? How dependent or independent are they, one from the other? The answer is less obvious than one might thank.

As Kat readers may recall, in May 2015, the UK Supreme Court ruled in the case of Starbucks (HK) v. British Sky Broadcasting Group, confirming the common-law rule that, to make out a case for passing off, the plaintiff must establish goodwill by virtue of genuine business activity in the UK; mere reputation is not enough. IPKat has previously commented on the Starbucks(HK) decision (here and here) and it is not this Kat’s intention to revisit those discussions. One point, however, continues to gnaw at this Kat. The Supreme Court (in para. 11) refers to para. 158 of the judgement of the High Court (itself deriving from para. 153 of the High Court decision), which states as follows

“153. In case I am wrong about the absence of a protectable goodwill, however, I should consider whether Sky's use of the name NOW TV would be likely to lead UK viewers who were familiar with PCCM's NOW TV to think that the former was the same as, or connected with, the latter.”

“158. As discussed above, there is no evidence of actual confusion, but that is not conclusive. In my judgment, there is a likelihood that a substantial number of UK viewers who were previously familiar with PCCM's NOW TV will wrongly believe that Sky's NOW TV emanates from the same or a connected source. The names are identical and the services are essentially identical. I am not persuaded that either the visual differences between the respective presentations or the absence of Chinese language content on Sky's service or the fact that it is advertised and promoted as being provided by Sky will suffice to prevent confusion occurring. The visual differences are relatively insignificant. Most of the Chinese-speaking Community in the UK also speak English. Viewers who are familiar with PCCM's NOW TV may well think that it has gone into some kind of joint venture with Sky, and that the joint venture has chosen to focus on English-language programming for the UK market. Furthermore, references to NOW TV in the media sometimes do not mention Sky. “

It is this passage that leaves this Kat a bit flummoxed. Here is my problem. The finding of a likelihood of confusion does not depend upon whether the plaintiff enjoyed goodwill or mere reputation. This is because, whatever the determination of the court regarding the question of goodwill versus reputation, the facts on which the court relies in support of likelihood of confusion are the same. But if this is so, the upshot is that there is a decoupling of the facts that support a finding of goodwill from those that support a likelihood of confusion. This means that there will be instances (such as in the Starbucks (HK) case) in which there is apparently a likelihood of confusion, but no actionable passing off, because no goodwill has been proven.

If so, it seems to mean that the law of passing off is willing to tolerate a degree of likelihood of confusion in the name of maintaining a proper balance between IP protection and competition. In the words of the Supreme Court in theStarbucks (HK) case, if the plaintiff’s position were correct—

“… it would mean that a claimant could shut off the use of a mark in this jurisdiction even though it had no customers or business here, and had not spent any time or money in developing a market here—and did not even intend to so (para. 63).”

All of this is well and good—but what about the likelihood of confusion? Surely, that must count for something.

(Detail from the Cheshire cat vanishing in Lewis Carroll’s Alice in Wonderland drawn by Sir John Tenniel)