Passing off in the UK, Australia and New Zealand: A divergence in criteria

Article written by: Paul JohnsThomas Huthwaite    |   Friday 29th May 2015

On 13 May 2015, the UK Supreme Court [1] affirmed the traditional requirements for the tort of passing off.  The Court maintained that a claimant must first prove a trade presence within the UK before it can succeed in a passing off action. 

In doing so, the Court distinguished the UK position from that of Australia and New Zealand.  Its decision is the most recent appeal in the NOW TV saga.
 

NOW TV

The Hong Kong claimants have provided TV content over the internet since 2003 and have used the name NOW TV since 2006.  From 2012, NOW TV has been the biggest pay TV operator in Hong Kong, with over 1.2 million subscribers.

The claimants did not operate in the UK.  However, a number of UK residents were aware of the NOW TV service due to its business in Hong Kong and its online presence more generally.

The three defendants are all part of the British Sky Broadcasting Group (“Sky”).  On 21 March 2012, Sky announced that it intended to launch a new internet TV service under the name NOW TV.  Sky launched NOW TV in the UK in July 2012.

The claimants sought to prevent Sky from using the name NOW TV, arguing that use of the name amounted to passing off.  Their claim was rejected both at first instance and on appeal to the Court of Appeal.  The claimants appealed again to the Supreme Court.
 

The requirements for passing off

The appeal turned on the traditional first requirement for passing off, which is that the claimant must prove “goodwill”.  For many years, commonwealth jurisdictions defined goodwill as being the “attractive force which brings in custom”.[2]  Goodwill therefore had to attach to the claimant’s business within the jurisdiction.  Without local business, a passing off action would fail.

In Australia and New Zealand, this view was confirmed well into the 1900s.[3]  However, with globalisation and the development of modern trade practices, Australian and New Zealand courts started to challenge and relax the traditional rigid view of “goodwill”.[4]

A leading Australian case, cited in both Australia and New Zealand, is ConAgra.[5]  ConAgra was a US claimant using the trade mark “Healthy Choice” in the US.  McCain then began using the trade mark “Healthy Choice” in Australia. 

The Australian Full Federal Court was prepared to recognise that a foreign claimant with no local business may succeed in a passing off action if it has a local reputation.  In the words of a leading Australian text, ConAgra established that “goodwill is now an international commodity and that business activity within the jurisdiction is no longer a prerequisite for success in a passing off claim.”[6]  The word “goodwill” may be used interchangeably with “reputation”.[7]

The New Zealand courts have adopted a similar approach.  Dominion Rent A Car[8] involved an Australian claimant and New Zealand defendant.  Cooke P accepted that Australia and New Zealand’s markets can increasingly be recognised as one market:[9]

… an international business may have one individual international goodwill, the reputation of any local branch or agency being that of association with the international organisation.

… I think that an Australian company’s reputation and goodwill can extend to New Zealand (and vice versa) and, at least if there is a sufficient business connection with this country, will be entitled to protection here…  the goodwill transcends territorial boundaries.

Somers J agreed,[10] saying that in some cases, “reputation itself may be almost tantamount to goodwill”.

The flexible approach of the Australian and New Zealand courts may also be considered to align more closely with the Australian Competition and Consumer Act 2010 (previously, the Trade Practices Act 1974) and New Zealand Fair Trading Act 1986.  The elements of a successful claim under those Acts are similar to the elements of a passing off action, but the Acts do not specifically require “goodwill”.  Rather, the Acts prohibit “misleading” or “deceptive” conduct more generally, focussing on consumer protection rather than a trader’s reputation or goodwill.[11]        
                                                                     

A divergence in criteria

In the UK, the Supreme Court has now clearly affirmed that mere “reputation” is not enough to establish a claim in passing off; a claimant must show that it has “goodwill” in the traditional sense, being a trade presence within the jurisdiction.  It is not enough to point to consumers who are merely aware of the claimant within the jurisdiction, even if those consumers are actual customers of the claimant in another jurisdiction.

Given the long-term trend of the New Zealand and Australian decisions, it is unlikely that the NOW TV approach will be adopted by our Courts.  International brand owners and their advisers should be aware that brands which are not protectable under the law of passing off in the United Kingdom may be protectable in Australia and New Zealand on the basis of reputation regardless of actual market presence.

This article is intended to summarise potentially complicated legal issues, and is not intended to be a substitute for individual legal advice. If you would like further information, please contact a Baldwins representative.


[1] Starbucks (HK) Limited and another v British Sky Broadcasting Group PLC and others [2015] UKSC 31.

[2] IR Commrs v Muller & Co’s Margarine Ltd [1901] AC 217 (HL) at 223 – 224.                          

[3] For example, in GJ Coles & Co Ltd v GJ Coles (NZ) Ltd [1933] NZLR 1189,[3] an Australian claimant, despite being known in New Zealand, failed to establish a physical trade presence in New Zealand, and therefore failed to establish goodwill.  Its claim to passing off failed.  The New Zealand defendant was entitled to continue its trade in New Zealand, despite the Court taking an unfavourable view of the defendant’s sharp practice in appropriating its name.

[4] In the following cases, the New Zealand courts began to relax the “goodwill” requirement, particularly where claimant had a strong trade presence in Australia and a reputation in New Zealand: Gallaher Ltd v International Brands Ltd (1976) 1 NZIPR 43 (SC); Esanda Ltd v Esanda Finance Ltd [1984] 2 NZLR 748 (HC); Crusader Oil NL v Crusader Minerals New Zealand Ltd (1984) 1 TCLR 211 (HC).

[5] ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) IPR 194.

[6] Davison and Horak (eds) Shanahan’s Australian Law of Trade Marks and Passing Off (5th ed, Lawbook Co, Pyrmont, 2013) at p739.

[7] ConAgra at 231 – 232; P Sumpter (ed) Intellectual Property Law: Principles in Practice (2nd ed, CCH New Zealand Limited, Auckland, 2013) at p203.

[8] Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 NZLR 395 (CA).

[9] At 405 – 406.  Similar comments also been made in more recent decisions; for example, see: Cyclone Hardware Pty Ltd v Patience & Nicholson (NZ) Ltd [2001] 3 NZLR 490 (CA) at [31] – [32].

[10] At 420.

[11] See, for example: Part 3-1 sections 18, 29 – 37 of the Competition and Consumer Act 2010; Part V sections 52 – 59 of the Trade Practices Act 1974;  sections 9 – 16 of the Fair Trading Act 1986.

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