19 October 2011

Fishy! The Problem of Foreign Goodwill in the Context of the Internet

In PlentymoreFirsh BL 0/029/11 (1 Feb 2011), the hearing office Mr. David Landau dismissed an application by Plentyoffish Media Inc. for the invalidation of UK trade mark number 2,453,920. The mark had been registered for dating services in class 47 with effect from 27 April 2007. The application was brought under s.47 of the Trade Marks Act 1994 on the ground that the applicant had an "earlier right" within the meaning of s.5 (4) of the Act. The applicant contended that it had run one of the world's largest on-line dating services under the sign "PLENTYOFFISH" since 2001.

The hearing officer dismissed the application on the ground that the applicant was unable to prove that it had goodwill in the UK as at the date of application for the mark.
    "28) There is no need for a business to be based in the United Kingdom to have goodwill in this jurisdiction. There is nothing to stop a website based in Canada having a goodwill in relation to a dating business in the United Kingdom, if it has customers here. In 800-Flowers Trade Mark [2000] FSR 697 Jacob J stated:
    'I questioned this with an example: a fishmonger in Bootle who put his wares and prices on his own website, for instance, for local delivery can hardly be said to be trying to sell the fish to the whole world or even the whole country. And if any web surfer in some other country happens upon the website he will simply say "this is not for me" and move on. For trade mark laws to intrude where a website owner is not intending to address the world but only a local clientele and where anyone seeing the site would so understand him would be absurd. So I think that the mere fact that websites can be accessed anywhere in the world does not mean, for trade mark purposes, that the law should regard them as being used everywhere in the world. It all depends upon the circumstances, particularly the intention of the website owner and what the reader will understand if he assesses the site.'
    A dating website is not on a par with a fishmonger in Bootle but the issue of the clientele is still the same. However, there is no evidence that prior to 27 April 2007 the visitors from the United Kingdom to the website could even be members. The nature of [the Appellant's] business is such that data as to the number and location of its members/customers should be readily available. Mr Frind gives a large amount of detail about hits on his website from the United Kingdom but signally fails to give any details of members/customers and/or revenue from the United Kingdom. He does not identify one member/customer from the United Kingdom prior to 27 April 2007. [The Appellant] has to establish a goodwill. Mr Edenborough submitted that it would be perverse to find that there was no goodwill when there were so many hits on Inc's website from the United Kingdom. He was specifically asked to identify a legal precedent in the United Kingdom which did not require customers/business within the jurisdiction to establish goodwill. He could not. The legal precedents, as rehearsed above, are clear; customers are required, whether they be described as customers or members.
    29) A web based business should be able to readily access details of members/customers by reference to location, date and number. [The Appellant] gives no details of any members/customers or advertisers from the United Kingdom at all, let alone prior to 27 April 2007. Inc has not established a goodwill prior to 27 April 2007 and so its application must be dismissed.
    30) The absence of members/customers from the United Kingdom is startling, taking into account the nature of the claims and the nature of the business. It is not just that [the Appellant]has failed to establish goodwill and so its application must fail, the reasonable inference that can be drawn from the absence of evidence is that [the Appellant] did not have any members/customers in the United Kingdom prior to 27 April 2007. It is noted that [the Appellant] filed three rounds of evidence and so had plenty of opportunity in relation to this matter. It is also very surprising that rather than supplying data of visits to its website directly, which could identify such things as unique visitors, time spent on the website, pages interrogated and location of the visitor, [the Appellant] has relied upon third party calculations.
The applicant appealed on the ground that it did not need "members" as such in the UK. All it needed was a trade connection and it certainly had that if one counted the number of hits that its website received from residents of this country.

Judge Birss QC, sitting as a judge of the High Court, dismissed that appeal. Referring to Crazy Horse, Alain Bernardin v Pavilion Properties Ltd [1967] RPC 581, Pete Waterman Ltd v CBS United Kingdom Ltd [1993] EMLR 27, Anheuser-Busch v Budejovicky Budvar [1984] FSR 413 (CA)). and Hotel Cipriani Srl and Others v Cipriani (Grosvenor Street) Ltd and Others [2010] EWCA Civ 110 (24 February 2010)[2010] EWCA Civ 110, [2010] Bus LR 1465, [2010] RPC 16 he concluded that he was bound by authority to distinguish between goodwill and reputation and that there can be no goodwill in the UK without a business here. And as he put it at paragraph [28] there can be no business without customers:
"A reputation in the UK is not sufficient, customers in the UK are required and that is so whether the business provides products or services. Deciding who constitutes a UK customer from the point of view of a services business may involve tricky questions in some cases but as a matter of law in my judgment customers of some kind are required. Thus Mr Landau applied the right test when he sought customers (or a business) within this jurisdiction."
"Customers" for the purpose of this analysis meant persons who received services through the applicant's website even if those services were free at the point of delivery. The applicant relied on the fact that it funded its services from advertising. The judge indicated that he might have entertained that point if there had been evidence that at least some visitors to the site from the UK had received services through the site or been influenced by the advertising but there was none. As one had to join the site in order to receive services there could have been no customers in the UK and hence no business here.

Though Judge Birss QC was indeed bound by a long line of decided cases not every common law jurisdiction has followed those authorities. I have to say that I saw considerable force in the argument of the applicant's counsel Michael Edenborough QC which was founded on the following well known passage from Lord MacNaghten's speech in IRC v Muller & Co.'s Margarine [2010] AC 217:
"What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there. To analyse goodwill and split it up into its component parts, to pare it down as the Commissioners desire to do until nothing is left but a dry residuum ingrained in the actual place where the business is carried on while everything else is in the air, seem to me to be as useful for practical purposes as it would be to resolve the human body into the various substances of which it is said to be composed. The goodwill of a business is one whole, and in a case like this it must be dealt with as such. For my part, I think that if there is one attribute common to all cases of goodwill it is the attribute of locality. For goodwill has no independent existence. It cannot subsist by itself. It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again."
If goodwill is the "attractive force that brings in custom" and a website generates that attraction then why should it not be protected. Might the case have been decided differently under the continental notion of concurrence déloyale?

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