No UK Business? No Problem for Cipriani Passing Off

Those suing for passing off in the English courts must prove a business and associated goodwill in the UK. Or must they?

Lack of a UK business has long been regarded as a textbook example of a fatal flaw in an English passing off case. Without a local business, the courts have long been sceptical as to the commercial attractiveness or “goodwill” of a brand in this country. The position may not be so inflexible now, though, following the recent High Court decision in Hotel Cipriani SRL and Ors. v Cipriani (Grosvenor Steet) Ltd. and Ors. ([2008] EWHC 3032 (Ch) ).

The Court’s reasoned approach to English goodwill in a foreign business offers a fresh and modern perspective and gives a new angle on protection for international businesses with significant custom from the UK. 

Ciprianis at War

The tangled background to the dispute involved decades of parallel trade by members of the Cipriani family and its business associates in hotels and restaurants around the world bearing the well-known CIPRIANI name. Its fame derived primarily from the internationally famous Harry’s Bar in Venice, founded in 1931 and the home of the Bellini cocktail and beef carpaccio, and the world-famous luxury hotel, Hotel Cipriani, in the same city, founded in 1956.

Other hotels and restaurants founded in Italy and the US and including CIPRIANI in their name or branding were sold off over the years, and continued to operate under their original names. Disputes and litigation erupted from time to time and agreements were signed to settle litigation in the US, where each party agreed to refrain from use of CIPRIANI on its own, and in Europe, where the parties agreed in 1967 that the original family business would have the exclusive right to use CIPRIANI in relation to hotel or restaurant services.

In April 1996, the original family business applied to register CIPRIANI as a CTM for hotel and restaurant services. The CTM was duly granted.

In April 2004, owners of sold-off parts of the business opened an upmarket Italian restaurant in London’s Mayfair, with eye-watering prices and a star-studded clientele. The restaurant was called CIPRIANI LONDON but the name was often abbreviated by customers and staff to simply CIPRIANI.

The original family sued for infringement of its CTM and passing off.

Goodwill Hunting

Much of the decision addressed issues relating to likelihood of confusion, whether the defendants could rely on an own-name defence, and whether the claimants could be said to have acted in bad faith when applying for the CTM. The Court found for the claimants on all these points.

There was no doubt that the claimants’ CTM gave them locus to sue for infringement, but the claimants’ entitlement to sue for passing off was far from clear.

The claimants’ Hotel Cipriani and other CIPRIANI establishments were located in Italy. The claimants had never traded in the UK. It was common ground that the claimants enjoyed a reputation in CIPRIANI in the UK at the time Cipriani London opened in April 2004. However, the defendants argued that goodwill was inextricably linked to a business, and that without a business in the UK there could be no business goodwill here. Following Anheuser-Busch Inc. v Budejovicky Budvar NP [1984] FSR 413, mere reputation in the UK was not enough.

In an extensive review of the authorities, the judge noted that there had been a steady drift toward recognising that goodwill was a more flexible concept now than it was a century ago when it was famously defined. In respect of services in particular, as far back as 1964 the making of hotel bookings abroad from the UK was recognised as giving rise to goodwill in the UK (Sheraton Corp. of America v Sheraton Motels Ltd. [1964] RPC 202).

It was clear that since Sheraton it had become increasingly common for UK travellers to research and make bookings for international hotels and restaurants from home, whether independently or through travel agents. This was due in large part to an exponential growth in international travel, a rise in the use of English internationally, the availability of Internet information on international hotels and restaurants, and the availability of credit cards as a means of securing advance bookings.

In this case, the Hotel Cipriani was clearly world famous. It was rated one of the top 10 hotels in the world, and there was evidence that it was very well-known to British travellers. Between 2001 to 2007 British guests occupied 28% - 33% of the hotel’s rooms, and the hotel regularly received reservations for its rooms and restaurants directly from the UK through its website and by telephone and email.

In this case, there was ample evidence not only that the Hotel Cipriani enjoyed a substantial number of British visitors, but also that many of those visitors booked rooms and restaurant tables from the UK, either independently or via travel agents. The judge found that the claimants owned goodwill in the UK in CIPRIANI, the common abbreviated name of the hotel, and went on to find a misrepresentation by the Mayfair restaurant and ultimately passing off.

Comment

The judge did not go so far as to suggest that every foreign hotel or restaurant with a reputation in the UK would own goodwill in the UK. Goodwill was a matter for evidence, and although a reputation arising from entries in guide books, for example, would help, what was really needed was actual custom arising from the UK.

It is unclear whether a foreign hotel or restaurant with a reputation and customers in the UK, but which could not show bookings made from the UK, would succeed. Such establishments number more than one might think. Fast food and informal restaurant chains abroad are a good example; they are commonly seen and patronised by the British abroad but do not typically accept bookings. However, the mere fact that they are not booked does not mean that British travellers do not know them by name and intend to make visits to them as part of their next trip.

Nonetheless, without proof of actual bookings or enquiries from the UK, a claimant relying on such a reputation is likely to face an uphill battle in proving goodwill. In such cases a witness-identifying exercise to prove knowledge of, past visits to and intent to re-visit such establishments on future trips is likely to prove essential.

Hotels and restaurants are just one small part of the international business landscape, however. Many other types of businesses with international reputations have no business nexus to the UK, but enjoy a reputation here among British travellers through their exposure to advertising, products and services abroad. If it is not possible for British customers to buy or book the goods or services from the UK, however, it is unlikely that the reputation would be held to give rise to goodwill in the UK.

Even if a foreign business does take bookings or purchases from the UK, the cost of proving the existence of goodwill to the required standard can be high. Foreign businesses with an interest in the UK market, even if they have no current business here, would be much better served by a UK trade mark registration or CTM, since there is no need to prove goodwill to succeed in an infringement action.

Such proceedings are typically less costly than passing off actions, and the small outlay involved in securing rights is typically a very favourable investment in return for significant enforcement advantages.