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IP Cases & Commentary – Details

05 November 2012

Starbucks (HK) v Sky, EMI v Sky -To Stay or Not to Stay: That is the Question

On 13th September 2012, the Court of Appeal upheld a stay of infringement proceedings pending the outcome of an invalidity application at the Office for Harmonisation in the Internal Market (OHIM) in respect of alleged trade mark infringement. What makes the case interesting is that, whilst upholding that stay, the Court of Appeal simultaneously upheld a decision not to stay infringement proceedings where invalidity proceedings had also been commenced at OHIM. A brief analysis of the two gives some insight as to the thinking of the Courts in such stay proceedings.

Some legal background

Under Article 104(1) of the Community Trade Mark (CTM) Regulations, a court hearing a CTM infringement action shall, “unless there are special grounds for continuing the hearing”, stay the proceedings where the validity of the CTM is already in issue before another court or where an application for revocation or declaration of invalidity has already been filed at OHIM. In short, there is a presumption of staying the infringement proceedings unless there are “special grounds”.

EMI v Sky (first instance)

Avid readers of our Trade Mark Newsletter will recall (Issue 64 “Now That’s What I Call a Balance of Convenience”) Sky’s success in seeking a stay of infringement proceedings pending conclusion of an invalidity action at OHIM. EMI, owner of the NOW CTM and promoter of albums sold under the NOW THAT’S WHAT I CALL MUSIC brand, sued Sky for trade mark infringement and passing off in relation of Sky's proposed use of the ‘NOW TV’ name for an imminent television service. Sky had sought an interim injunction to stop EMI using the name NOW TV or associated logo and a stay of the proceedings pending the outcome of an application to OHIM to have the NOW mark removed from the register on the basis of alleged non-use. The stay was granted.

Starbucks (HK) v Sky (first instance)

The EMI case was joined, at Court of Appeal, with another: Starbucks (UK) (not to be confused with the coffee chain) v Sky. At first instance, Mr Justice Arnold had reached an entirely different conclusion based on a separate set of facts. As we reported in the last issue, EMI’s argument that irreparable damage would be sustained to the NOW brand was significantly undermined by it having already reached an agreement with Starbucks (HK) which allowed Starbucks to use the name NOW in relation to a TV service. Subsequent to the action between EMI and Sky, Starbucks (HK) commenced its own action against Sky alleging trade mark infringement (relying on its CTM for the sign NOW) and passing off in respect of the same proposed launch, on the basis that NOW TV would infringe its CTM for a figurative mark containing the word ‘“now’”, registered in relation to a range of goods and services including “radio and television communication services; television broadcasting services; broadcasting and transmission of radio and television programmes; cable television broadcasting; transmission of music, films, interactive programmes, videos, electronic computer games" in Class 38.

Starbucks had claimed that it had goodwill and reputation in the UK in the names NOW TV and NOW, such that Sky's use of NOW TV would amount to passing off. Starbucks (HK)’s parent company, PCCW, had significant commercial activity in Hong Kong, and accordingly substantial goodwill and reputation had been acquired within the Chinese population in the UK in the NOW TV name. Furthermore, between 2000 and 2002, PCCW had offered an internet television service in English to consumers across the globe through the domain name and that although the use of the service had ceased, the goodwill had not disappeared. Moreover, another company in the PCCW group had been using the name NOW and the NOW mark under licence since 2004 in relation to the provision of broadband services, and those services were similar enough in nature for any accumulated goodwill to be relevant to a passing off action.

In response, Sky had applied to OHIM to invalidate Starbucks' NOW mark as being devoid of distinctive character and/or descriptive in relation to the services for which it was registered. Even if the CTM were found to be valid, Sky argued that the scope of protection of that mark would be so narrow that it would not be infringed by the signs which Sky planned to use, because there was no likelihood of confusion with NOW TV. Sky also denied passing off.

Mr Justice Arnold ordered an expedited trial, refusing Sky's application for a stay pending the outcome of the OHIM invalidity proceedings. In his view:

• Starbucks had established special grounds, as required under Article 104(1) of the Community Trademark Regulation, to support its submission that a stay of infringement proceedings should not be granted. Sky only sought a stay after it had been issued with a letter before action;

• if the stay were granted, it might take years to resolve the invalidity proceedings before OHIM; and

• it would not be right to stay the passing off claim - which was not affected by Article 104(1).

Court of Appeal Decision

In one swift blow, the Court of Appeal dismissed both appeals against the first instance decisions of Mr John Baldwin and Mr Justice Arnold, respectively: one, to stay, the other not to stay. Lord Justice Etherton gave the principal judgment.

When are there ‘special grounds’ within the meaning of Article 104(1)?

The Court emphasised that there was very little authority on the meaning of "special grounds" in Article 104(1); however, the decision of Mr Justice Lewison in Guccio Gucci Spa v Shipton & Heneage Ltd [2010] EWHC 1739 was helpful. Guccio is a recent decision and came out after the first instance decisions in EMI v Sky and Starbucks (HK) v Sky. The conclusions were as follows:

• The policy objective of Article 104(1) was to avoid inconsistent decisions. This policy was particularly important in the context of a CTM given its “unitary character”.

• The presumption in favour of a stay under Article 104(1) is a strong one. This was because of the importance of the policy of avoiding inconsistent decisions in the particular context of CTMs (as mentioned above). Consequently, it will be a “rare and exceptional case” where there were special grounds within Article 104(1).

• “Special grounds” relates to factual circumstances specific to the given case. It was irrelevant whether there were systemic differences in terms of rules of evidence, procedure and powers of case management applicable to proceedings in the CTM courts of different member states and at OHIM. For those reasons, it was irrelevant that an application to OHIM might take a long time.

• Sky's argument that “special grounds” must relate only or primarily to circumstances which would not give rise to irreconcilable decisions was rejected. The CTM Regulation itself expressly contemplated that there could be circumstances in which there were inconsistent decisions concerning the same CTM. The issue to be addressed here was whether, on the making of a counterclaim for invalidity or revocation, the infringement claim should be permitted to proceed notwithstanding the risk of inconsistent decisions.

• The general need of a business to know ‘where it stood’ is not sufficient for “special grounds”. The urgency must be such as to “surmount the heavy presumption in favour of a stay”, bearing in mind that protective and provisional measures might be available to protect the claimant in the event of any delay.

• It was not relevant that the application to OHIM had been made on a purely reactive basis to a threat of infringement proceedings.

How does this apply in Starbucks (HK) v Sky?

The Court of Appeal did not agree that the reactive nature of Sky's applications to OHIM was of any relevance to the determination of the stay application. Similarly, the fact that there was a passing off claim was irrelevant: it was commonplace that infringement claims were accompanied by passing off claims. Nonetheless, the first instance judge, Mr Justice Arnold, was entitled to take the view that there were exceptional circumstances of urgency. Sky had had plans to launch its service imminently (it did in fact do so on 17 July 2012), and it was in its interests to be able to do so. It was not a case in which it would have been appropriate to delay Sky's launch by interim relief. As such, the Court considered the circumstances ‘unusual’ and Sky’s appeal against the refusal to stay was dismissed.

How does this apply in EMI v Sky?

The Court of Appeal indicated that the first instance judge, Mr John Baldwin, was both entitled and right to take a different view of the urgency from that taken by Arnold J in the Starbucks (HK) proceedings. He had found that EMI had shown no urgency in launching a NOW-branded music TV channel and had no definite plans. Further, EMI had reached an agreement with Starbucks (HK) for the latter to be free to use the NOW mark in relation to a TV service in the near future. In contrast to the position in the Starbucks (HK) proceedings, the first instance Judge concluded, and was entitled to conclude, that EMI can be adequately compensated in damages for any loss. As such, EMI’s appeal against the decision to stay was dismissed.

What does it all mean?

The Court of Appeal has set out in this judgment some clear and helpful guidance on the approach that a CTM court should take on an application for a stay of infringement proceedings under Article 104(1) of the CTM Regulation. It has made it clear that factors such as the existence of passing off claims, the length of time it might take for invalidity proceedings to come before OHIM, or the reactive nature of an application to OHIM, will not constitute special grounds.

The divergent outcomes highlight the fact-specific nature of applications under Article 104(1). The key difference between the two actions was the view taken by the respective judges in the High Court of the urgency of the situation, and whether an interim injunction would have been appropriate.

Useful links

Full text: Starbucks (HK) Ltd v British Sky Broadcasting Group Plc & Ors [2012] EWCA Civ 1201

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