BSkyB Wins Passing Off Action Against Telesales Companies

BSkyB was successful in a passing off action against various individuals and businesses which misrepresented themselves as acting with or on behalf of BSkyB in the course of marketing extended warranty contracts and repair services for satellite equipment. The Court confirmed that misrepresentation could take place by conduct as well as by the making of express statements and, further, considered that a newcomer to a monopoly market place has a duty to avoid confusion with the established supplier.

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The facts of the case were complex with two separate groups of defendants, each comprising a number of individual and companies. Some used company names incorporating the word "Sky", eg. "Sky Support Services Limited" or "Skycare", which had been the name of a previous BSkyB product protection plan. The defendants’ literature and the conduct of their telephone sales to customers were alleged to be misleading. The defendants admitted to goodwill in the "Sky" name but denied misrepresentation. However, by the end of the trial it had become clear that a complete denial of misrepresentation could not be supported and the issue become one as to the extent of the passing off which had taken place.

In relation to the defendants’ marketing and telesales activities, the Court referred to a number of factors, including the corporate names of the defendants, the express or implied assertion made that the caller had access to subscribers’ account with BSkyB, misleading written materials which erroneously appeared to be official BSkyB communications and embellishment of sales scripts to encourage assumptions by consumers that calls were indeed from BSkyB or its agents.

The Court found that all of these factors combined to result in passing off. It confirmed that:

• misrepresentation could occur by conduct alone, here by failing to correct a clear and mistaken impression of customers who assumed that the defendants were connected with BSkyB; if the defendant realised that the customer was under this misapprehension and did nothing, passing off could occur; and

• in the case of a monopoly market where a new product is introduced, while the newcomer does not have an obligation to distinguish himself from the monopoly holder, care must be taken to avoid confusion, the extent of the steps to be taken being a question of fact in each case.

As time had passed, the defendants’ sales scripts were rewritten in an attempt to reduce the risk of passing off. Passing off was found then to be sporadic rather than "endemic". Using a rough and ready approach, the Court assessed the level of passing off at around 80% of sales before the re-writing of the scripts, and 50% afterwards, then reducing to an estimated 10%.

There was also some discussion of the circumstances in which the directors of the various companies should be personally liable for acts of passing off. The directors here were found liable up until the point when they made efforts to avoid passing off, as they had been deeply and personally involved in the companies’ actions. However, the Court found that it would be unfair to find directors personally liable after that point as they could not be held to be personally responsible for the ongoing failings of their sales agents.

This is a long and detailed (although quite readable) judgment from which it is clear that the case was highly complex on its facts, document heavy and no doubt extremely costly.

This type of case is notoriously difficult to prove and BSkyB were able to do so given the sheer scale of evidence available and the clear intention of the defendants to mislead consumers. In most situations obtaining credible evidence from consumers which will stand up to the scrutiny of the Court can be extremely difficult, not least because showing mere confusion is insufficient to demonstrate passing off.

In similar circumstances there might also be an action for trade mark infringement (which can include oral use of the mark) depending on the manner in which the trade mark is used. This judgment did not consider such a claim.

This type of scenario often arises in conjunction with database protection issues: where a database owner fears that third parties may be using his database of customers to sell competing product, pass off, denigrate him or otherwise act against his interests, it can be useful to incorporate "seeds" (non customer name and addresses) into a database and arrange for any sales calls or mailings to those seeds to be closely monitored. Further, issues of database right infringement and data protection may also arise.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 11/01/2007.