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How to prove 'passing off'

14 December 2017

'Passing off' does not have a statutory basis and doesn't need to be registered to be effective. In this podcast, Michael Carter explains the basis for the tort of 'passing off' and outlines the circumstances in which it can be used alongside, or in place of, trademark rights to protect 'goodwill' in a business.

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Transcript

Hello everyone, my name is Michael Carter and I am a principal associate in the Gowling WLG Intellectual Property team. In this podcast I will explain the basis for the tort of 'passing off' and outline the circumstances in which it can be used alongside, or in place of, trade mark rights to protect 'goodwill' in a business.

It is probably fair to say that passing off is, for many, one of the less familiar forms of intellectual property right. Unlike trade marks, registered designs and copyright, it does not have a statutory basis and it does not need to be registered to be effective. However, rights in passing off are still incredibly valuable because they protect one of the most valuable assets of a business - which is the value of the brand itself - otherwise known as 'goodwill'. Having the ability to protect the value of the brand without it being necessary to spend money on filing for trade mark registrations to cover each and every way the brand is used or presented is therefore very attractive, particularly given that the value of a brand can account for a significant percentage of value of a business. However, as I will explain later, passing off should not be relied on in place of such registered rights - it should be used to supplement such rights as part of a wider IP strategy.

Passing off occurs at its simplest when a business misleads customers into believing their goods were actually those of another supplier so as to benefit from the reputation that other supplier enjoys. Although the scope of the right has expanded over many years and covers a variety of similar situations, the essence of the right has remained the same: That nobody has any right to represent his goods as those of someone else. It can, in effect, be seen as preventing a form of unfair competition where customers are deceived as to the origin of the goods they are purchasing. It has been described as being:

"closely connected to and dependant upon what is happening in the marketplace. It is a judge-made law which tries to ensure…a degree of honesty and fairness in the way trade is conducted."[1]

Because the right has been developed by judges rather than via statute, the requirements of the tort are contained in the case law. There are a number of key cases, which we need to briefly consider.

First, the starting point for the modern law of passing off is the House of Lords decision in Reckitt & Coleman Products Limited v Borden Inc[2]., otherwise known as the "Jiff Lemon Case". This case concerned Rekitt's well know lemon shaped container for lemon juice and the dispute related to Borden's decision to begin selling lemon juice in a similarly shaped container.

In finding that Borden's similar container infringed Reckitt's rights in passing off, Lord Oliver held that whilst the law of passing off could be summarised in the short general proposition that no man may pass off his goods as those of another, there are three elements of the tort which a claimant needs to establish in order to succeed with an action. There are three elements, which are sometimes called the "classical trinity". These elements can briefly be summarised as:

  1. establishing a goodwill or reputation in the goods or services by association with a particular 'get up' which would be recognised by the public as distinctive of the claimant's goods and services.
  2. demonstrating a misrepresentation which is likely to lead the public to believe the goods offered are those of the claims; and
  3. establishing that damage has or will be caused.

Let's take a look at each of these in a little more detail.

Goodwill

We've seen that passing off protects a business' goodwill. However, this begs the question as to what exactly goodwill is and, more importantly, how one demonstrates that the 'get up' associated with the goods or services is recognised as being distinctive of them so as to establish sufficient goodwill in those goods and services?

As to the first question, goodwill is described in the case law as "the attractive force that brings in the custom". It is, in effect, the ability of a particular brand to persuade customers to purchase goods or services by identifying them as originating from a particular business.

The requirement for trade, as opposed to simply having a reputation, is important. The fact that consumers know that a particular brand identifies certain goods or services as originating from a particular business, is not sufficient unless there has actually been appreciable trade in those goods and services.

This is particularly important for foreign businesses who want to establish a claim in passing off because they need to be able to establish trade in the UK in the goods and services in question, over and above a reputation. A business which is conducted completely outside the UK will struggle to establish goodwill in the UK, even if there are people in the UK who are aware of the business, and even if they are customers when they go abroad. In these circumstances, a business would be better advised to rely on trade mark rights as part of a wider IP strategy because for an initial period of five years, there is no requirement for the owner of a trade mark to show any trade in relation to the goods or services.

The 'get up' of goods or services often means how the goods or services are branded. It is also possible, however, to establish goodwill in the shape of goods themselves, although the courts have recognised that it is more difficult to do so. As the courts have held, this is because:

"the principal function of a brand name is to denote origin, the shape and get up of a product are not normally chosen for such a purpose. A member of the public seeing a product which looks identical to another (a red cricket ball is an example) does not necessarily, or even normally, conclude that they come from the same source"[3]

In order to be able to establish goodwill in the shape of a product, the claimant must prove that the shape of its goods has come to denote a particular source to the relevant public and that the public rely on the appearance of the goods as indicating that the origin of the goods is the claimant. This reliance on the shape of the goods, or get up, by the consumer as identifying the origin of the goods is paramount.

So how can a business provide that it has established goodwill in particular goods or services which are sufficient to establish passing off? The circumstances of each case will be different, but often the necessary goodwill can be established by adducing evidence of sales figures, advertising spent for the products, press coverage, awards, web pages or social media references. If this material is not sufficient then survey or witness evidence as to the link made by consumers between the 'get up' of the products and the identity of the claimant will also be useful - albeit survey evidence is inherently difficult to adduce and always needs to be carefully considered before being commissioned.

Misrepresentation

However, it is not sufficient for a business to establish that it owns goodwill. The second element of the test is to demonstrate that a misrepresentation has taken place which leads or is likely to lead the public to believe that goods or services it is offering are actually the goods or services of the claimant. For the purposes of passing off, the misrepresentation can take any number of forms, each of which is known as a different 'form' of passing off. Provided that damage has been suffered as a result of the misrepresentation, it is likely to be possible to establish an arguable passing off case.

Before we consider the different forms of passing off which have been established over the years, there are a number of general points which apply to all of the forms of misrepresentation.

First, it is key that the misrepresentation must deceive consumers as to the identity of the goods, not simply confuse them[4]. In the Jiff Lemon case, Lord Oliver held that "Mere confusion which does not lead to sale is not sufficient".

This distinction is important. In order to establish passing off, consumers must assume that consumers believe the goods to be those of the claimant or made by it, as opposed to merely wondering whether this is the case. Therefore, if a customer asks for a type of product without specifying the brand he may be confused as to the origins of the product, but he has not been deceived into getting it. In those circumstances misrepresentation has played no part in his purchase and there can be no passing off. On the other hand, if the customer asks for a specific branded product but is sold something else without realising it, he has been deceived.

It is worth noting at this point that this distinction between deception and confusion is another reason why trade mark rights can be more helpful than passing off, because the test for passing off only requires the claimant to establish confusion, rather than deception, as to the origins of the goods or services and is therefore, arguably, easier to establish.

The second point is the number of people who need to be deceived to establish a claim for passing off? The cases are clear that it does not have to be everyone - passing off can be established even though most people are not deceived. The correct approach appears to be to consider the evidence of deception in light of the size and nature of the market in question and the channels of sale, and then assess whether it is likely that sufficient individuals have made or will make the false assumption such as to cause material damage to the goodwill of the claimant.

The final general point is that the deception does not need to be intentional. Nor does it matter if intermediaries are not deceived, provided the end consumer of the goods or services is. All that is needed is an actionable misrepresentation and damage.

So, what are the types of misrepresentation which will lead to passing off?

The first type is the classical misrepresentation as seen in the Jiff Lemon case; that is that the public are deceived into believing that the defendant's goods or services are those of the claimant when they are not.

A related form of misrepresentation is known as "reverse" or "inverse" passing off. Rather than making the public believe that its goods are those of the claimant, reverse passing off occurs where the defendant makes the public believe that the claimant's goods are actually its own. The classic example of this is the Bristol Conservatories case where the salesman for the defendant was alleged to have showed prospective customers pictures of the claimant's conservatories rather than those designed and made by the defendants. The defendant was therefore representing to customers that if they purchased from the salesman they would be getting the conservatory in the photographs, which had been designed and made by the claimant who had earned goodwill in the products shown in those photographs. Accordingly, this would be sufficient to establish passing off.

A third form of misrepresentation is what is known as 'extended' passing off. This occurs where there is goodwill in a general class of goods, rather than in a specific brand, and the defendant seeks to pass off their goods as belonging to that class. Examples of this type of passing off are the Spanish Champage, Dutch Avocaat and, most recently, Greek yoghurt cases.

Whilst the principle basis of the tort is identical to conventional passing off, in order to establish extended passing off a claimant will also need to show that it belongs to a class of traders whose products are known by a distinctive name and that the class can be defined with reasonable precision. It must also show that the name by which the products are known has come to denote a particular kind of product which has recognisable characteristics which distinguish it from other products, and that the public are motivated to buy the product by reason of those characteristics.

The final form of misrepresentation to consider is that of misrepresentation by false endorsement. Although there is no "image right" or "character right" in English law which allows one to control the use of his or her name or image, the law of passing off can be used to prevent falsely using a person's image or name to endorse a product provided that person is able to establish significant reputation or goodwill in their name or image and that a misrepresentation that the goods are endorsed, recommended or approved of by that person. This right was originally developed by the Eddie Irvine v Talksport case where the defendants were successfully sued for using an image of the racing driver, Eddie Irvine, to promote their radio station. It has been seen more recently in the case of Fenty v Arcadia which involved a t-shirt sold by Topshop featuring a photograph of the pop star Rihanna. The judge held that use of the photograph in the specific circumstances of the case was misleading and found that Arcadia had infringed Rihanna's rights in passing off.

Two points in particular which one needs to be careful of in false endorsement cases is that not all uses of a person's name or image will be an endorsement, and that endorsement is not the same as merchandising where the products may bear the image of a certain person but have no connection with them - simply using the image is unlikely to be passing off. Each case of false endorsement will be highly fact specific and based on the evidence. However, like all of the forms of passing off we have considered, it is still based on the three principles of establishing goodwill, a misrepresentation and damage.

Damage

The final element which a claimant needs to establish to prove passing off is to show that the claimant has suffered damage, or is likely to suffer damage to his goodwill. This damage must arise from the reliance of the defendant's misrepresentation and can arise in a number of ways:

The first and most obvious instance is where the claimant has lost sales as a result of the Defendant's misrepresentation. However damage can also occur as a result of dilution to the claimant's goodwill, such as, for example, due to the inferior nature of the Defendant's goods or their reputation.

Conclusion

That completes our overview of the law of passing off. In summary, it is a very flexible right which can be used to protect goodwill in a wide range of situations. This flexibility, and the fact that nothing needs to be registered to enforce the right, makes it incredibly attractive to claimants.

It also can be advantageous to bring passing off claims alongside trade mark infringement claims, particularly as, the provisions on unjustified threats which restrict how one alleges infringes of trade mark rights, do not apply to passing off. However, although there have been instances where trade mark claims have failed but passing off claims have proven to be successful, this is not common and passing off should form part of a wider IP enforcement strategy. This is because it is primarily an 'offensive' trade mark right and does not have the same deterrent effect as other registered IP rights. So there we have it - that is the law of passing off in a nutshell. Thank you for listening. Please do let me know if you have any questions about passing off, or how it might fit into your business' IP strategy.

Footnotes

[1] Mr Justice Laddie, Eddie Irvine v Talksport Ltd
[2] Reckitt & Colman Products Ltd. v Borden Inc. [1990] 1 WLR 491
[3] Floyd J (as he then was) stated in Numatic International Ltd v Qualtex UK Ltd [2010] 1237 (Ch), [2010] RPC 26
[4] Moroccanoil Israel Ltd v Aldi Stores Ltd [2014] EWHC 1686 (IPEC)


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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