IP basics: The law of passing off

Welcome to the latest episode of Gowling WLG's Global Intellectual Property podcast, where we'll discuss a range of topics to help you protect your brands, creations and inventions.

Lucy Singer: Hello there. My name is Lucy Singer and I am an associate in the Gowling WLG Intellectual Property team. In this podcast, I will explain the basis for the tort passing off and outline the circumstances in which can be used alongside or in place of trademark 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 rights. Unlike trademarks, registered designs and copyright, passing off does not have a statutory basis and it does not need to be registered to be effective. Moreover, 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 trademark 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 a value of a business. However, as I will come to explain later, passing off should not be relied on in place of such registered rights, it should be used to complement them as part of a wider IP strategy.

Passing off in its simplest form is when a business misleads customers, whether that be intentionally or unintentionally, into believing their goods or services were actually those of another business, so as to benefit from the reputation another business enjoys.

Although the scope of the right as expanded over many years and covers a variety of similar situations, the essence of the right has remained the same, but nobody has a right to represent their goods or services 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 dependent on what is happening in the market place. It is therefore a judge made law, which tries to ensure a degree of honesty and fairness in the way trade is conducted.

Because the right has been developed by judges rather than by a statute, the requirements of this particular intellectual property right are contained in the case law. So, the starting point for the law of passing off is the House of Lords decision in Reckitt & Colman Products Limited versus Borden Inc, otherwise known as the Jif Lemon case. I believe you may grow sour after hearing the many times I will reference this case by the end of the podcast.

As you might have guessed this case concerned Reckitt's well‑known lemon shaped container for lemon juice and the bitter dispute that followed after Borden decided to begin selling lemon juice in a similarly shaped bottle. I promise I will stop making lemon puns. In finding that Borden's similar shaped lemon 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 person may pass off their goods as those of another there are also three elements of the talk which a claimant needs to establish in order to successfully 'squeeze' everything they can out of a passing off action.

OK, OK, I might have lied, there are more puns. There are three elements which are sometimes called the classical trinity. These elements can be briefly summarised as follows: 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. By way of brief explanation, the 'get‑up' of a product is typically how goods and services are branded and not the beginning lyric of a toe‑tapping James Brown song.

The second element is demonstrating a misrepresentation which is likely to lead the public to believe the goods offered are those of the claimant and the third element, establishing that damage has or will be caused. Let us take a look at each of these in a little more detail.

So starting off with goodwill. We have seen that passing off protects a business's goodwill, however this begs the question as to what exactly goodwill is and more importantly how can you demonstrate that the get‑up associated with the goods or services is recognised as being distinctive 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 custom'. It is in effect the ability of a particular brand to persuade customers to purchase goods and 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 insufficient 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 could struggle to establish goodwill in the UK even if there are people in the UK who are aware of the business. In these circumstances, a business would be better advised to rely on trademark 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 trademark to show any trade in relation to said goods or services.

As discussed above, the get‑up of goods often means how the goods are branded. It is also possible however to establish goodwill in the colour or shape of the goods themselves, although the court has recognised that it is more difficult to do so. As the courts have held, this is because the principle function of a brand name is to denote origin, the shape and get‑up of a product is not normally chosen for such a purpose. A member of the public seeing a product which looks identical to another, for example a red cricket ball, does not necessarily or even normally conclude that they come from the same source.

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. The reliance on the shape of the goods or get‑up by the consumer as identifying 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 for sales figures, advertising spent for the products, press coverage, awards, web pages or even social media references. If its material is insufficient that survey or witness evidence as to the link made by consumers between the get‑up of the products and the identity of the claimant can also be useful, albeit it must be stressed that survey evidence is inherently difficult to adduce and always needs to be carefully considered before being commissioned.

Secondly we will move on to misrepresentation. So, 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 offered by the defendant are actually the goods and 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 forms of misrepresentation. First, it is key that misrepresentation must deceive customers as to the identity of the goods, not simply confuse them. In the Jif Lemon case, Lord Oliver held that mere confusion which does not lead to the sale is not sufficient. This distinction is important. In order to establish passing off consumers must assume they 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, they may be confused as to the origins of the product but that does not mean that they have been necessarily deceived into purchasing said product. In those circumstances, misrepresentation has played an insufficient part in the customer's purchase and there is not passing off.

On the other hand, if the customer were to ask for a specific brand of product and then be sold a different product without realising, that customer has been deceived. It is worth noting at this point that this distinction between deception and confusion is another reason why passing off should not be considered as a replacement for trademark rights. The test for trademark infringement only requires the claimant to establish confusion rather than deception as to the origins of the goods or services and therefore is arguably easier to establish than passing off. Secondly, it is necessary to consider at which point of the sale the misrepresentation occurred. It is typically insufficient for any misrepresentation to occur as a result of a similarity occurring after the point of purchase. For example, in the case of Bostik and Sellotape, it was deemed insufficient for any misrepresentation to occur once the product, in this case Blu‑Tac, was removed from its external packaging. That said, in the more recent case of Freddy SpA and Hugz, it was established that misrepresentation can occur after the point of sale in certain situations. In this instance, misrepresentation occurs when a consumer is wearing a jeans given the number of markers which would identify the origin of said jeans. As such, the judge found that the owner of the goodwill is entitled to have that goodwill protected throughout the life of the relevant product and not just at the relevant point of sale.

The third general point to consider is the number of people who need to be deceived in order to establish a claim for passing off. The case law makes 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 needs to be intentional nor does it matter if intermediaries are not deceived provided the end consumer of the goods or services is deceived. All that is needed is an actionable misrepresentation and damage.

So, what other types of misrepresentation will lead to passing off? The first is the classical misrepresentation as seen in our favourite Jif Lemon case. That is the public are deceived into believing the defendant's goods or services are those of the claimant when they are actually 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 their own. The classic example of this is Bristol Conservatories case, where the sales person for the defendant was alleged to have shown prospective customers pictures of the claimant's conservatories rather than those designed by the defendant. The defendant was therefore representing to customers that if they purchased from the sales person they would be getting the conservatory in the photographs which, unbeknown to the customers, had been designed and made by the claimant who had earned goodwill on the products shown in the photographs. Accordingly, a similar misrepresentation 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 general class of goods rather than 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 French Champagne and most notably Greek Yoghurt cases. Whilst the principle basis of the tort is identical to conventional passing off, in order to establish extended passing off the 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 a 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 a person's name or image, the law of passing off can be used to prevent a false use of a person's image or name to endorse a product provided. This is on the basis that said person is able to establish significant reputation or goodwill in their name or image and that there has been a misrepresentation that the goods are endorsed, recommended or approved by that person. This right was originally developed by the Eddie Irvine and Talksport case where the defendants were successfully sued for using an image of the racing driver to promote their radio station. It has been seen more notably in the case of Fenty and Arcadia which involved a T‑shirt sold by Topshop featuring a photograph of the popstar Rihanna. The judge held that the use of the photograph in the specific circumstances of the case were misleading and found that Arcadia had infringed Rihanna's rights in passing off.

Two points in particular which one needs to be careful 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 forms of passing off we have considered, it is still based on the three principles of establishing goodwill, a misrepresentation and damage, aka the classical trinity.

The final element which a claimant needs to establish to prove passing off is to show they have suffered damage or are likely to suffer damage to their goodwill. This damage must arise from the defendant's misrepresentation and can arise in a number of ways. The first and most obvious example of damage is where the claimant has lost sales as a result of the defendant's misrepresentation. In a similar vein, damage can also occur where a claimant has lost an opportunity to expand their business whether that be geographically or within the substance of their business as a result of the defendant's misrepresentations. Finally, damage can also occur as a result of a dilution to the claimant's goodwill, for example, as a result of the inferior nature of the defendant's goods or their reputation.

So, that completes our overview of the law of passing off and 'lemon tell you', it has been a pleasure. I promise that is it now.

In summary, it is one of the more flexible intellectual property rights which can be used to protect goodwill in a wide range of situations. This flexibility and the fact that nothing needs to be registered makes it an incredibly attractive right for claimants to rely. It can also be advantageous to bring passing off claims alongside trademark claims, particularly as the provisions of unjustified threats which restrict how one alleges infringements of trademark rights do not apply to passing off. It can also be advantageous to bring passing off claims alongside trademark claims, particularly as the provisions on unjustified threats restrict how one can allege infringement of trademark rights do not actually apply to passing off. Although there have been instances where trademark claims have failed but passing off claims have been 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 trademark right and it 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 or lemon case.

Thank you for listening. Please do drop either myself or one of my wonderful colleagues a line if you have any questions about passing off or how it might fit into your business's IP strategy.

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