Passing off is a ‘civil wrong’ or tort closely related to trade mark law. Passing off involves one trader somehow misrepresenting its goods or services as being those of another trader, or vice versa.
If a competitor passes itself off as you, it can cost your business dearly. Taking action to protect your reputation if you don’t have registered trade marks can be difficult and requires expert knowledge and experience. In this article, our intellectual property solicitors explain the basics of passing off law below.
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What is passing off?
Passing off occurs when a party, deliberately or unintentionally, offers its goods or services in a way that deceives the customer into believing they are doing business with another party.
This misrepresentation can negatively impact a business in several ways:
- its goodwill may be harmed
- It may suffer financially (revenue is lost on unsold products and services, because another business has instead benefited from those sales)
- It may suffer in terms of reputation (if the products or services sold were inferior, its reputation may be damaged)
Elements and characteristics of passing off
There is no legislation about passing off – the relevant law has been established through cases. The leading case on passing off, involving the JIF plastic lemon, tells us that there are three key requirements that must be satisfied by a claimant to prove passing off and make a claim for compensation:
1. Goodwill
Goodwill has been described as 'the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom'. Goodwill is personal property which has value. Everyone doing business with customers in this country has goodwill, but beware – a business without customers in the UK will not usually be able to sue for passing off.
The claimant in a passing-off action must prove it has established a reputation or goodwill in its goods, name, mark, or other identifying feature by using it in business so that the public associates this use with the claimant’s name personally, or with its specific products or services.
The claimant must also show that the feature distinguishes them or their goods and services from others. Marks can have many different forms, for example:
- Name (for example, ADVOCAAT).
- Style or shape of packaging (the JIF lemon being the classic example).
- Colour (for example, the purple packaging of Cadbury chocolate).
The length of time required to build up goodwill depends on the circumstances of each case. A motor manufacturer launching a new model might spend so much on advertising that the model’s name is recognised as soon as the car hits the market.
Goodwill may also be limited to a particular area, and the claimant must also prove that the other side’s act has taken place within the geographical limits of its goodwill.
While defining goodwill in a mark can be difficult, reputation and goodwill of a business is generally considered as something that provides an identity to a business and its goods or services and distinguishes them from those of its competitors. This can be a difficult characteristic to prove because it is a very subjective test, as the goodwill associated with a particular company may have very different effects on different members of the public. For consumers simply to know that a particular brand identifies certain goods or services as originating from a particular business is not sufficient, unless there is evidence of sales figures, advertising spend, press coverage, awards, web pages or social media references.
2. Misrepresentation
The second element the claimant must show is that there has been a misrepresentation by the defendant. The most common type of misrepresentation in the context of passing off is where the defendant represents that their goods are the goods of the claimant, but there are many variations on this basic idea.
The misrepresentation may be an express statement or may be implied from the defendant’s use of the same or similar distinguishing marks in respect of their goods or services which are also used by the claimant.
The misrepresentation must have led (or be likely to lead) to the confusion, deception or misleading of the public into believing its goods and services belong to the claimant, such that a distinction between the two could not be made.
Confusion alone will not suffice to prove misrepresentation – the consumers must be deceived and believe the goods to be those of the claimant or made by the claimant, instead of merely wondering whether this is the case.
Similarly, as for the number of people who need to be deceived to establish a claim, case law is clear that passing off can be established even though most people are not deceived. The courts will look at the evidence of deception considering the size and nature of the applicable market as well as sale streams. The court will then assess whether it is likely that enough individuals have made or will make the false assumption such as to cause material damage to the goodwill of the claimant.
The deception does not need to be intentional because passing off is a strict liability tort, meaning that intention is irrelevant, the conduct alone is enough.
In terms of when the misrepresentation occurred, there must usually be a misrepresentation at the point of sale. If a similarity only became apparent after a product was purchased, this would indicate the misrepresentation did not play a part in influencing the customer at the time of making the purchase.
3. Damage
The final element which a claimant needs to establish to prove passing off is to show that the misrepresentation caused damage or is likely to cause damage to the claimant’s identifiable goodwill or that such damage is reasonably foreseeable. Damage to reputation without damage to goodwill is not sufficient.
This damage must arise from reliance on the defendant’s misrepresentation and can arise:
- where the claimant has lost sales because they have been diverted to the defendant as a result of the misrepresentation; or
- as a result of dilution to the claimant’s goodwill – for example, due to the inferior nature of the defendant’s goods.
Where the defendant misrepresents their goods as those of the claimant, the claimant may also allege their reputation will be damaged.
There are several other less obvious ways in which the claimant may suffer damage. An ‘injurious association’ may occur where the defendant misrepresents it has an association with the claimant, and this claim damages or could damage the claimant’s goodwill – for example, if the defendant has a poor reputation.
A claimant may also claim for the loss of opportunity to expand where the claimant alleges a misrepresentation by the defendant has restricted the claimant’s scope to expand.
If a claimant would struggle to show it goodwill has been damaged, it may consider a ‘dilution’ or ‘erosion’ of goodwill claim. In this scenario, if another trader starts using the claimant’s mark, the claimant may be able to claim its goodwill has been damaged by the fact the public will no longer exclusively associate that particular mark with the claimant. Finally, the claimant may be able to claim for ‘initial interest confusion’ if a defendant lures customers through deception and then seeks to take advantage of the deception to close a sale – for example, by setting up a website with a very similar domain name and selling to customer who think they are actually buying from the claimant.
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Passing off and misrepresentation
For the purposes of passing off, there are different kinds of misrepresentation. However, provided damage has been suffered as a result of the misrepresentation, it is likely to be possible to establish a passing off case.
- Conventional misrepresentation – an untrue statement is made by the defendant which induces the public to enter into a contract – for example, they are made to believe the defendant’s goods or services are those of the claimant when they are not. In the Jif Lemon case, it was held that the reproduction of a lemon shaped container for lemon flavouring amounted to passing off because of the reputation and goodwill that the shape of the Jif lemon container had established.
- Reverse/inverse passing off – instead of the public believing that the defendant’s goods are those of the claimant, reverse passing off happens where the defendant makes the public believe the claimant’s goods are its own. In Bristol Conservatories, the defendant’s salesman showed prospective customers pictures of the claimant’s conservatories rather than those designed and made by the defendant. The defendant was therefore representing to customers that if they purchased from the salesman, they would get the conservatory from the photographs, designed and made by the claimant who had earned goodwill in those products.
- Extended passing off – where there is goodwill in a general class of goods rather than in a specific brand and the defendant seeks to pass off its goods as belonging to that class. The Greek yoghurt case is a good example of this kind of passing off. In this case, the owner of the famous TOTAL Greek yoghurt brand, FAGE, took American company Chobani to court for passing off by marketing and selling in the UK its yoghurt made in the United States as being ‘Greek yoghurt’ claiming it could only be labelled ‘Greek yoghurt’ if it came from Greece and was thickened by straining (as opposed to using thickening agents). The court concluded Chobani was wrongfully passing off its product as ‘Greek yoghurt’, impinging on the goodwill held in this mark by a clearly identifiable class of traders in the UK which sold yoghurt made in Greece using the traditional Greek method and ruled in favour of FAGE.
- False endorsement – where the defendant falsely represents the claimant has endorsed a business or product, and the claimant has or is likely to suffer damage as a result. Although there is no image right in English law allowing a person to control the use of their name or image, passing off can be used to prevent falsely using a person’s image or name to endorse a product, so long as the 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 established in 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.
Passing off defences
As liability for passing off is strict (there is no requirement for intention), defending a claim for passing off can be difficult. However, it is equally difficult to prove passing off.
The key defences are:
- Use of defendant’s own name
- Use other than in the course of trade
- Claimant cannot show sufficient goodwill
- Claimant’s mark is not distinctive
- Claimant’s mark is generic
- Claimant delayed in taking action
- No proof of misrepresentation
- Misrepresentation has not caused damage to the claimant (usually difficult to show once a misrepresentation has been established, and even very little damage will suffice)
- Claimant gave consent
- Claimant encouraged use of the mark
Passing off remedies
A claimant in a passing off action may claim the usual remedies that are available in intellectual property cases:
- An inquiry to establish loss
- Damages for loss of reputation and/or profit
- An account of the defendant’s profits, so the claimant takes the ill-gotten gains
- An order for the delivery up or destruction of the infringing articles or products
- An injunction, including an interim one if swift action is needed as well as an injunction to prevent further actions that amount to passing off)
Passing-off claims
Process
The process of suing for passing off is similar to starting any legal action. It is crucially important to follow the rules throughout, including before even issuing proceedings: you must make the defendant aware of what your claim is about, so they have enough information to work out what case they have to answer. Firing off a simple “cease and desist” letter is likely to be a bad move: your solicitor will be able to advise what you can and cannot say.
Bear in mind also that, although there is no remedy for someone who receives a groundless threat of a passing-off action, it is common to link passing off and trade mark infringement and a threat might well cover both – and if it extends to trade mark infringement, and the threat is groundless, the recipient of the threat or someone else damaged by it could sue you.
While most passing-off cases will go to the High Court, smaller claims could be handled by the Intellectual Property Enterprise Court at much less cost to the parties. The catch is that IPEC’s procedures are intentionally quick, to save money, and in a passing-off claim you might need more witnesses than IPEC is prepared to permit.
What evidence do you need to bring a passing off claim?
Passing-off cases are very fact-dependent. The judge needs to know that your business has goodwill, and that the defendant’s misrepresentation has damaged that goodwill. Usually, the only way to convince the judge on either of these points is to produce witnesses who will explain how seeing the identifying feature in question made them think that they were dealing with you, and that the defendant’s misrepresentation led them to do business with them instead. Survey evidence, when it is allowed, is tightly controlled to avoid the questions putting answers into the respondents’ minds: hearing it from the horse’s mouth will be much more likely to persuade the judge.
Time limitations to bringing a claim
Passing off is a tort, and the general rule for torts is that an action cannot be brought after six years from when the cause of action accrued. When you became aware of the claim has nothing to do with it – but if a competitor’s unlawful actions are diverting business, you are unlikely to be unaware of it for long.
Can you make a passing off claim if the person or business is based in a different jurisdiction?
It’s not impossible to sue a foreign defendant for passing off, but it’s certainly harder than suing a domestic defendant. The action protects your trade reputation, and that can be damaged as much by someone outside the UK as within it. Suing a foreign defendant is always a complicated business, and when you add to that the difficulties involved in an action for passing off – satisfying the court that someone overseas is doing something that damages your business – and it’s a big hill to climb. And of course, if you win, judgment might be impossible to enforce. So be very careful before suing in a situation like this. There will usually be someone in the supply chain within easier reach.
Summary
The law on passing off is complicated, and outside the experience of the majority of solicitors. Putting together the claim, including pre-litigation correspondence, is a delicate business and requires familiarity with the law and procedure. A wrong step and you could be liable for the other side’s costs in that part of the proceedings.
If you have any issues in relation to a potential passing off claim, you should seek specialist advice from our intellectual property solicitors.
