Passing off is a ‘civil wrong’ or tort (where a party unfairly causes another to suffer loss or harm) connected to intellectual property (IP). This sometimes involves one trader misrepresenting its goods or services as being those of another trader, or vice versa.
Passing off can cost your business dearly and enforcing against an infringer can be difficult if you don’t have formal IP protection. Find out the basics of passing off law below.
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 buying the goods or services of another party.
This misrepresentation can negatively impact a business in several ways:
- its goodwill may be harmed
- it may suffer financial (revenue is lost on unsold products and services as another business has instead benefitted from such 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 specific legislation relating to passing off – the relevant law has been established through case law. There are three key requirements that must be satisfied by a claimant to prove passing off and make a claim for compensation:
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. The courts do not accept that a business with customers in this country may exist without goodwill.
However, the claimant 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 its specific products or services.
The claimant must also show that the mark distinguishes them and/or its goods and services from others. Marks can have many different forms, for example:
- Style or shape of packaging (for example, the Toblerone triangular prism)
- Colour (for example, the purple packaging of Cadbury chocolate)
The length of time required to establish goodwill varies depending on the circumstances of each case. However, to succeed, the claimant must also prove the infringing act has taken place within the geographical limits of its goodwill.
Whilst 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.
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.
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, deceit and 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 tort which attracts strict liability, 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.
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; and
- 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 infamous 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 passing off is a strict liability offence, 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)
- Claimant gave consent
- Claimant encouraged use of the mark
Passing off remedies
A claimant in a passing off action may claim any of the following remedies:
- An inquiry to establish loss
- Damages for loss of reputation and/or profit
- Seek an account of the lost profit
- An order for the delivery up or destruction of the infringing articles or products
- Injunctive relief (either an interim injunction if you need to act quickly or an injunction to prevent further actions that amount to passing off)
Passing off cases
Starbucks v BSkyB
The claimant, Starbucks (HK), was the operator of the largest subscription TV service in Hong Kong through its NOW TV channel; however, it had not yet begun broadcasting to UK customers. The defendant, Sky, had launched an internet-based pay-per-view channel in the UK operating under the name NOW TV. The claimant objected and brought an action for passing off. The UK Supreme Court upheld the longstanding principle that to bring an action in passing off the claimant must have more than a reputation in the UK – it must have actual paying customers and the fact the service is one known to individuals living in the UK does not affect this requirement.
Rihanna v Arcadia/Topshop
Rihanna brought a claim against Topshop for damages of £3.3m following the sale by Topshop of t-shirts featuring a photograph of her taken during a video shoot by an independent photographer, who had licensed the use of the image to Topshop. As Rihanna had not given her consent, she argued that her image on the t-shirt amounted to a misrepresentation that she was associated with it and encouraged the public to buy it, and this resulted in damage to her reputation and goodwill as a fashion icon. The High Court decided in favour of Rihanna and found that the sale of the t-shirt amounted to passing off as it was likely to lead people to buy it in the false belief that she had approved or authorised it. The High Court granted an injunction prohibiting Topshop from selling the garment without informing purchasers that it had not been approved or authorised.
Sofa Workshop v Sofaworks
The Sofa Workshop had registered two EU Trade Marks for the word mark SOFAWORKS and brought a claim for trade mark infringement against Sofaworks on the basis of these EU Trade Marks, as well as a claim for passing off. Whilst the trade mark infringement claim failed, the passing off claim was successful. The Sofa Workshop had goodwill in the UK and Sofaworks’ use of the SOFAWORKS brand amounted to a misrepresentation leading or likely to lead a proportion of relevant actual consumers to believe that Sofaworks’ goods were the goods of The Sofa Workshop which had caused material damage to The Sofa Workshop’s goodwill.
The law on passing off is complicated. If you have any issues in relation to a potential passing off claim, you should seek specialist advice from our IP solicitors.