Intellectual Property: Passing Off

1 Introduction

In the sixteenth century the common law evolved to protect marks. A trader’s mark was an indication of the source of a product. If another trader used the same mark it would, so the reasoning went, allow the commission of a fraud on the public. The trader could bring an action for deceit to remedy the situation which later became an action for passing off. A trader who had acquired a good reputation which was associated with the use of a particular sign or mark could take action to protect that use.

An action under the common law for passing off may still be brought today, it is the oldest of the contemporary legal remedies the available to protect trade symbols which, at its simplest, is designed to prevent a trader’s competitor from passing their goods off as those of the trader. The competitor, as was stated in one leading nineteenth century case:

… cannot … be allowed to use names, marks, letters or other indicia, by which he may induce purchasers to believe, that the goods which he is selling are the manufacture of another person.¹

A successful action for passing off requires a trader to establish that a misrepresentation has been made which deceived customers as to the source of a product. While passing off, as a common law remedy, requires no proactive action on the part of a producer of goods, it can be a complex and costly action to take.

In the late nineteenth century trade mark registration brought a number of additional benefits. The legislation still worked on the basis that a trade mark was an indication of source, but the fact of registration was sufficient to give protection without having to establish misrepresentation and deceit, plus the ability to secure protection of a mark or sign prior to first use.

The Trade Marks Act 1994 provides greater protection covering the use of a mark on a dissimilar product, the recognition of a mark as an asset and extended infringement provisions. If a mark has not been registered, resort to the common law action for passing off is a clear alternative.

 

2 The Elements of a Claim in Passing Off

The three essential requirements for a successful claim were established in the famous Jif lemon case.² The elements which a plaintiff must show are:

1. Establish that goodwill or reputation connected to goods or services offered exists and is in the minds of the purchasing public.

2. Demonstrate that a misrepresentation has been made to the public which has led or is likely to lead to the conclusion that other goods or services are the same as those offered by the plaintiff.

3. Suffer or be likely to suffer damage by reason of the erroneous belief of the public.

In short, these elements come down to reputation, deception and damage.³ The claimant must be a trader who is actually trading at the time and all of the above elements must have existed or occurred at the time when the conduct about which the claimant objects took place.

A contemporary illustration of this approach can be found in FAGE UK Limited v Chobani UK Limited.⁴ The question before the High Court was whether the phrase ‘Greek yoghurt’ carried sufficient reputation and goodwill as a distinctive yoghurt made in Greece to warrant protection. Whilst the production of yoghurt can be traced back some 15,000 years, FAGE was undoubtedly assisted by the fact that all yoghurt sold in the UK during the last 25 years labelled ‘Greek yoghurt’ was strained yoghurt made in Greece. FAGE succeeded on this occasion, but the case illustrates the difficulties likely to be encountered in bringing an action for passing off.

2.1 Goodwill and Reputation

Goodwill is a form of intangible property hard to define. Goodwill attaches to a trade or business. It is a quality that generates repeat business, customers buy a product or service because of the reputation they have acquired.⁵

Goodwill can exist in several ways. It may take the form of invented words, including Nike, Adidas, Lexmark, Asda, FedEx, Psion, Q8, Xerox and many others. There are quasi-descriptive words, including Phones4U and Toys R Us, for example.

The courts are reluctant to grant a monopoly in the use of plain descriptive words.⁶ Before this happens a claimant trader must be able to show the descriptive words have become distinctive in fact or have taken on a secondary meaning.⁷ The mother and baby store ‘Mothercare’, for example, is known as a clothing store for expectant mothers and children.⁸

In general, traders may use the real names of people and places which are already in use by another trader, but there are exceptions. A small brewery in the town of Stone in Staffordshire which had operated for over 100 years selling a beer known as ‘Stone Ale’ prevented a new rival in the town from using the word ‘Stone’ in marketing its beer.⁹ Similarly ‘Swiss Chocolate’ has come to be known as chocolate made only in Switzerland¹⁰ and, more recently, ‘Greek yoghurt’ is yoghurt made in Greece in a particular way.¹¹

It remains to be seen what happens to the Redwell micro-brewery which was recently challenged by the makers of the Red Bull energy drink to change its name or face legal action. The response to the news on social media was such that Red Bull UK may have been quick to conclude that it had a potentially far more damaging PR scenario on its hands and a diplomatic retreat was in order.

Goodwill may be acquired through packaging. The Jif lemon was successfully protected from imitation because the court accepted that Reckitt & Colman had succeeded in persuading the public that lemon juice sold in plastic lemon containers was made by it and nobody else.

A style of advertising, the use of particular slogans and techniques can become a part of the goodwill of a product so that other traders who may seek to mimic that style may be prevented from doing so.¹²

Ordinarily, goodwill in reputation must be exclusive to the claimant trader but there are instances where shared reputation has been accepted, notably in the case brought by Bollinger Champagne, one of around 150 houses, to prevent the sale of Spanish sparkling wine under the name ‘Spanish Champagne’.¹³ Similar case involved ‘British Sherry’¹⁴ and served to protect Scotch whisky.¹⁵

It may not take long to establish goodwill. In the case of ‘Mr Chippy’ a mobile fish and chip shop, it took just five weeks.¹⁶ Goodwill may not endure and the passage of time may result in words becoming generic.¹⁷ When a business closes the issue is not how much time has passed before a subsequent trader can make use of a name, but whether goodwill in the name has been retained.¹⁸ There is no protection for future goodwill within the scope of passing off.

Goodwill may be limited to a defined geographical area, it does not automatically subsist throughout the whole of the UK. A shop, for example, well known in one locality may have no goodwill in another locality 100 miles away.¹⁹

2.2 Misrepresentation and Deception

Misrepresentation typically occurs where a person says or does something which wrongly suggests they are selling a product or service of the claimant, it creates a false belief of connection between the products. The sale of orange-flavoured cakes as ‘Jaffa cakes’ is not passing off, it is simply a description of the product. Selling ‘Jaffa cakes’ in packaging which mimics the market leader may well amount to passing off.²⁰ The confusion which arises must affect a substantial proportion of the public. This leaves the court with a wide measure of discretion in making a qualitative and quantitative assessment in any given case.

Confusion alone between two traders' products does not provide the basis for a passing off action. So where two traders launched at much the same time magazines called ‘Leisure News’ but neither had shown any established goodwill no action in passing off could succeed.²¹

The practice of ‘cybersquatting’, where a third party attempts to register the names of famous companies as domain names with a view to selling them on, has also been successfully challenged by actions for passing off.²²

Finally, all that a claimant trader needs to show is that a misrepresentation is likely to harm their interests, innocent or unintentional misrepresentation is no defence.²³

2.3 Damage

Generally, a claimant trader must be in a position to evidence damage which has been incurred or, where an injunction is sought, the likelihood of damage. In this context, damage may result from lost sales and other provable losses, a diminution in the value of goodwill may also arise.²⁴