What is Passing off?
Passing off is a little understood intellectual property right.
On a superficial level it protects trademarks, trade dress and reputation of businesses.
Passing off protects businesses and does more than that.
Much more.
One of the reasons it does, is that it adapts to apply in the ever-changing business environment to protect the true source of products and services: the business.
Passing Off Protection
Passing off can protect a business against competitors:
- using unregistered and unregistrable trademarks
- selling second-hand goods of a business as new goods
- using registered trade marks, where registered trademark infringement claims have no hope of succeeding
- selling imitation goods and services, or re-selling goods and services of the business
- stealing credit for technological developments
- claiming that its product or services is:
- made of or uses its technology
- licensed from another company, or
- manufactured under licence,
when it’s not.
Purpose of Passing Off
Passing off claims enforce fair trade practices against an exacting standard: honesty.
It protects against unfair competition in its own unique way.
- Dishonesty does not need to be intentional. Whether or not the competitor intends to do the wrong thing or not doesn’t come into it. The dishonesty for passing off is an entirely different type to that required for business fraud cases
- Deception of the buying public – and those that can influence purchasing decisions - can’t even be unintentionally unfair
- Buyers of goods and services who are deceived don’t even need to know of the business that is protected
- A competitor’s entire distribution chain can be brought to a halt in an appropriate case
What is Passing Off?
Originally, the most often legal test applied by courts for passing off claims required 5 elements to make out the claim: (Erven Warnick BV v Townend & Sons (Hull) [1979] AC 731):
- a misrepresentation
- made by a trader in the course of trade
- to prospective customers of his or ultimate consumers of goods or services supplied by him
- which is calculated to injure the business or goodwill of another trader in the sense that this is a reasonably foreseeable consequence, and
- which causes actual damage to a business or goodwill of the trader by whom the action is brought or, in a quia timet action, will probably do so.
Leading Passing Off Case
The most common test now is one distilled down to 3 elements, from Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, commonly known as the "Jif Lemon” case:
- reputation
- misrepresentation, and
- goodwill.
These 3 different elements were explained in the Jif Lemon Case:
- Reputation:
[The claimant] must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by with the identifying "get-up" [ie trade dress] (whether it consists simply of a brand name or a trade description or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services.
- Misrepresentation:
[The claimant] must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of [the claimant]
- Damage:
[The claimant] must demonstrate that he suffers or, in a quia timet action, is likely to suffer damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or services is the same as the source of those offered by the [claimant].
In summary, it distils down to:
- a competitor deceives purchasers into believing that they are getting goods or services of another business, when the purchaser was really getting the goods of the claimant
- the competitor misrepresents the circumstances to put its own goods or services as the goods or services of the claimant.
So if a competitor deceives a substantial number of potential purchasers into thinking another business’s goods or services are theirs, then it’s passing off.
There are two prerequisites though:
- the claimant must have goodwill and reputation, in the passing off sense, and
- the business of the claimant must be caused damage by something that the competitor does
Independent Claim: Grounds to Sue
Like all the intellectual property rights, registered trademark infringement and passing off apply concurrently.
If a business has a registered trademark, it can sue for passing as well as for registered trade mark infringement. They often do. Passing off catches a wider range of unlawful conduct.
If a business doesn’t have a registered trade mark, it can still sue for passing off and protect its brand and reputation.
For example:
In Montgomery v Thompson (1891), the "Stone Ales" case:
Mr Thompson owned registered a trademark. It lapsed. He no longer had registered trademark protection.
Mr Montgomery started using the trademark, because he thought protection of the trademark had ended with the lapse of the registration.
Mr Montgomery was sued by Mr Thompson in a passing off claim.
Mr Thompson said that his business had the required goodwill, Mr Montgomery had made a misrepresentation that his business was that of Mr Thompson's (by using "Stone" in its marketing).
Mr Thompson suffered damage as a result: loss of profit, caused by diversion of trade.
Mr Montgomery was prevented from using the trademark in a claim for passing off, after the court granted an injunction to Mr Thompson.
The cause of action in passing off was independent of any registered trade mark rights which Mr Thompson might have had.
Burden of Proof
The burden of proof is with the claimant - the business harmed - to show on the balance of probabilities:
- it has goodwill attached to the goods or services which it supplies, and
- the misrepresentation of the competitor affected the public to buy from the defendant when they thought they were buying from the claimant
Criminal Offence?
It’s not a criminal offence to pass off one business as another.
It gives rise to civil liability, primarily for damages, which is a civil remedy.
Businesses passing off are also likely to be on the receiving end of an injunction to halt further passing off, as was the case with Mr Montgomery in the example above.
That's not to say that the same facts giving rise to a passing off claim would not give rise to a criminal offence of some description. It depends on the facts of the case.
Goodwill protected by Passing Off
Passing off doesn’t protect trade marks used by a business directly.
No, the protection is wider - and better - than that.
It protects against harm to the goodwill and reputation of the business, which is:
- the standing or recognition that the business has
- as result of sales, marketing and promotion of its products and services
- to the relevant market.
That’s recognition brought about primarily by sales, but also by marketing and promotion of the goods and services of the business.
In passing off language, it’s known as goodwill. The case law though uses the language of "goodwill" and "reputation" interchangeably.
What does Goodwill mean in Passing Off?
In the law of passing off, goodwill is a legal concept, not a business concept. There are similarities between the two, but the differences are significant to sustain a legal claim - or defend one successfully.
Goodwill is the proprietary right - the right that is owned by a person - which is protected by passing off.
Goodwill the attractive force which brings in business: the power of attraction that brings customers into the business and buy.
Passing off protects against damage to the goodwill when a competitor uses some indication, signal or suggestion that its goods and services are those of the owner of the goodwill.
Being more legalistic, passing off protects against:
any act by a competitor that which misappropriates the goodwill of the business which is likely to be harmed by the defendant's misrepresentation: Reddaway v Banham (1896)
A business can protect its goodwill using the law of passing off against misrepresentations made by other businesses and its direct competitors which cause damage to its goodwill.
That means that passing off is not limited to protecting visible trade marks and logos, as registered trade mark law is. There are significant differences between passing off and trade mark infringement.
Who owns or can have Goodwill?
Because it is the property right that is protected by passing off, only the owner(s) of goodwill are entitled to sue for passing off.
Goodwill may be owned by:
- an individual trading as a sole proprietor
- a separate legal entity, such as a company supplying goods or services
- trade associations
- non-trading entities, such as churches, political parties, educational institutions, amongst others
Groups of producers of champagne, vodka, sherry, chocolate, Scotch whisky and yogurt have been successful in claims of ownership of goodwill in the UK.
Types of Passing Off
Courts recognise goodwill can be misappropriated by competitors in different ways.
Passing off claims have developed to address 3 forms of passing off.
The overarching principles are the same in each of the forms.
They’re just different types of categories of facts that the tort of passing off will recognise and protect.
The most common – by a long way – is the classic form.
1. Classic Form of Passing Off
In the classic form of passing off, an indication of a competitor gives rise a misrepresentation that the competitor’s goods, services or business are somehow the goods, services or business of the claimant – ie the protected business.
There's no passing off unless the defendant somehow misrepresents the origin of goods or services as their own.
In these cases, the competitor instils a belief in the minds of the buying public - or those that influence buying decisions - that there is a connection between their goods or services and those owned by the owner of the goodwill.
However, not every connection will lead to passing off. The misrepresentation must suggest that the defendant is somehow behind the defendant in some way.
This classic form of passing off claims protects:
- a business, including a direct competitor, holding out its goods and services
- which falsely indicates or suggests an affiliation (false endorsements can exist even if the goods or services are dissimilar)
- with the claimant’s goods or services
- and that indication or suggestion is misleading because
- it failed to disclose that the goods or services are not theirs.
When that misrepresentation causes buyers to change their buying behaviour, damage is caused to goodwill. That gives rise to a passing claim in its classic form.
2. Inverse or Reverse Passing Off
In cases of inverse or reverse passing off, the competitor says that the goods or services of the protected business are actually its own, but doesn't sell the protected business’s goods or services at all.
In passing off language, a competitor sells their own goods by reference to someone else's goodwill.
The competitor seeks to get sales by falsely representing that work actually done by the protected business is actually done by the competitor
This sort of passing off most easily shown with an example:
A business sells conservatories (“the Seller”). They’re the leader in the market.
A competitor has photographs of the Seller’s conservatories. It compiles a product catalogue with glossy photographs which includes those conservatories.
The competitor presents the product catalogue to potential customers and says in terms: “These are some of the conservatories you can buy from us. We designed them and construct them”.
The competitor is using the Seller’s goodwill – accrued by sales by the Seller of its conservatories to sell its own conservatories.
But they are not the makers of conservatories which provide the skill, experience and reputation.
The competitor doesn’t and can’t sell the conservatories of the Seller.
The competitor uses the goodwill of the Seller – passes off the Seller’s products of their own – to sell their own conservatories.
That’s the Bristol Conservatories case.
The competitor uses the competitor’s goods to sell their own.
In inverse passing off cases, it’s not even necessary to show that the potential buyer knew of the business that actually made the products or delivered the services.
Reverse passing off can apply to other marketing material which belongs to a business, such as:
- prizes
- testimonials
- personnel profiles
- advertisements, and
- recommendations.
Suppose this: you are employed in a job and you work with a large well-known client. Say it's IBM, but it could be Virgin, Marks & Spencer or anyone else.
Then suppose you leave that job and join another company.
Part of your profile published at your new job says that you worked with IBM on a large project, with no mention of you previous employer.
Applying principles of separate legal personality and the law of agency, you didn't work at IBM - your former employer did. Your former employer was engaged by IBM. You weren't. You were only an agent for your employer.
The goodwill of your former employer may be being passed off, and actionable as a passing off claim. It depends on the facts of the case and exactly how it's done.
3. Extended Passing Off
In classic passing off cases, one business owns the goodwill that is protected.
In extended passing off:
- a group of businesses all trade in a product or service
- with the same description
- collectively own the goodwill in the product or service, and
- may sue to protect it
- independently of one another.
UK law takes the view that these groups of businesses all have a common interest in the goodwill associated with the product or service which has acquired goodwill:
The group of businesses collectively own the goodwill, not just one of them.
The passing off takes place when a competitor sells a product of the same description, but does not match what the market thinks it is. It doesn’t matter whether the buying market actually knows that the competing product or service has same description or not.
Decided cases have protected:
- Champagne: “Champagne” in the UK market means sparkling wine products produced in the Champagne district of France and shippers of that district
- Greek Yogurt: In the UK it is the product made in Greece with specific characteristics
- Vodka: the potato based alcoholic drink
- Swiss Chocolate: a product made to a particular formula and with particular characteristics
Extended passing off applies just as much to generic products. It’s not limited to:
- prestige or luxury products
- highly specialised products
- products with specific geographic origin
The centrepiece of extended passing off is a product with the same description.
For instance, if a group of companies cooperate to develop and maintain a specific branded technology, and then licence it:
- the goodwill arising from sales is likely to be owned by all of the businesses
- protectable by each and any of the businesses which use it
- from others using it without permission.
To take a basic example, if a product is said to be "Powered by [insert name of brand name of technology]", and:
- satisfies the other requirements of passing off
- and isn't actually using that technology...
It's a candidate for a passing off claim.
What is a Passing Off Misrepresentation?
The classic statement of a passing off misrepresentation is that of Lord Oliver in Reckitt & Colman v. Borden Inc [1990] RPC 340:
a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff
That’s the Jif Lemon Case.
The claimant sold lemon juice in a container which was precisely the same shape … as a lemon. The claimant had established goodwill in the container through sales over many years.
The defendant - Borden - more or less copied what the claimant had done, to do the same thing.
Borden passed its own product off as the claimant’s – lemon juice sold a lemon shaped container. Borden tried to distinguish its product with different labelling, but that didn't avoid a successful claim, because consumers didn't notice the labelling. They were looking for a lemon shaped product.
A passing off misrepresentation is made by a competitor:
- which leads or may lead buyers or potential buyers to believe
- that goods or services offered by the competitor
- are goods or services:
- of the business which owns the goodwill (ie the claimant), or
- is connected to the business of the claimant.
“Mere” Confusion
Misrepresentation in the law of passing off requires confusion to be caused in the minds of the buying public.
A special type of confusion.
“Mere” confusion is not enough.
The leading case law says that confusion only amounts to a misrepresentation if it's "really likely" to divert business away from the business of the owner of the goodwill. That results in a loss of sales, which qualifies as damages which are recoverable.
If the confusion is of the sort that doesn't do that, it’s not a misrepresentation, including where:
- the confusion is self-induced, such as a jump in reasoning made by consumers which is not objectively justifiable, or
- a well-informed class of customer knows the true situation:
- they can't be confused, because they know the true situation and/or
- they have not relied on the misrepresentation to buy the product.
So “mere” confusion doesn't affect the economic behaviour of the relevant buying public.
Even actual confusion does not show that there has been a misrepresentation by anyone. In a classic statement of the law:
It shows is that people make assumptions, jump to unjustified conclusions and put two and two together to make five.
Even though some sections of the consuming public may not be confused, does not mean that other relevant sections of the public are not. It's those members of the public which do operate under the relevant confusion that tips the balance of probabilities for success in a passing off claim.
There's no legal duty on competitors to guard against self-induced misapprehensions that the buying public may reach. The problem can be working out which ones are, and which ones aren't.
In summary, misrepresentations in passing off must be:
- believed by the consumers
- material in the sense that it causes a real, tangible risk of damage to the goodwill of the claimant, and
- relied upon by the buying public - to cause them to buy the competitor’s goods or create a real risk of doing so.
When assessing whether a misrepresentation has been made to the buying public, it doesn’t matter whether misrepresentation was intentional or not.
That’s because passing off is a tort which attracts strict liability.
Example forms of Misrepresentation
Businesses can make misrepresent their goods or services in any number of ways.
Common forms take place when a competitor:
- gives the impression that its goods or services or its business are those of the claimant
- says the claimant’s goods or services are of a particular type of quality, and they are not
- says that it is able to use another party’s mark, name, trade dress or other sign, and that is not true
- states its business is the same or affiliated with the claimant's business, such as a business relationship, or trade connection in respect of its goods and services
- allows the buyer to continue operating under a known mistaken understanding or an erroneous belief or assumption, and does nothing to correct it.
These sorts of misrepresentation are completely different to the sorts of misrepresentation required in the law of misrepresentation.
Damage in Passing Off Cases
The law of passing off is designed from the ground up to protect the goodwill of businesses.
Relevant damage for passing off purposes is damage suffered which detrimentally affects the business’s goodwill, however that may happen.
It’s also well-established that passing off also protects against a likelihood of damage.
So even if damage has not actually been caused, the likelihood of it is enough. It's enough to obtain an interim injunction to restrain passing off pending the trial.
Types of Damage in Passing Off
There are 3 types of damage recognised by the law of passing off.
They all affect the value of the goodwill of the business:
- Diversion of Trade and Sales
- Erosion or Dilution of Reputation
- Injurious Association
1. Diversion of Trade and Sales
When a defendant competes directly with the claimant, sales will be diverted to the defendant.
It’s a natural consequence of the misrepresentation: the buyer buys from the defendant, rather than the claimant.
It results in a loss of orders to the claimant, the owner of the goodwill.
The competitor receives the money for the sale, not the business with the goodwill. That results in a loss of profit.
Damages are awarded for depriving the claimant of the profit it would have made by the sale of the goods which the purchaser intended to buy.
Distribution Networks
When the business sells down through a distribution network, the loss will be felt through its resellers, rather than directly itself. Those losses are equally recoverable.
2. Erosion or Dilution of Reputation
When a competitor acts to reduce, blur or diminish the goodwill and reputation, it causes damage.
When a competitor uses a trade name, trade dress or other indication of the owner of the goodwill, the distinctiveness of the trade name diminishes.
It’s vindication of the claimant's exclusive right to the reputation or goodwill.
Reduction of Exclusivity
The damage is caused by the reduction of the distinctiveness or exclusivity:
- The owner of the goodwill no longer has the exclusive use of its own branding
- The defendant takes advantage of the claimant's reputation for their own business.
It draws away from the business of the claimant.
That might happen in any number of ways.
Aspects of the defendant’s business may be held in low regard, such as
- inferiority of quality of goods or services
- the defendant may personally have a bad reputation
- the defendant may break the law in its trading practices
- the defendant’s business may fail or face difficulties which may also damage the claimant’s credit.
Example: Diminution of exclusivity of Goodwill
Here’s a classic case:
The word “champagne” denotes sparkling wine sourced from producers and distributors from the champagne region of France.
In a series of cases, those producers contested the right of businesses to use the word champagne in conjunction with their own products, such as:
- “Elderflower Champagne”
- “Spanish Champagne”
Incorporating the word champagne into competing product names not sourced from the Champagne region reduces the value of the word, because it diminishes the distinctiveness of the word.
It was said in Taittinger SA v Allbev Ltd [1993] FSR 641, the “Elderflower Champagne” case:
... the effect [of allowing competitors to use the word champagne] would be to demolish the distinctiveness the word champagne, and that would inevitably damage the goodwill of the champagne houses
This is not to say that it is only prestige brands which may suffer loss and damage as a result of passing off. The same principles apply for the benefit of any business, including businesses with:
- specialised goods and services
- products with geographic origins
Example: Second Hand Goods
In Rolls-Royce Motors Limited v Zanelli (1979), the defendant bought Rolls-Royces second-hand and made them up as new.
The Royce-Royce trade marks were retained on the cars. One was sold under the name “Rolls Royce Panache”.
In the judgment it was said:
The damage that may be done to [Rolls-Royce Motors Limited], if inferior work is put out as being the work of Rolls-Royce, is quite incalculable and of very great financial harm to Rolls-Royce. On this aspect of the case they are certainly in a very unusual position, in that a large part of the goodwill of Rolls-Royce does depend on their reputation for immaculate finish and engineering.
In a case going the other way the defendant sold clothes: fitted, club, street and casual wear in Carnaby Street, London. Some of the clothes were branded MERC. The claimant was the owner of the Mercedes-Benz trade marks. In the judgment:
The market for Alavi was the pop music industry and included mods and skinheads. The reputation of Mercedes-Benz was not affected by the manner in which Mr Alavi did business.
3. Injurious Association:
Recovery of damage in cases of passing off is not limited to loss of sales, or cases where the defendant's goods or services are inferior to those of the claimant.
An injurious association is enough.
Injurious associations with the goodwill of a business also damages goodwill.
It’s the sort of injury that detracts from the exclusivity of the goodwill:
- the credit in the buying public that the business might enjoy
- the suggestion of an endorsement or connection by the defendant of the claimant’s goods, services or reputation, when it does not exist
Passing Off Defences
The law recognises that there are situations where it would not benefit the buying public if certain activities were prohibited by the ordinary operations of passing off.
Business are likely to have a defence where it:
- shows the purpose or suitability of products or services to be used in conjunction with the products of the owner of the goodwill, such as:
- accessories (such as mobile telephone cases), and
- spare parts
- compares its goods or business as part of fair competition
- demonstrates its goods or services as an alternative
- had a former business relationship
Also, as a rule of law of general application, a business can’t succeed on its own claim for passing off its own use of the name, mark or indicia relied upon is inherently deceptive.
Ambiguous use disentitles availability to the defences. That's because the law imports a standard of honesty in trading activities. Sharp business practices are not likely to be protected.
The other ways to defend a passing off claim is to show on the balance of probabilities that one of the essential elements of passing off does not exist.
Examples: Passing Off Cases
Misuse of Trading Names
- A business traded as "Buttercup Dairy Company" and retailed margarine. A competing business set up to sell margarine as a wholesaler under the name "Buttercup Margarine Company".
By doing so, the competitor would generate relevant confusion between its products and the products sold using the trade mark Buttercup Dairy Company.
That would lead to the impression that the two businesses were connected, or the competitor was a branch of the claimant's business, or in some way mixed up with them.
The common element "Buttercup" in the trade name gave rise to relevant confusion. - In another case, a business owned substantial goodwill in the trademark Neutrogena, arising from sales of haircare and skincare products under that name. The defendant in the case marketed shampoo and haircare products under the name Neutralia.
Neutrogena sued for passing off (and registered trademark infringement) of its marks, and was successful. The names were too close to one another.
Confusion and Representation
- Two pizza restaurants used the expression "Chicago Pizza" to describe the type of pizza which they both sold. The second business to enter the market adopted the trademark "Chicago Pizza Co" as part of its trading name.
The original business said that adopting the name constituted a misrepresentation that the defendant's restaurant was connected with the claimant's business.
There was evidence that the public was confused about source of the business.
"Chicago Pizza" was an accepted trade description of the type of pizza.
Chicago Pizza was a purely descriptive term consisting of ordinary English words. It was not distinctive of one business or the other because it described the sort of pizzas that was being sold.
There was no passing off.
Goodwill generated in the UK
- A group of retailers sold a drink known as "Advocaat".
The consuming public did not know what made it different from other alcoholic drinks. English consumers thought that it contained brandy. It didn’t.
A competitor started marketing “Olde English Advocaat”, which did contain brandy.
The buying public's own misconception about what the drink named Advocaat contained did not prevent passing off: it was what they were accustomed to and what they understood the drink to be that set the standard for the misrepresentation.
Advocaat meant the same thing in England as it did in its original source – Holland.
The point of the case is that what matters is what the UK consuming public think the product is, whether that conception is right or wrong. - In another case, the claimant was the regulator in Italy for Parma Ham.
To be called Parma Ham in Italy, the ham had to be sliced in front of the consumer at the time of purchase.
Marks & Spencer sold pre-sliced ham in sealed packets. The ham was sourced from the Parma Region of Italy. Marks & Spencer labelled the product “Parma Ham”.
Marks & Spencer was sued by the Italian regulator in the UK because what Marks & Spencer was selling was not properly called Parma Ham, in the way it was sold in Italy.
The court held that Marks & Spencer was not passing off. There was no misrepresentation because:- consumers could see at point of purchase that it was not sliced in front of them: it was pre-sliced
- consumers were not confused or deceived by Marks & Spencer's pre-sliced Parma Ham - there was no misrepresentation.
It’s the way the term is used and known in the UK market that matters in the law of passing off.
What was relevant was how the term "Parma Ham" was known in the English market.
There was no passing off.
False Endorsements
- A radio station - Talksport - bought the right to use a photograph of a famous F1 racing driver, Eddie Irvine. The photograph showed the driver holding a mobile telephone.
The photograph was edited in Photoshop to show the word "Talksport" on the mobile telephone.
The driver did not give permission for his image to be used in association with Talksport.
The enhanced image suggested that the driver endorsed Talksport, when that was not the case.
The driver was successful because the market would have falsely believed that he was endorsing Talksport and it was likely that he would suffer long term economic damage.
Remedies
The primary remedy for passing off is damages.
The usual principles of damages apply, so as to place the claimant in the position it would have been in if the unlawful conduct had not taken place.
In addition to damages, legal remedies are available in an appropriate case:
- an account of profits
- an injunction to restrain the competitor from further passing off in the future
- Orders for delivery-up and destruction of articles which pass off, such as:
- signage
- computer graphics of logos, goods or services
- strike off trademarks from Registers of Trade Marks which due to prior rights existing for the purposes of passing off
- cost of publishing corrections by the claimant
Those that cooperate to pass off one business as the other participate in a common design. That gives rise to joint & several liability against all of the joint tortfeasors.
How does passing off fit into an IP Protection Strategy?
There are several points.
Passing off can be used to catch loose ends that registered trademark won’t catch for your business.
Goodwill accrues with sales and marketing. It happens automatically.
Tracking Goodwill
It's a matter of being able to tie the sales, marketing and advertising spend, and other promotional activity to a particular products or services of the business.
Ensure that marketing expenses and sales related to each product you are interested in are itemised. It's an exercise in accounting sales and marketing spend to profit centres.
The trick is to be able record sales connected with each product or service. It's the best evidence of relevant goodwill.
If you sell shoes under a trade mark and some other product another trademark, the figures should be able to be sourced readily.
Goodwill: Early entry to the UK
There’s no reason in principle why a business outside the UK which has no trading physical presence in the UK (such as a chain of restaurants) can’t sell merchandise into the UK to accumulate goodwill.
The sales of merchandise in the UK starts off sales and accrues goodwill.
It increases the prospects of preventing a poacher from acquiring trade name related rights in the UK, and prevent your business form using its own name in the UK.
Selling or offering to sell merchandise in the UK can be a shortcut to accumulating goodwill. Customers don't necessarily need to have direct contractual relationship with the buyer, as long as they buy the goods or services of the business outside the UK.
Marketing Budgets
If you’re low on sales, and short on money, increasing non-monetary marketing and exposure may be your only resort to accumulate goodwill.
Registration of Designs and Trademarks
Where registered trade mark will work, register rights for:
- Packaging: design rights and/or registered trade mark
- Slogans: registered trade mark
- Domain names: registered trade mark
- Trading names, product names and service names: registered trade marks
The registrations might include design rights for packaging and trade marks for business names, product names, shapes and logos.
Registered trade mark protection is narrow compared to what passing off can do. What registered trade mark law does, it does well. But it is a narrow field of intellectual property protection.
For the money that you pay for a trade mark registrations, the value in law is actually quite spectacular, provided the application – particularly the classes of goods and services and specification is done properly. Done badly, it's mostly a waste of time and money and won't do what you want it to do.
Done badly or if one doesn't know what to focus on, passing off is time-consuming and expensive to pursue through courts. Provided you are able to attribute sales, marketing and promotional activity to specific goods or services, you’re in a vastly superior position.
Trade Mark Searches
To ensure you don’t tread on anyone else’s trade mark toes, you’ll want to conduct trade mark searches and business searches before using a trade mark.
Even then, you’re not guaranteed to catch everything that may hurt the business. It’s not just exact matches that might hurt you.
And even when you think you’re finding an exact match, it still might not get in your way.
Contract Management: Goodwill
Many businesses operate in the UK, but have no physical presence here. They might appoint a distributor, an agent or series of both for different regions.
In cases such as these, who accrues the goodwill?
The goodwill is arguably owned by some or all of them.
It becomes difficult to say that the goodwill is owned by one single business.
Bearing in mind common traders trading in a single class of goods (such as champagne), if the goodwill is not exclusive to any one business and therefore can’t be distinctive.
When it’s two or more businesses, it can’t be distinctive of any one single business. No-one has standing to sue for passing off.
The last in the last in the queue of possibilities is the true – overseas - owner of the business.
In order to avoid the situation, ownership goodwill which does accrue by sales in the UK is assigned to the relevant company.
Conclusion
Passing off enables businesses to enforce their rights associated with its good name in the market.
It prevents competitors stealing - or over-borrowing - the traits of a product or service which has made it a success. It's the goodwill - the attractive force that brings in customers - that passing off protects.
Whether a claim for passing off is successful will depend on a series of interrelated factors:
- The level of goodwill acquired by the business, achieved by:
- buying and selling of goods and services,
- exposure of the goods and services to the market
- interaction with customers, and
- the duration of trading activity
- The degree of distinctiveness of trade mark of the claimant, where the trade mark is relied upon to base a claim
- The nature and extent of the misrepresentation of the competitor, and the
- nature and extent of its trading activity
- similarities with any presentation of the claimants trade marks or good and services to the market
- The type of the damage caused to the goodwill of the claimant
- The degree of copying of any visual representations by the defendant
- Whether the defendant behaved dishonestly
- The field(s) of trade which the two businesses operate
The greater the degree of goodwill, the more extensive the protection granted by passing off.
Slight use of a trade mark generates goodwill sufficient to protect when the defendants trade mark does little to differentiate itself.
Passing off does so by enabling a business to prevent other businesses from unfairly using its goodwill. It protects against all activities of a business that may lead the public into believing that they are another business.
It is therefore a flexible and adaptable area of law, geared to protect what might be called the reputation and association of goods or services to a particular business.
Passing Off Solicitors: Intellectual Property Protection
Passing off is one of those causes of action that crops up in all sorts of different contexts.
If trade reputation is at stake, the actual trade name doesn't even need to be used in passing off claims. It's that flexible.
Registered trade mark infringement can also be an option. It has its limitations.
Good outcomes are possible with passing off. Our intellectual property & passing off solicitors can support your business by:
- taking action on your behalf if you think you may have a passing off claim
- acting to defend you if accused of passing off
- using alternative dispute resolution strategies such as mediation to resolve conflicts between businesses over branding
Our passing off solicitors are based in London. Our lawyers advise clients on how to protect their businesses with intellectual property rights. Passing off is just one of the forms of intellectual property which can be used to get you where you want to be.
Our solicitors have advised national companies on passing off rights, and advanced clients' intellectual property rights and interests in the High Court in London and the Intellectual Property Enterprise Court, also in London.
Call us on +44 20 7036 9282 or email us at contact@hallellis.co.uk if you believe that you've got a competitor that's sailing a bit too close to the wind, or you're facing down a passing off claim and want to do something about it to find a resolution. We're also commercial disputes lawyers that handle business disputes to get a better result.