How to know if you can bring an action for passing off?
Written by Aljaž Mihelič- Law student at University of Southampton on 22 February 2018« Return to Reading Room
The oldest and most common protection of trade symbols is the action for passing-off. In order for the claim to be considered by the courts, the claimant must prove that they have goodwill, that there has been some kind of misrepresentation by the defendant and that they have suffered or are likely to suffer damage. If any of the three is not proven, the claimant cannot bring an action and expect to win. To know exactly how to determine whether you, as a claimant, can bring an action to the court, determining whether passing-off applies is necessary. Needless to say, this is just a guideline and not an absolute formula for predicting success in court.
Goodwill is, as explained by Lord Macnaghten, something that brings the customers back to the company or the product. It can be an advantage of a good name, reputation and connection of a business.
Once the goodwill of the trademark is proven the scope of it has to be decided. The scope is dependent on a geographical area where the trader operates, who the target public is etc. The scope is often subjected to an objective test.
Misrepresentation means that the defendant must have implied that the goods derive from the claimant or if a reasonable person would come to such a conclusion. Three types of misrepresentations are actionable: (1) misrepresentation as to the source, (2) quality and (3) misrepresentation as to the fact that the claimant has control or responsibility for the goods or services. Misrepresentation can be actionable even if it is unintentional but has to be deceptive. For the goods to be deceptive a substantial number of the public for whom the services were intended must be deceived at the time of purchase. There are some exceptions when it comes to the time of purchase. Generally speaking, even if the deception occurred before the time of purchase the claimant must still prove that there was a substantial damage that occurred.
There are four types of damage that can occur: (1) loss of existing trade and profits, (2) loss of potential trade and profits, (3) damage to reputation and (4) dilution.
Loss of existing trade and profits is defined as diverting the trade and therefore the profit from the claimant. It is a common occurrence when the defendant and the claimant work in the same field and the use of same or similar trademark creates confusion.
If the defendant is trading in an area that a claimant wants to expand to it can usually result in loss of potential trade and profits. This is outlined in the Lego v Lemelstrich case where Lemelstrich was selling garden equipment named Lego. Lego's goodwill extended to garden equipment and it was, therefore, a potential area of expansions. Loss of potential profits can also include loss of licensing revenues which can be, depending on the case, decided both ways. The scope of goodwill can be decisive (Mirage Studios v Counter-Feat Clothing contrasted with Stringfellow v McCain).
If the public believes that the goods are somehow connected, a damage to reputation can occur. As in Associated Newspapers v Insert Media potential damage can occur if there is no consent by the claimant. Other instances of damage can be when there are high-quality goods which are misrepresented as of a lesser quality or in a case of celebrities if their name, image etc. are used without their consent.
Dilution means that the misrepresentation makes the goods seem more common or generalised, for example, if champagne becomes commonly confused with sprinkling wine (Taittinger v Allbev).
If all the conditions are satisfied the claimant is likely to win the case. Nevertheless, it is important to note that sometimes proceeding to court might be useless if the potential defendant does not have the assets (money, property etc.) that you as a claimant can claim if you win. This is the reason many major companies like Apple do not bother bringing an action against smaller companies that are selling misrepresentations of their products. Defendants would usually be smaller companies that can simply close down and there is little that can be done to receive compensation for the damage that was caused.
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