The pitfalls of passing off

In recent years, the Courts have shown a tighter approach to passing off.

The requirements of a passing off action were set out by Lord Diplock in Erven Warnink v Townend (Advocaat), where he stated that a passing off action required misrepresentation; in the course of trade; to prospective customers or ultimate customers; calculated to injure the business or goodwill; and which causes actual damage, or will probably do so. These requirements were further refined into the ‘classic trinity’ (discussed below) established in Reckitt and Coleman v Borden.

Goodwill

The first prerequisite of passing off is ‘goodwill’. This is the "attractive force which brings in custom" (per Lord Macnaghten in IRC v Muller & Co’s Margarine Ltd). The goodwill must attach to the brand particular goods, services or ‘get-up’ which are the subject of the misrepresentation. In Starbucks (HK) Ltd v British Sky Broadcasting Group PLC, the UK Supreme Court considered whether the claimant needed only to establish a reputation among a significant section of the public within the jurisdiction, or whether the claimant must also establish a business with customers within the jurisdiction. The judge concluded, “...In my view, a claimant who has simply obtained a reputation for its mark in this jurisdiction in respect of his products or services outside this jurisdiction has not done enough to justify granting him an effective monopoly in respect of that mark within the jurisdiction.” (per Lord Neuberger at paragraph 62).

The absence or presence of customers as the filter on a passing off claim is in the authors’ view misconceived. The second limb of the classic trinity should surely be the filter of whether a claim should succeed i.e. that the goodwill must be coupled with deceptive misrepresentation. A series of decisions around the difficulty of establishing goodwill in elements of goods in which businesses have invested that are not protected by other areas of the law risk the UK being a ‘safe haven’, which is more permissive than civil law jurisdictions where unfair competition would prohibit conduct that passing off allows.

Misrepresentation and confusion

The definition of misrepresentation is thus: ‘misrepresentation’ and ‘confusion’ are not synonymous. A deceptive misrepresentation calculated to injure the business or goodwill of the claimant is required. One of the benefits of passing off is the broad range of conduct to which it can be applied, including, substitution (Redbull v Mean Fiddler), false endorsement (Robyn Rihanna Fenty v Arcadia Group Brands) and passing off in advertising (Schweppes Pty Ltd v Pub Squash Co Pty Ltd). But when is a misrepresentation not a misrepresentation? The Court has determined that the following do not amount to a misrepresentation:

• Invisible misrepresentation (e.g. through use of invisible metatags of a competitor) as seen in Reed v Reed.
• Where the misrepresentation takes place after the point of sale: as seen in Bostik v Sellotape where the blue adhesive putty was packaged in a get-up dissimilar from that of the claimant and under a different brand. The colour of the putty only became apparent after the packaging was removed.
• Reverse misrepresentation where members of the public must be confused into believing that the goods of the defendant are goods of the claimant. Whilst this is sufficient for trademark infringement, the position is not the same for passing off.
• A ‘smell-alike’ cannot be regarded as a misrepresentation, e.g., L’Oreal v Bellure NV & Ors.
• When it has been ‘neutralised’ by corrective measures e.g. embedded explanations or disclaimers, explaining the presence of marks or get-up of the goods or services. In the absence of deception, ‘mere confusion’ will not give rise to a claim in passing off. Some argue that there is sufficient case law to promote that passing off protection for goodwill should echo the statutory protection for trade marks and provide a remedy where there is dilution of goodwill, irrespective of the absence of confusion.

Damage (actual or likely)

The third and last requirement is damage (or likelihood) to the claimant’s goodwill. The required link between the damage and the goodwill drives a further wedge between passing off and unfair competition.

IPR falling through the cracks

At a time when parties’ costs are under increased scrutiny, and permission to adduce survey evidence is subject to the very stringent guidelines set out in Interflora, it is difficult to see how, in cases that are so dependent on the quality of evidence (and indeed assembly of sufficient evidence to show that a ‘substantial number’ of customers have been deceived), a claimant can adduce evidence to show that the public have been ‘educated to recognise the shape of a product as indicative of the origin of the goods’. While evidence is helpful, its absence should not prejudice a claim, and yet the recent trend in case law shows just how crucial and difficult marshalling that evidence is. While certainty of the law is of course desirable, it is clear that the passing off net has developed too many holes allowing IP rights to become devoid of protection. Cases where in the authors’ view competitors are competing very aggressively around the margins, are proving unsuccessful. If the Courts continue to adopt a strict interpretation of the classic trinity, this trend is set to continue.

*This article was previously published in Intellectual Property Magazine*