PASSING OFF


Over recent years the tort of passing off has developed into an important action to protect a trader from one of unfair competition seeking a free ride on the plaintiff’s goodwill.

As a business expands its operation, it is likely that customers will gradually become loyal to a particular products or services of that business. The loyal customers will choose the products and services in preference to those of a competitor. This will definitely create temptations for the competitors, instead of offering better quality products for better value of money, to dress up their products or services in such a way to mislead customers into thinking that they are purchasing the goods of the first business. This action is known as passing off and was designed or practised to prevent one business from misrepresenting its goods as another.

A number of manufacturers have in recent years developed own brand products that mimic the get up of brand leaders. In the absence of specific legislation to prohibit this practice, branded owners know too well the danger of their brand becoming indistinguishable from those of the retailers. According to brand owners, the copying of their brand trade dress by retailer cause damage to the value of the manufacturers’ brand.

Over recent years the tort of passing off has developed into an important action to protect a trader from one of unfair competition seeking a free ride on the plaintiff’s goodwill. Passing off is a misrepresentation tort that protects the plaintiff’s goodwill, his customer’s connection, the attractive force that brings custom. The tort can be defined by the so called Diplockian principle as a misrepresentation made by a trader in the course of trade, to prospective customers of his or ultimate consumers of goods or service supplied by him, which is calculated to injure the business or goodwill of another trader (in the sense of reasonable foreseeable consequence) and which cause the actual damage to a business or goodwill of the trader by whom the action is brought[1]

The traditional test in passing off turns upon three inter related factors:-

a) Distinctiveness’ of the plaintiff’s name or mark which encourages the public to trade with him and so provide goodwill,

b) The confusion or deception of the defendants activity,

c) Which the misrepresentation causes or is likely to cause damage to the plaintiff

All these three ingredients of the tort are related to each other. The misrepresentation, to be relevant to the tort, must relate to the plaintiff’s goodwill and cause or likely to cause damage in some way.

Pre Advocaat

The term Passing Off first appeared in 1842 in the case of Perry v Truefitt, however, the origin of the action appears to go back at least as far as to 1618 . However the foundation of the modern law of passing off can be probably be said to be in the year 1842 in case of Perry v Truefitt [2] where Lord Longdale MR created a formula and which was subsequently been widely adopted :-

“A man is not to sell his own goods under the pretence that they are goods of another man; he cannot be permitted to practise such a deception, nor use the means, which contribute to that end. He cannot therefore be allowed to use the 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 other person”.

The principle mentioned in the above case gives rise to a solid foundation for the later cases in passing off. This indicates that before an action in passing off can take off the plaintiff must satisfy the court that he had some kind of reputation attached to the goods and there must be form of misrepresentation on the defendant’s goods. These principles have also created a path to the creation of the future modern law of passing off.

Advocaat

In Erven Warnink Besloten Vennootschap v J. Townend & sons (Hull) Ltd[3] the Plaintiff and other Dutch traders had for many years in Netherlands a liquor called ‘ADVOCAAT’ which was exported to Britain and distributed.. This liquor acquired substantial reputation in Britain. However in the year 1974 a drink described as :Keeling’s Old English Advocaat with some sort of the same recipe mixed with Cyprus Sherry was made and marketed in Britain by the defendants.

On appeal the appellants Erven Warnink BV argued that the name Advocaat had acquired substantial reputation in Britain and the Plaintiff used it as part of their business. Such reputation having built up deserves protection and is protected by law. The fact that the other person using the same material and the same process can come into the market and acquire goodwill of their own does not prevent goodwill attaching to the product nor stop the name meriting protection.

In this case two types of test were laid down by Lord Diplock and Lord Fraser by saying that in an action of passing off five characteristics had to be proved :

There must be misrepresentation
made by the 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 the goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and
which cause actual damage to a business or goodwill of the trader by whom the action is brought or will probably do so.

In this context the word misrepresentation is as much reference to the consequence of what someone has said or done as it means by which those consequences have been achieved. A representation is a misrepresentation when the construction placed upon it by members of public is false in the light of fact.

The word calculated to injure the business or goodwill of another trader relates to foreseeabilty of injury is a wider criterion of actionabilty than directness of injury and does not imply that any intention on the part of the defendant is necessary, but rather that injury to goodwill must be reasonably foreseeable consequence of the defendants conduct.

His Lordships five characteristics also cover cases where the plaintiff and the defendant’s business are not the same but where the plaintiff has a basis for contending that the defendant’s activity will cause damage to his business or likely to so. This also cover the cases where the plaintiff is a professional association having no business but which can provide proof of damage or likely hood of damage.

Lord Fraser proposed a different formula to that used by Lord Diplock. His Lordship held that ‘it is essential in a passing off action to show at least the following facts:

that the business consists of, or including, selling in England a class of goods to which the particular trader a name applies;
that the class of goods is clearly defined, and that in the minds of public, or a section of the public in England, the trader name distinguished that class from other similar goods;
that because of the reputation of the goods, there is a goodwill attached to the name
that the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value.
that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason that the defendant selling goods which are falsely described by the trade name of which the goodwill is attached.

Lord Fraser does provide the necessary qualifications to Lord Diplock’s speech. He makes it explicit that the plaintiff must have goodwill in England. Indeed he envisaged that the plaintiff’s business should consist or included, selling in England a class of goods which the particular trade name applies. He supports the distinction that the misrepresentation must be about the defendants goods, and he makes it clear that the plaintiff must be a member of the clearly definable class who are entitled to make representation about their own goods.




Post Advocaat

Most of the cases after Advocaat adopted the Lord Diplock’s test. However later in the century the law seems to be simplified as it goes. As well respected as Advocaat’s case is another line of definition adopted the simpler approach. Lord Oliver reduced this list to three main elements in Reckitt & Colman Products Lts v Borden Inc[4] (Jiff Lemon Case)

1. The existence of plaintiff’d goodwill (goodwill)
2. misrepresentation to the goods or services offered by the defendant (misrepresentation)
3. Damage or likely damage to the plaintiff’s goodwill as the result of the defendant’s misrepresentation. (damage)

Although those speeches by Lord Diplock and Lord Fraser in Advocaat are the highest authority, it has been my experience, and it is now my respectful opinion, that they do not give the same degree of atmosphere in analysis and decision as the classic trinity of
1. a reputation (or goodwill) acquired by the plaintiff in his goods, name, mark
2. a misrepresentation by the defendant leading to a confusion and causing
3. damage to the plaintiff

I might not have thought it was appropriate to give expression to the opinion had it not been first, from the recent speeches in the House of Lord in Jiff Lemon; and secondly for a belief that the classical approach is of real atmosphere in the analysis and decision of the present case.

To summarise the whole history of passing off we can say that the modern law of passing off went through a long period of reform until the principle in Advocaat. Even then this tests seems to be complicating and confusing. This is why the courts again went on to create a new principle called the classic trinity principle in jiff lemon.

The nature of goodwill is more easily understood than defined. Goodwill is the benefit and advantage of good name, reputation and connection of business. It is an attractive force, which bring custom. It is the one thing, which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended influence may be sufficient to bring customers to the source from which it emanates.

Passing off just requires only that damage should be caused to the goodwill of the plaintiff’s business as a result of the defendant’s misrepresentation. It should be noted that the goodwill is a form of legal property and is only valuable to the extent that it can be protected through the court. It can be assigned by the owner, dealt in other ways, and protected against infringement by the action of passing off.

Goodwill is created by trading activities, but it often happens that more than one business is involved in the sequence which result in goods or services being made available to the consuming public. If so the question arises of which of those business is the owner of goodwill, which the law recognises as damaged when the third party passes off his goods.

Ownership of goodwill has almost always been discussed with reference to specific marks, so that the question who owns the goodwill of the business is when the mark is used in equivalent to “of whom is this mark distinctive”. However the question of ownership of goodwill can exist without being attached to any distinctive trade mark at all. It is not in the mark , name or get up improperly used, but the business or goodwill is likely to be injured by the misrepresentation made by passing off one persons goods as the goods of another. Merely copying the name style of another trader is not per se, sufficient form a passing off action although it could give rise to an action of infringement of copyright, if what is copied is more than a simple name..

In Star Industrials Ltd v Yap Kwee Kor[5] Lord Diplock stated that the goodwill, as the subject of property rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. The basic rule in commencing a passing of action is that the plaintiff has to prove a reputation sufficient for members of the public to be misled by the defendant’s conduct into thinking that they are securing goods or services of the plaintiff. It is not enough for the public simply to be confused about whether it is getting the plaintiff’s or the defendant’s goods. There must be a goodwill associated with the reputation, which has been acquired by the plaintiff through the name or style.

In proving the existence of goodwill the plaintiff must be able to establish that the mark, name, or get up in question has become known in this country (depending on which test is followed. If Lord Diplock’s test is preferred than reputation obtain any where is admissible but Lord Fraser’s test is strictly based on domestic recognition of goodwill) for a substantial period of time and to a portion of the relevant public or trade. This is to say that the use of mark, name or get up in relation to any goods or services of the kind dealt with by the plaintiff will be understood by the public or trade as goods or services of the plaintiff. Trading normally creates goodwill and very slight trading activities have been held to suffice.

In supporting this argument Lord Hersell stated in Lealy, Kelly & Lealy v Gilven that the party alleging a goodwill “should prove in the first instance that any name which claims as his trade name has been so extensively used in connection with his manufactures, or with the foods which he sells, that his goods have come to be known that the name would intend that the name, that anyone whom the name was used would understand that his goods were related to”

By saying this, when a new trader has just ventured into business or just started using an unregistered mark or get up to develop his business, he may still be able to succeed in a passing off action. A newly registered trademark stands a better chance to get immediate protection under the Trade Mark Act, with passing off the plaintiff must be able to prove that he has built up a good reputation around the name, mark or get up. That is, he has acquired a property in the goodwill associated with the subject matter. i.e. property right by continuing user.

In determining whether goodwill has been established, it is very important to consider how the goodwill is associated with the product. In order to succeed, the plaintiff must have some badge of recognition upon which to base his reputation. It is the plaintiff’s reputation in relation to his goods or some service that is at issue. The courts do not require that he make his identity plain by, for instance, giving his full name and address. It is enough that a trader uses a mark, name or device of any kind by which to teach the public at large how to get his goods. If the plaintiff’s reputation is adequate for the purpose, than any infringement of his mark, name or get up is actionable, whether the infringement is with the same market category or in another category would be actionable.

In addition to the above, the plaintiff will have to demonstrate the volume of his sales and advertisement expenditure, and will supplement this by evidence from traders and the public at large of the meaning that they attach to the distinguishing features of the plaintiff goodwill or business. For instance, a long understanding that this particular trade name denotes the goods of the plaintiff’s manufacture. At the end of the day the plaintiff must show that it is his reputation that is being misappropriated by the defendant.

There have been series of cases seeking to gain passing off protection for a product yet to be launched. An early English authority held that trading must actually have commenced before there was any cause for action. In such a case a defendant who entered the market before the plaintiff could do so with impunity. However in modern days, the courts have a different approach in deciding goodwill. Goodwill is normally created by the trading, and very slight trading activities have been held to suffice. However there is some uncertainty as to whether a passing off action can be brought in respect of a business which is about to commence trading and for which a demand has been created by advertisement. Recently the courts have allowed the plaintiff in such circumstances, has at least and arguable case which should not been struck out and which may support an application for interlocutory injunction.

Many academician argue that pre launch publicity means a rapid acquiring of goodwill i.e. pre launch publicity / advertising can create sufficient goodwill prior to any customers been attracted, where Rouleau J (Federal Court of Canada) said as well as extensive promotion of the product yet to be launched and the plaintiff had taken advance orders this means that the plaintiff has created a demand for the product/service and that is sufficient to establish a goodwill. Goodwill could arise even before the business had been started. Goodwill could arise from the definite and substantial preparations to launch the product or service, and from the fact that a demand for that particular product or service from a substantial number of people could be established.

It should be noted, however, that, no goodwill can be established before the public has a sufficient means of judging that nature and quality of the new goods or services even if their intending supplier already had an extensive reputation as the supplier of somewhat similar goods or services, offered under another name, the public will not ordinarily have sufficient means of judging the nature and quality of his new good and service until it see them for itself.

In British Broadcasting Co v Talbot Motors Ltd it was held that goodwill can exist even of the product or services to which it relates has not yet been made available. It can be justified if a significant proportion of the public knew about the product or service because of the great deal of publicity i.e. where there is evidence that a significant part of the public recognised the name or a particular brand.

Conclusion

No one has a monopoly in his brand or get up, however familiar these may be. Passing off is a wrongful invasion of a right of property vested in the plaintiff, but the property which is protected by action of passing off is not the plaintiff’s property right in the name or get up which the defendant has misappropriated but the goodwill and the reputation of his business which is likely to be harmed by the defendant’s misrepresentation.


In the legal sense, bringing an action for infringement of registered trademark is much simple and cheaper than one passing off. There is no need to prove reputation or damage. The former advantage that infringement was easier to determine has been largely eliminated by the infringement of the new law. Only in the limiting case where the registered mark alleged infringement is identical does the advantage remain. Only those who bother to register the mark will be able to bring proceedings infringement. Passing off is very flexible and adaptable tool, which can be used in circumstances where it is difficult to say that any trademark being used.


Raguraman Gurusamy
Hema Nandhini Maseeah Pulai

[1] Erven Warnick Besloten Vennoottcschap & anor v Townend & Sons (Hull) Ltd & anor [1979] AC 273
[2] (1842) 6 Beav 66
[3] [1979] AC 731
[4] [1990] 1 All ER 873
[5] [1976] FSR 256
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