#15023 - Passing Off - Intellectual Property Law

Common law tort

• Actionable without proof of damage, as long as there is likelihood of future damage

  • D doesn’t need to be at fault

• NOT a full property right or general right against unfair competition

  • Must be in the course of trade

  • Right to bring an action only lasts as long as the underlying business

Erven Warnick v Townend [1979] AC 731 (Advocaat)

• UKHL (Lord Diplock): Misrepresentation could be on the origin of the goods or also the class or quality of the goods (even if they are accurately from C)

• Lord Diplock: 5 main elements

  • Misrepresentation

  • By a trader in the course of trade

  • To his prospective customers or ultimate consumers

  • Calculated to injure the business or goodwill of another (or reasonably foreseeable)

  • Causes (or is likely to cause) actual damage to C’s business or goodwill

• Lord Fraser: The business must involve selling a clearly defined class of goods in England which have goodwill attached to the name because of reputation

• UKHL: “no man might pass his goods as those of another”

  • NOTE: Extended passing off is no longer limited to this situation

• Lord Oliver’s “classic trinity”: 3 basic elements for passing off

  • C must establish “goodwill or reputation attached to the goods or services”

    • Must be distinctive of his goods/services

  • C must “demonstrate a misrepresentation by the defendant to the public”

    • That the goods or services are those of C

  • C must demonstrate that he suffers or is likely to suffer “damage by reason of the erroneous belief engendered by the defendant’s misrepresentation”

• 4 possible frameworks for the tort of passing off

  • “though at times a strict adherence to the classic trinity guides the courts, at others there is a manipulation of those same ingredients to achieve a desired result. This has obscured the direction of the tort, undermined coherence and has enboldened claimants”

• Strict classic trinity (Carty framework)

  • Strong focus on the need for goodwill, misrepresentation and damage

• Misappropriation classic trinity (Wadlow framework)

  • This is a tort of misrepresentation

  • 3 important intersections

    • Serving the interests of both producers and consumers

    • Acknowledging both ethical considerations and economic expediency

    • Liability for business misrepresentation and misappropriation

  • Exploiting goodwill and not just harming goodwill should be part of the trinity

  • E.g. Asda case

• Misrepresentation beyond the classic trinity (Wadlow’s alternative)

  • General tort of misrepresentation without the goodwill requirement

  • E.g. Lego case

• Misappropriation per se (Davis framework)

  • Protecting C’s “investment, competitive edge or promotional aura” and not just goodwill in the traditional sense

  • Rejected by Jacob LJ in L’Oréal, but supported by Aldous LJ in Aresenal FC

  • Davis: Since the courts often manipulate the classic trinity requirements “to counter a perceived misappropriation”, passing off “has in fact come to encompass a remedy against misappropriation”

• Carty’s conclusion: While there has been tendency to refocus passing off in terms of misappropriation or unfair competition, we should not “embrace such an action”

  • Passing off should be a “damage-based and fault-free tort”, shouldn’t develop into a pure misappropriation action (similar to ‘dilution theory’)

Advocaat Case (1979)

• Lord Diplock: Action for passing off shouldn’t be available in all cases involving actual damage “in consequence of inaccurate statements” made by rivals

  • This would “run the risk of hampering competition”

Unclear what the relationship is

• Arsenal FC v Reed [2003] 1 All ER 137

  • Aldous LJ: Passing off is “perhaps best referred to as unfair competition”

• L’Oréal v Bellure [2007] EWCA Civ 968

  • Ds marketed smell-alike equivalents of C’s perfumes and issued comparison lists

  • Jacob LJ: “the tort of passing off cannot and should not be extended into some general law of unfair competition”

    • Claim failed because there was no misrepresentation or deception

    • ALTHOUGH the use of C’s trade marks in the comparison lists was infringement

• Aplin/Davis: UK has specific laws preventing anti-competitive practices

  • BUT it has no general law against misappropriation

    • E.g. where there is unjust enrichment by relying on the value created in the product by C (such as by creating similar perfumes in the L’Oréal case)

• The traditional view: there is no tort of unfair competition

  • Swedac v Magnet & Southerns (1989): “unfair competition is not a description of a wrong known to the law”

• BUT Paris Convention Art 10bis requires Union countries to provide “appropriate legal remedies” to repress acts of unfair competition

  • UK claims that it complies by a mix of legal mechanisms (e.g. consumer protection legislation, passing off and breach of confidence”

  • L’Oréal v Bellure: CA held that UK was not in breach by not having general tort

• Main acts that constitute unfair competition

  • Acts calculated to influence demand (e.g. misleading advertising)

    • Covered by consumer protection law and malicious falsehood

    • Usually enforced by public authorities rather than privately by traders

  • Acts that impede competing supplies

    • Covered by economic torts

  • Acts that exploit a competitor’s value

    • Covered by passing off, trade mark and breach of confidence

• Although there is still no general tort of unfair competition, it is NOT true that there is no English law of unfair competition

  • Similar protection is offered in harmonised areas (e.g. consumer protection laws) although it may be less effective than other EU countries since no private action

  • Passing off and malicious falsehood have evolved to offer broad protection

  • This doesn’t mean that there is a line drawn, since there are still areas where English law differs from other EU States

IRC v Muller & Co [1901] AC 217

• Lord MacNaghten: “the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force that brings in custom”

NOTE: There is generally no property in the trade name or other indicia

• To get a proprietary right, it must be registered as a trade mark

  • In passing off it is the goodwill that is being protected, not the name or get-up

• This view is supported by Millet LJ in the Harrods case

• D ran a preparatory school on the site of the former ‘Harrodian Club’ (sports club run by C up till 1990)

  • C did not run a school nor did it intend to do so, but brought a claim for passing off

• CA (Millet LJ): C’s claim failed

  • “The name ‘Harrods’ may be universally recognized, but the business with which it is associated in the minds of the public is not all embracing”

  • C had wide reputation in the name “Harrods” but there was no related goodwill being infringed in this case

  • The law protects not the “value of the brand name as such, but the value of the goodwill which it generates” and requires confusion

• DISSENT (Kerr LJ): “the reputation of a trader's name may be such that it constitutes part of the goodwill of his trade” and should therefore be protected

  • Here, the use of the name “Harrods” was unfairly cashing in on C’s reputation

• 2 small local tree surgery businesses 10 miles apart

• Court: C’s business had goodwill that was localised in 4 particular postcodes

• C ran a law practice in Guildford specialising in employment law

• D was based in Glasgow and had a small office in London providing legal advice and representation on employment law (but were not lawyers)

• Court: C could not claim for passing off because his goodwill was local to Guildford

• “The concept of goodwill limits the concept of damage in the tort”

  • Since any relevant damage must be to the integrity of C’s goodwill

• Concept of goodwill is controversial

  • Traditional view: Requires trading activity in that specific jurisdiction

    • E.g. in Star Industrial v Yap Kwee Kor (1976)

  • Recent attempts to expand this to include reputation

• International reputations

  • Advocaat: Must sell the class of goods in England

  • Issue for international businesses

    • They have international reputation but no current business in England

    • Pirates using their name could cause confusion, damage to reputation and impede their future expansion into England

  • Expansive view: If the name is worth hijacking then goodwill exists

    • Applied in Maxim’s v Dye

  • Hard view: Goodwill cannot be established by mere reputation, needs market activity in the jurisdiction

    • Applied in Crazy Horse, Athletes Foot and Budweiser

    • BUT Athletes Foot limits this view by only requiring customers in the UK

      • Walton J also went against the traditional view by suggesting that the goods need not be purchased from within the jurisdiction

    • The customers need not have direct contractual relations with C, as long as they purchase the goods/services (Panhard Levassor [1901])

  • Both views agree that pure advertising is not sufficient to create goodwill, since customers are definitely required

  • Wadlow’s view: The attractive force must exist as reason for travel

    • If the customers from UK are travelling as tourists and happen to experience C’s goods or services,...