“Passing off” occurs when a person passes off their products as those of another. In other words, a person directs the public to a product in a way that causes the public to believe that the product comes from another source. Cases of passing off can typically be divided in to two kinds:
- where the plaintiff and defendant are competitors in the same field and the defendant is packaging or describing its product or business in such a way that the public believes it is actually the plaintiff’s product or business; and
- where the defendant is promoting its product or business in a way that leads the public to falsely believe that the product or business has been endorsed or approved by the plaintiff.
The use of someone else’s trademark, for instance, could be the basis for a passing off claim, whether or not the trademark is registered pursuant to the Trademark Act.
If a competitor is found to be passing off another’s business or products, then a remedy exists for those who suffer damages as a result.
Although the law of “passing off” has been around for decades, courts have gone on to apply it to common business practices of today’s marketplace. For instance, in recent cases, courts have found passing off to occur when the defendant was:
- using a name similar to that of a competitor name;
- copying a competitor’s website;
- using a similar domain name to that of a competitor’s or having a domain name that is similar to someone else’s trademark or trade name;
- sending solicitation emails to a competitor’s customers;
- copying a competitor’s packaging (ie product wrapping and boxes) – although the packaging need not be identical, passing off may occur if the packaging is so similar that, from the point of view of the customer, the packaging is essentially the same .
On the other hand, courts have refused claims of passing off when the defendant has been using a competitor’s trademark or trade name in keyword advertising or in website metatags.
The test for passing off
For a successful claim of passing off, the following three elements must be proven:
- the existence of goodwill or reputation;
- the likelihood of deception of the public due to a misrepresentation; and
- actual or potential damage to the Plaintiff.
If the passing off claim involves a trademark, the Trademark Act will govern but, in any event, the same test (above) will apply.
Goodwill or reputation
“Goodwill” has been defined as “the positive association that attracts customers towards its owner’s wares or services rather than those of its competitors”. In other words, it is the reputation that draws customers to a specific product or company. How widespread that reputation is will also be important as it determines the extent to which courts will provide protection. For instance, the relevant portion of the market and the geographical location in which the reputation exists will define the limits of a passing off action.
Deception due to misrepresentation
For passing off to occur, there must be more than just the copying of a competitor’s goods or symbols; there must be a misrepresentation that the goods are those of the competitor’s. Misrepresentation may be established if the plaintiff can prove that the defendant’s product is likely to be confused with the plaintiff’s product.
In determining whether there is confusion between trademarks, the court typically examines the first impression that is made out by a casual consumer in somewhat of a hurry, who does not give much regard to a detailed consideration of the similarities differences between the two trademarks. Furthermore, the court may consider the surrounding circumstances involving the trademark including:
- the inherent distinctiveness of the trademarks and the extent to which they have become known;
- the length of time the trademarks have been in use;
- the nature of the goods, services or business;
- the nature of the trade; and
- the degree of resemblance between the trademarks in appearance or sound or in the ideas suggested by them.
In a passing off claim, the defendant will be “liable for all loss actually sustained by the plaintiff that is the natural and direct consequence of the unlawful acts of the defendant”, including any loss of business, reputation, goodwill or trade. Speculative and unproven damages on the other hand will not be allowed. The plaintiff must demonstrate that actual damages have resulted, or are likely to result, from the misrepresentation.