Passing off

Registering a trademark gives you an exclusive right to use your mark and prevent others from using your mark without permission.

Although there is some protection provided to unregistered marks, it is difficult and costly to enforce.

Businesses who do not own registered trademarks may have to rely on a claim of ‘passing off’.

This guide discusses what passing off is and what you need to prove to claim passing off.

What does passing off mean?

‘Passing off’ is based on the principle that ‘no man may pass off his goods as those of another’.

Unlike an action for the infringement of a registered trademark, passing off is not a statutory remedy – there is no prescribed action written in law.

Instead, it is an action that has been developed over the years by the courts.

‘Passing off’ can offer you some limited protection if a copycat rival causes damage to your business (loss of sales or damage to your good reputation, for example) after passing off your brand’s intellectual property as their own – essentially confusing your customers to think that the copycat is you.

For example, if Pepsi tried to sell their soft drinks as Coke by using the same packaging and distributing the product through similar channels.

However, taking action against a copycat infringer using the law of passing off isn’t as easy, reliable or cost effective as registering a trademark and then taking enforcement action in reliance on that registered right.

Being eligible for this type of protection is far from assured and it is particularly challenging for startups and SMEs.

This is because generally you must establish the following three elements to succeed in a claim:

1. your market reputation or goodwill is already of a high enough level for the public to automatically assume the other copycat trader was you;
2. the goods or services are misrepresented so that consumers are likely to be deceived into thinking that they are yours; and
3. the other trader’s deception to the public has caused you a loss of business (or other relevant damage, such as reputation loss) as a result.

Reputation and goodwill

The focus of goodwill is often a name or logo.

It can however relate to other things such as packaging, advertising style etc.

In order to build up goodwill, you must be a trader.

The definition of trader, however, is very wide.

For example, authors, performers, celebrities, charities are all examples of “traders”.

You must have a reputation or goodwill in the same region that the other party is attempting to sell goods.

This depends on the circumstances, and whether or not you have a presence within the relevant market.

Importantly, this does not mean that you must be a local trader.

An international trader can prove their reputation in a particular geographic area by pointing to marketing materials, including those that appear on television, radio and in print.

Misrepresentation

A misrepresentation can be perfectly innocent but still be the subject of a passing off action.

It is the consequences of a trader’s actions that matter, but more specifically the effect of those actions on the public.

If you are to succeed in a passing off action you must clearly demonstrate that the way the other party has presented their goods will likely deceive consumers.

For this to occur, there has to be significant copying of the whole brand.

It is important to note that while passing off does not require evidence of actually misleading customers; it is useful for you to produce this material at hearings.

In a case involving Cadbury and an Australian chocolate distributor Darrell Lea, Cadbury claimed that Darrell Lea was ‘passing off’.

The Court accepted that using the colour purple was an integral part of Cadbury’s marketing strategy dating back to 1920.

However, the court found that Darrell Lea was not guilty of passing off.

This was because their use of the colour purple was unlikely to mislead consumers.

The Court explained that for Darrell Lea to pass off their products as Cadbury’s, they would have to use Cadbury’s entire ‘brand architecture’.

This would involve things like using the brand name, and not just the colour purple.

Damage

Finally, the other party’s misrepresentation of their goods and services must cause significant damage to your business or your business’ reputation.

The damage may take the following forms:

• Loss of sales resulting from the public being led by another business’s misrepresentation to buy their goods or services where they would otherwise have bought yours
• Damage to reputation
• Damage by association, e.g., caused because the other business has a bad reputation or supplies goods or services of an inferior quality
• Loss of the opportunity to expand where the other business’s field of business is one into which you might naturally be expected to seek to enter
• Erosion of goodwill resulting from a proportion of the public ceasing to associate a mark with one particular business, leading to the exclusivity of your business being reduced, blurred or diminished

This means that Cadbury would have had to show harm to either its reputation or business.

For example, if Darrell Lea attached the Cadbury name to a sub-par product and Darrell Lea’s actions resulted in Cadbury losing sales.

What if someone copies your unregistered intellectual property?

We recommend getting advice from a legal expert.

There are options, such as reporting the passing off to an internet registry company or looking into arbitration (a way of settling disputes outside of court with the help of a third party).

You could also try for a court order that stops, compensates for and/or destroys all infringements of your IP wherever possible.

As this can be a complex, costly matter, it’s definitely recommended that you approach this with the help of a lawyer.

But first of all, however, you should explore whether it is still possible to apply for trademark registration.

If your copycat hasn’t applied first, then you can apply online in a matter of minutes and get priority status over the copycat.

Notice of your application is published in the Trade Marks Journal and the trade mark examiner may even notify your copycat of your application as part of the registration process.

If/when your copycat opposes your application, you should be prepared to prove your prior usage of the trademark, including the brand recognition and value attributed to it by your customers.

Key Takeaways

Passing off occurs when one party presents their goods as the goods of another party.

Passing off extends to unregistered trademarks which legislation otherwise would not protect.

To successfully claim passing off, you must establish three key elements.

These are reputation, misrepresentation and damage.

If you are successful, the remedy will either be an order to stop engaging in the conduct or compensation.

Take a look at our guide on protecting your intellectual property to find out more.