September 24, 2011

Passing off, Extended Forms of Passing off and Reverse Passing Off

Passing off
This means doing business by presenting goods or services as someone else's, where the products may be of the same standard or be of substandard. The tort is known as "passing off". For most of the Commonwealth countries, "palming off" in the USA and unfair competition elsewhere. Passing off is a judge made law. In some countries they have incorporated a kind of passing off in their legislation as a type of infringement. There is an international obligation to assure effective protection against unfair competition under art 10 bis of the Paris Convention.

Classic Trinity Test:

The Honourable courts have developed a classic test to identify the tort of Passing off.

# In Reckitt & Colman Products Ltd. v Borden Inc [1990] RPC 341, it was held that: A claim may be bought:

· The claimant’s goods or services have acquired a goodwill or reputation in the market and are known by some distinguishing feature;

· There is a misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by the defendant are goods or services of the claimant; and

· The claimant has suffered, or is likely to suffer, damage as a result of the erroneous belief engendered by the defendant’s misrepresentation.

# In Consorzio del Prosciutto di Parma v Marks & Spencer [1990] FSR 530, famously Known As The classical trinity, as the Parma ham case; In this case Court confirmed the three test as been laid down in Reckitt & colman case.Court also affirmed the stand as observed in the Pub Squash case (Cadbury Schweppes Pty Ltd. & ors. v. Pub Squash Co. Pty Ltd. (1981) RPC 429), the tort of passing off is no longer confined to early 19th century formulation, i.e. to the name or trademark or a product or a business. It is now recognised that the tort can encompass other descriptive material, such as slogans or visual images or advertisement campaigns that imply an association with the plaintiff's product, provided always that such descriptive material has become part of the goodwill of the product. The Ambit of passing of has been increased as been interpreted in famous “champagne case”.

# In Cadila Healthcare Limited vs Cadila Pharmaceuticals Limited, 2001, In this case Court laid down several points which needs to be considered for action of passing off on the basis of unregistered trade mark generally for deciding the question of deceptive similarity:
· The nature of the marks i.e. whether the marks are word marks or label marks or composite marks, i.e. both words and label works.
· The degree of resembleness between the marks, phonetically similar and hence similar in idea.
· The nature of the goods in respect of which they are used as trade marks.
· The similarity in the nature, character and performance of the goods of the rival traders.
· The class of purchasers who are likely to buy the goods bearing the marks they require, on their education and intelligence and a degree of care they are likely to exercise in purchasing and/or using the goods.
· The mode of purchasing the goods or placing orders for the goods and
· Any other surrounding circumstances which may be relevant in the extent of dissimilarity between the competing marks.
Court also held that weightage of various factors need to be considered on case to case basic. A fixed criteria on each factor cannot solve the purpose. Every case should be dealt on case to case basic, but court must consider these criteria in mind before considering the case for passing off.

# In AG Spalding & Bros v A W Gamage Ltd and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off:
(1) a misrepresentation
(2) made by a trader in the course of trade,
(3) to prospective customers of his or ultimate consumers of goods or services supplied by him,
(4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and
(5) Which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.

# In Bristol Conservatories Ltd v Conservatories Custom Built Ltd the defendants’ salesmen showed prospective customers a portfolio of photographs of ornamental conservatories as if constituting a sample of the defendants’ goods and workmanship. In fact these were photographs of the plaintiff’ ornamental conservatories. This was held to amount to passing-off as the defendants had misrepresented that they were the commercial source of those conservatories. By showing the photographs to prospective customers goodwill arose towards the supplier of those conservatories and was simultaneously misappropriated by the defendants. [This case might be considered as reverse passing off also]

# In John Henderson & Sons v Alexander Munro, In that case the defendant had issued circulars and claimed that a certain Mr Munro had experience in drilling artesian wells. However the circular did not state that Mr Munro had drilled the wells whilst working as managing director of the plaintiff’s company, not the defendants’. The Scottish House of Lords held that this amounted to passing off.

# The landmark passing off case J Bollinger v The Costa Brava Wine Co Ltd (Spanish Champagne) created 'extended passing off'. This enables a class of traders to prevent rivals from incorrectly applying descriptive terms. While the class cannot prevent rivals applying the term correctly, they can prevent its incorrect application. Other cases about products made in geographical areas followed, for example Scotch Blended Whiskey, and Spanish Sherry. It was widely believed that extended passing off required the plaintiff to prove that consumers associated the disputed term with a particular location.

“The usual remedies are injunctions, delivery up of offending items and inquiries as to damages or accounts of profits”.

Extended Forms of Passing off

The extended forms of passing off are one kind of passing off. These basic principles have been refined over the years to protect appellations of origin, such as Swiss chocolate.
In the most famous Case, The UK’s biggest vodka supplier, Diageo, has succeeded in an action against the manufacturers of VODKAT, Intercontinental Brands, on the basis of “extended” passing off. VODKAT is a mixture of vodka and fermented alcohol, and has 22.5% of alcohol by volume (ABV).

“Extended” passing off applies where:
A) A particular sign has obtained some distinctiveness in relation to goods of a particular quality;
B) Goods not having that quality are sold under that sign (or a confusingly similar one); and,
C) Any business having goodwill from dealing properly in those goods under that sign has, or is likely to, suffer damage.

In this case, Court considered that the term “vodka” denotes a clearly defined class of goods (i.e. clear and substantially flavourless spirits with at least 37.5% ABV), having sufficient reputation to give rise to protectable goodwill. It was held that there is an assumption among consumers, retailers and wholesalers that VODKAT and vodka are the same thing, which was considered to be exacerbated by the nature of VODKAT's labelling and marketing. This was considered to amount to the misrepresentation of VODKAT as vodka, rather than a drink containing vodka, leading to the deception of consumers.
“The decision puts vodka in the same class of protectable product descriptions as champagne, sherry, Scotch whisky, and Swiss chocolate.”

# In Erwen Warnick B V vs. J Townend & Sons (Advocaat) the House of Lords dispelled that popular conception by preventing incorrect application of the descriptive term 'Advocaat', which was associated with specific ingredients rather than a geographical location. Thus extended passing off protects use of a descriptive term associated with a distinctive and recognisable product; geographical association is not required.

Reverse Passing Off

“A wrongdoer commits the tort of ‘reverse passing off’ when ‘the producer misrepresents someone else's goods or services as his own.’ That is, ‘X’ copies ‘Y's’ work without permission and claims it as ‘X's’ own.’ Or in other words when X puts his Mark, logo or sticker, on the product of “Y” which goes to prove that the product is of “X”, it is considered as reverse passing off. In this case actually the wrongdoer is not producing any new product and selling it in order to hamper the goodwill and reputation of others and to secure benefit. Basically he is using others product, by just giving it his name or brand, so the customer gets to know that it’s his product. In other words we can say that he is not creating any substandard product, but he is selling the product of same standard as of original one. Sometimes removing the label or removing the label and putting any other label is also considered as reverse passing off.

# In Bristol Conservatories Ltd. v Conservatories Custom built [1989] RPC 455), Court held that when defendant claims the claimant's work as his own; it can be condered as a case of reverse passing off.

# In Roberts Powers School v Tessensohn [1995] FSR 947), It will be recalled that orthodox passing off entails the defendant representing that his product is the plaintiff's product.

In many cases, reverse passing off can be explained under the ordinary rules: for example where a defendant may represent that he or she made goods which were in fact made by the plaintiff so as to pass off his own business as a branch of the plaintiff's. The classic example of passing off takes place when one trader represents his goods to be those of another trader with a better reputation. However modern cases show that passing off is also possible when one trader represents the inverse: that the goods of another trader are his own.

Reverse Passing off in China:
This is the first case in China about trademark reverse passing-off. On May 1994, a dealer of Singapore Crocodile bought some western-style garment with trademark “Maple Leaf” from Beijing Garment Factory with unit price RMB 230. Then it removed the logo of “Maple Leaf” and replaced it with the trademark “Crocodile” and resold to customers with unit price RMB 560 at Beijing Parkson Shopping Center. This was found by Beijing Garment Factory and a lawsuit was filed. The court finally recognized as unfair competition and the defendant was ordered to stop the infringement and liable to pay compensation.
After this case, China revised its trademark law in 2001 and reverse passing-off was officially listed as a type of trademark infringement.
If a person, without permission of the trademark holder, replaces the trademark with another one and resells the product in the market, his behavior may infringe the trademark right of the holder. To be simple, trademark reverse passing-off means a person buys another one’s goods, removes the trademark on the goods and replaces it with his trademark. And then he resells the goods to customer.

Following features for trademark reverse passing-off:
· The trademark infringed shall be a registered trademark. That is, the trademark must be registered;
· The product is acquired in a legal way. It may be manufactured or sold by the trademark holder;
· The purpose for reverse passing-off is to make use of the good quality reputation of other person’s product and therefore to make illegal profit by disguising the true source of the product.

" If goodwill, misrepresentation and damage can be proved an action will lie regardless of whether the wrongdoing was intended and there is no threats action to protect those accused of passing off from intimidation of their customers."


John said...

That is a good posting Biplab and Vivek keep it up!!

NaKuL said...

very handy to understand..