Passing Off
8
In the United Kingdom, the common law tort of passing off enables an enterprise to protect its business’s goodwill. Goodwill is intangible and this is why the subject falls within the intellectual property law regime. Passing off may apply in situations where trade mark protection does not apply. If a registered trade mark exists, the proprietor can sue both for trade mark infringement as well as for passing off. The concept for passing off derives from the ancient case of Perry v Truefitt (1842), which ruled that a trader must not ‘sell his own goods under the pretence that they are the goods of another man’.
For example, Trader A will commit a tort against Trader B if he passes off his goods or business as those of B. Trader B need not prove that Trader A acted intentionally or with intent to deceive. Nor does Trader B have to prove that anyone was actually deceived, if deception was likely. Further, this cause of action does not require Trader B to prove damage.
The tort of passing off is usually carried out by imitating the appearance of the claimant’s goods, or by selling them under the same or a similar name. If the name used by the claimant merely describes the goods, then generally no action will lie. It is not necessary for the defendant’s trade to be identical to that of the claimant if there is sufficient similarity to mislead the public.
False advertising is not generally considered to amount to passing off, but it may in exceptional circumstances. Reverse passing off may occur when the defendant holds out the claimant’s goods as his own: Bristol Conservatories Ltd v Conservatories Custom Built (1989).
There is an international obligation to assure effective protection against unfair competition under Art 10 bis of the Paris Convention. Finally, the remedies for a successful claim of passing off include an injunction and either damages or an account of profits. Damages will reflect the lost profit plus loss of goodwill and reputation. A delivery up order is also available.
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Kensington Fashion Ltd has sold clothes under the ‘Kensington Chick’ label since the 1960s in their shops in Nottingham, Leeds and York but was refused trade mark registration. In 2007, another clothing manufacturing firm, Kensington Man Ltd, proposed to extend their business from men’s clothing to womenswear and brought out their own ‘Kensington Chick’ clothing line. The line sold successfully in Leicester, Coventry and Northampton. Kensington Fashion Ltd has plans to open a fourth store in Leicester in 2008. Advise Kensington Fashion Ltd as to any cause of action they may have against Kensington Man Ltd. If successful, would the appropriate remedy be an injunction covering all of the UK and Wales?
Answer Plan
This problem question focuses on the tort of ‘passing off’ as there are no registered trade mark rights. An action in passing off is a common law tort whereas other forms of protection (ie copyright, trade marks, design rights and patents) are statute-based rights. The facts of the problem are based on the case of Chelsea Man Menswear Ltd v Chelsea Girl Ltd (1987). Lecturers often reconfigure the facts of an existing case usually designed to reward those students who have done the recommended reading on the topic. The question essentially has two parts. Students should:
- introduce and define the common law tort of passing off;
- outline the elements required for a successful action in passing off as established in Reckitt and Coleman Products v Borden Inc (1990);
- apply each element to the facts in turn and reach a conclusion as to KF’s likelihood of success;
- introduce the equitable remedy of injunction and how it will assist KF; and
- consider the terms on which the court might injunct KM from using the words ‘Kensington Chick’ in future.
Answer |
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As Kensington Fashion Ltd (‘KF’) have been refused trade mark registration they cannot rely on any registered rights under the Trade Marks Act 1994. Further, the UK has no law of unfair competition as in the EU and other civil law countries. However, KF may have a cause of action against Kensington Man Ltd (‘KM’) based on the common law tort of passing off which has its origins in the tort of deception. The tort of passing off is sometimes referred to as protection of the goodwill in a business or a concept and makes it possible for a trader to protect a business’ goodwill. Goodwill is an intangible concept but is nevertheless a property right. According to Lord MacNaughten in Inland Revenue Cmrs v Muller & Co’s Margarine Ltd (1901) the concept of goodwill means:
Every positive advantage that has been acquired in carrying on the business which would give a reasonable expectancy of preference in the face of competition; the benefit and advantage of the good name, reputation, and connection of a business and the attractive force that brings in custom.
In other words, the positive benefits that attract a consumer to prefer one business’s products (or in this case, clothing line) over those of another.
The underlying basis for an action for passing off is found in the case of Perry v Truefitt (1842) which held that ‘A man is not to sell his own goods under the pretence that they are the goods of another man’. Passing off may therefore be defined as a misrepresentation in the course of trade by one trader which damages the goodwill of another. In the context of the problem at hand, this means that KF may be able to bring an action for passing off against KM for their use of the words ‘Kensington Chick’ in connection with the KM clothing sold in Leicester and York.
Since the decision in Perry v Truefitt there have been several important cases that further developed the law of passing off, including Reddaway & Co Ltd v Banham & Co Ltd (1896), Spalding (AG) & Bros v AW Gamage Ltd (1915), Bollinger v Costa Brava Wine Co Ltd (1960) and Warnink BV v Townend & Sons (Hull) Ltd (1980). However, the classic legal definition of passing off was established by the ‘Jif Lemon’ case. In Reckitt & Coleman Products Ltd v Borden Inc (1990), Lord Oliver reduced the elements to be proved in a passing off action to three. These three elements are now known as the ‘classic trinity’ formulation:
- goodwill or reputation attached to goods and services (eg in claimant’s goods, name, mark, get up etc);
- a misrepresentation made to the public (leading to confusion or deception), causing …
- damage – actual or potential to the claimant.
Lord Oliver’s classic definition of an action for passing off has since been endorsed in: Consorzio del Prosciutto di Parma v Marks & Spencer Plc (1991); Harrods v Harrodian School (1996); and BBC v Talksport (2001). The advantage of the ‘classic trinity’ formulation is that it is simpler and is preferred in practice. For KF to be successful in an action for passing off against KM, it must satisfy all three elements.
DOES GOODWILL EXIST IN KF’S CLOTHING LABEL NAME ‘KENSINGTON CHICK’?
The words are descriptive in that ‘Kensington’ is a geographic word for the place known as Kensington in London and ‘Chick’ is slang for a young woman. In County Sound plc v Ocean Sound Ltd (1991) the court found that the purely descriptive words did not attract goodwill. However, one could argue here that this case can be distinguished as KF have been using the two-word combination for more than 40 years, whereas the use of descriptive words in County Sound was new use. Nevertheless, the length of time it takes to establish goodwill sufficient to bring an action for passing off is a question of fact in each case. However, in Antec International Ltd v South Western Chicks (Warren) Ltd (1998) goodwill was established through use of a name for a period of 10 years and in Stennard Reay (1967) goodwill existed after just five weeks’ use. We will assume for the sake of further analysis that a court would find that a period of 40-plus years’ use by KF of the name ‘Kensington Chick’ would attract sufficient goodwill to found an action for passing off against KM. KF must be careful to ensure that goodwill exists (ie there are actual customers for its Kensington Chick clothing line) and not merely reputation as there is strong authority that the law of passing off only protects goodwill and not reputation. Indeed, in Harrods Ltd v Harrodian School Ltd (1996) Millet LJ stated that ‘damage to reputation without damage to goodwill is not sufficient to support an action for passing off’.
HAS KM MADE A MATERIAL MISREPRESENTATION TO THE PUBLIC LEADING OR LIKELY TO LEAD THE PUBLIC TO BELIEVE THAT THE CLOTHING LINE SOLD BY KM IS THE CLOTHING LINE OF KF?
In other words, is KM’s Kensington Chick clothing line associated in the minds of the public with those of KF? The fact that the public may be confused as to the origin of the clothing line may not necessarily amount to a material misrepresentation: Phones 4u Ltd v Phone4u.co.uk Internet Ltd (2007); HFC Bank v HSBC Bank plc (2000). An initial misrepresentation which is corrected before the actual point of sale or contract may not amount to a material misrepresentation and therefore no actionable misrepresentation in passing off: BP Amoco plc v John Kelly Ltd (2001). Further, customers will not be assumed to be ‘morons in a hurry’ to quote Foster J in Morning Star Co-operative Society v Express Newspapers (1979). On the other hand, KM will not have a defence by asserting that the public would not have been misled if they were more ‘literate, careful, perspicacious or wary’: Reckitt & Coleman (1990). As to whether KM has misrepresented a connection with the KF Kensington Chick clothing line, the court will assess the amount of attention a typical customer might be expected to exercise in purchasing the clothing, the type of shop in which the clothing is sold and generally the habits and characteristics of women’s clothing consumers and how many customers have been misled. In relation to the number of customers deceived, KF will have to show that KM misled a substantial number of customers, but not all of the potential public: Neutrogena Corp v Golden Ltd (1996) per Morritt LJ. KF may wish to consider gathering survey evidence from customers and/or engaging an industry expert to give evidence to support its case.