Passing Off
Nature of Passing Off
Passing off is an interference with the claimant’s rights to his goodwill, brand, business name and reputation. Passing off may occur innocently. It does not require either actual deception or an intention to deceive.
Passing off may occur where there is a misrepresentation by a business in the course of trade, to prospective customers which is calculated to or foreseeably injures the goodwill of another and causes damage to that business or goodwill, or may do so.
An injunction may issue to restrain passing off. An interlocutory injunction may be sought on a quia timet basis, in respect of prospective risk in advance of publication. Damages or an account of damage may be granted.
The courts emphasise the risk of confusion. Confusion may arise from the description of goods, packaging style or get up. Many passing off cases relate to clothes and fashion. This is measured from the perspective of the likely impression on the casual and unwary consumer. It is not a defence that an observant person making a careful examination would not have been misled.
Scope of Goodwill Protected
A business is entitled to the goodwill in its brand and name in a broader sense. There may be a likelihood of confusion even if the claimant and the defendant are in different businesses. The impression might be created that the former is endorsing the latter business. There may be evidence of a likelihood of confusion.
A business may acquire a goodwill, which may be protected by passing off, even though it has not traded in the State. The business may have acquired a reputation in the state, which it is entitled to protect.
If two entities each have a common name and each trade in a different field, there is unlikely to be passing off. Where each bona fide trades under a similar name, but they do not compete or marketing competing goods, then there is unlikely to be passing off. There will generally be no element of misrepresentation or confusion in the minds of the public.
In some cases, goodwill may be owned by trade associations. In these cases, any individual member of a class may be entitled to take legal action for the benefit of the group. The individual must be able to show the goodwill has been infringed that he has sustained more than minimal damage.
Instances of Reputation
Celebrities have been held to have rights in their names and reputation. Where their name of their endorsement is a marketable commodity, misuse may constitute passing off of their brand and image. It may be restrained in the same manner under the civil wrong of passing off. They may assert and protect their goodwill, reputation and brand rights, in the same way as a business.
Use of a domain name may constitute a breach of trademark. Its misuse may constitute passing off. Where the claimant can show that it has incurred significant expenditure on marketing and building of goodwill in connection with its name, it will be more readily protected. The more unique the name, the more likely protection is forthcoming. The more generic or common the name, the less likely it will be protectable.
Likelihood of Confusion
The key question in many passing off cases is whether there is a likelihood of confusion. There must be an objective similarity between what is represented by the defendant and the plaintiff’s names, brands, etc. There must be a real risk of confusion. If the possibility is remote, such as where the parties are not in the same market, an injunction may be refused.
Where there is no direct similarity between the goods, but there is a false claim of endorsement or misuse of another’s person’s goodwill, there may be passing off if the claimant has a significant reputation and goodwill, and the actions of the defendant give a false impression or message which could be understood by an insignificant section of the market, typically that the claimant has endorsed, recommended or approved by the respondent’s goods.
A business need not necessarily have goodwill within the State, in order to bring a claim for passing off in Ireland. If the name already has a value and is recognized within the State, despite the goods being marketed or sold, this may constitute sufficient grounds for an action for passing off.
Injunction I
Many cases of passing off are determined at the interlocutory injunction stage. See our separate guide on pre-trial injunctions. In these cases, the only question is generally whether there is a question to be tried and where the balance of convenience lies. Injunctions will often be granted on the basis that damages may not ultimately compensate the claimant.
The courts do not usually look at the strength of the arguments, but rather whether there is a fair question to be tried and where the balance of interest lies. The party granted an injunction will need to give an undertaking for damages caused in the event he fails in the trial of the action. In many cases, there is no ultimate trial of the action because the interlocutory injunction effectively determines the matter because of the long delay before a full trial.
Injunction II
Where an interlocutory injunction is sought, it must be shown that there is a serious issue to be tried. This implies that there is a bona fide and fair question of law relating to the subject matter of the claim. The matter is determined on the basis of the adequacy of damages and the so-called balance of convenience.
Damages must not be an adequate remedy. The claimant is required to give an undertaking as to damages it loses in the ultimate trial of the action. If damages are inadequate the court will consider the balance of convenience. Once it is satisfied that there is a serious question to be considered in the underlying claim, the court will exercise its discretion according to what it regards as the ‘balance of convenience’.
The court will weigh the likely inconvenience or damage which would be suffered by the applicant if the injunction is not granted against the likely inconvenience or cost for the respondent if it is. An important factor in this balancing exercise is whether any potential injustice could be adequately compensated for by damages.
Market surveys are relevant in passing off litigation. They can be offered as evidence regarding the actual or likely confusion. Arguments have been made that this type of evidence is impermissible hearsay.
Instances of Balance of Convenience
If the adverse effect of the injunction on the respondent is measurable in financial terms then the court will be more likely to grant an injunction while seeking an undertaking from the applicant to pay financial compensation if it turns out that the injunction was wrongly granted. Similarly, if the applicant’s inconvenience in failing to obtain the injunction could be adequately compensated by damages after the trial then the court will be more likely to refuse the injunction.
Financial compensation is unlikely to be a sufficient remedy for such an injustice if:
- the other party is unlikely to be able to pay for any damage that arises;
- compensation would be very difficult to assess such as where injustice would result in damage to business reputation; or
- if the effect of the injustice would be irreparable – for example, taking away a party’s right to vote at a meeting.
Cybersquatting
The question of cyber-squatting has been raised in several cases. In the early days of the Internet, persons commonly registered names pre-emptively, hoping to sell them to a business with financial interest and connection with that name. Significant sums were paid for the transfer of domain names which had been pre-emptively registered by cybersquatters, with no legitimate connection to the name.
The courts were extremely unsympathetic to cybersquatters, given their patent intention of selling trade names to the owners of the goodwill. In some cases, where courts discerned evidence of systematic registration of well-known names, without any bona fide connection with them, they have been prepared to grant injunctions to prevent them being used as such.
The more stringent requirements for domain name registration has curtailed this practice significantly in respect of most registries. Some registries still operate on a first come first serve basis with minimum other criteria.
Registration of very similar names, typically with a common typographical error or misspelling, raises passing off issues. The registering party may seek to attract customers, or more commonly advertisers, who seek to obtain traffic through links from the cybersquatting site.
Such practices are likely to constitute a misuse of the established brand’s name and goodwill or website. The benefit generated is indirect such as by way of advertising or monitoring traffic.
They seek to take advantage of the goodwill and will readily meet the general criteria for passing off. This is so, notwithstanding that the respondent will typically not trade in similar goods or services.
Own Name
Generally, a person who bona fide trades under his own name, may not be restrained from using it. In many cases, the courts have taken the view that the person is entitled to do so and there is no passing off. The principle does not apply to company names and registered business names, given that they can simply be chosen.
In other cases, the courts have taken the view that the use of one’s name may be deliberately designed to cause confusion. While the general principle is that one may use one’s personal name, where there is strongly established trading name and the use by another of his personal name which is calculated and not bona fide, may be held to be passing off.
A person may use his own name, but not in such a way as to mislead members of the public into believing that his goods are those of another. He may not represent his business as that of another. He may use his own name as long as he does so honestly. He may not do so, in order to deliberately avail of another person’s goodwill dishonestly or other than in good faith.
A person may not, however, simply assume a name or register business name and avail of this exception. This is unlikely to be accepted as an honest practice.
Where an entity registers a domain name or site or uses a name similar to that of an existing business and seeks to attract criticism and negative publicity, there may be passing off or misuse of goodwill. This will be so if there is any risk of it being confusingly similar or capable of being confused with the claimant site.