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Guide to Passing Off and Goodwill

Friday, 25 January 2013

The common law principle of passing off aims to protect businesses carrying out trading activities under a trade mark from unfair competition. Relying upon this principle, traders can take legal action against parties who have used similar marks to mislead the public about the origin of goods or services. Businesses should be aware of the legal consequences of passing off to avoid law suits and protect their own trademarks.

Establishing a Claim for Passing Off

In order to establish a claim for passing off, the Claimant must satisfy three primary conditions:

  1. The trade mark must have been used for a substantial period of time to sell goods or services, and thereby created goodwill in the market. In other words, a claim of passing off cannot be brought in respect of newly acquired marks that have no goodwill in the market.
  2. The passing off must involve a misrepresentation, i.e. the public must be under a false impression that the goods or services originate from a particular source. It is important to realise that the intention to misrepresent is irrelevant, and the existence of confusion in the minds of public is sufficient to establish a claim.
  3. The passing off must be likely to cause detriment to the goodwill of the Claimant’s business, resulting in actual or reasonably foreseeable damage.

Passing Off and Goodwill

It is important to understand the legal relationship between passing off and goodwill. The legal principle only applies in cases where trade marks have been used for a period of time, and as a result, have gained market reputation i.e. goodwill. Smaller businesses may have difficulty establishing goodwill beyond their place of business due to the limited scope of their operations; multinationals, on the other hand, often have worldwide recognition of their marks. The burden of proving the existence of goodwill and misrepresentation rests with the Claimant.

Making a Claim for Passing Off

To successfully bring a claim for passing off, Claimants should act as soon as they have knowledge or suspicion of it; delay in filing a claim may be considered acquiescence. Remedies may include: i) injunctions preventing continued use of the mark, ii) financial damages for loss of goodwill in the market or reduction in sale of goods or services, and iii) accounting for profit earned by the passing off of goods or services. Damages and accounting for profit are alternative remedies with the former being more commonly awarded.

If you need advice about protecting marks or using marks in the course of your business, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.